Sibley, Hiram (1807-1888)

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Hiram Sibley (1807-1888)

Telegraph entrepreneur

Background. Hiram Sibley, the man who more than any other single figure knit together a national telegraph network and monopoly. spent his youth and early business career working in a series of mechanical and manufacturing ventures in western Massachusetts and upstate New York. He was born in North Adams, Massachusetts, and attended village school there before working in a shoemaking shop. As a young man he moved to the Genesee Valley region of New York and found work as a machinist in a cotton factory until he started up a machine shop of his own. He also operated a wool carding business in the region. By the time he moved to Rochester in 1838 he had amassed a solid fortune, which he deployed in banking and real estate. It was a career that placed him squarely in the context of the early New England Industrial Revolution at its western fringes. Sibley did not engage in the telegraph business until he was forty-two years old.

Initial Venture. He first became intrigued with the telegraph in the 1840s, when Royal Earl House, the inventor of the House printing telegraph, fell into financial difficulties and approached Sibley for help. Sensing the technology’s potential, Sibley in 1849 joined several partners to form the New York State Printing Telegraph Company, bidding for western New York territory. But the initial foray foundered when it went up against the well-equipped and tightly managed New York, Albany and Buffalo Telegraph Company. As he struggled to keep the venture going, Sibley became convinced that the telegraph industry would have to be centralized somehow—its confused tangle of competing companies and overlapping lines ungnarled—if it were to achieve maximum efficiency and realize its full potential. This conviction shaped Sibley’s future telegraph investments and management. It also put him in on a course of alternating collision and cooperation with other, equally ambitious and consolidation-minded telegraph entrepreneurs.

Western Union. In 1850, after only a year in the business, Sibley spelled out his vision for his partners, proposing to turn west and broaden the company’s scope of activity by building a company that would bring all of the telegraph lines west of Buffalo under its control. Buying up the House patents and raising $100,000 in capital, he organized the New York and Mississippi Valley Printing Telegraph Company in April 1851 to build a line west from Buffalo and woo the smaller western companies into strategic alliances. Progress was initially slow, but after recapitalizing and reorganizing the company in 1854 Sibley scored a major coup when he persuaded managers of the Cleveland and Toledo, the Michigan Southern, and the Northern Indiana railroads to build and equip telegraph lines to Detroit and Chicago on the company’s behalf in exchange for stock in the New York and Mississippi Valley and free use of the telegraph for railroad business. In short order he also acquired control over a rival company, the Lake Erie Telegraph, widening his territory. In 1856 Sibley again reorganized and renamed the company, choosing a label that clearly identified what was now not only vaunting ambition but growing reach: he called it Western Union.

Strategic Alliance. By 1857, as he modernized equipment, linked up his acquisitions and systemized operations, Sibley had basically accomplished his first goal. The Western Union Telegraph Company controlled a vast western territory, extending from the northern Atlantic to the burgeoning cities of the Midwest. His main competitor had also emerged by this point: the American Telegraph Company, which had developed an eastern network as comprehensive as Sibley’s western version. In 1859 he approached the American, proposing a strategic alliance. Samuel Morse and other original telegraph developers temporarily blocked the move. But eventually Sibley was able to broker a far-reaching agreement, the “Treaty of Six Nations” (referring to the six major companies participating), which pooled telegraph traffic and allocated geographical territories to each participant. Sibley claimed Ohio, Indiana, Michigan, most of Wisconsin, part of western New York, and slices of Pennsylvania and Virginia for Western Union. The companies formalized the treaty by forming the North American Telegraph Association. Diplomacy did not end competition, however, and Western Union continued to contest the American for territory and traffic.

Transcontinental Expansion. At this point Sibley again turned west. Unable to convince Western Union’s board of directors to build a transcontinental line, he took on the project independently, securing an annual federal subsidy in 1860 of $40,000 for ten years to open California to telegraphic communication. To handle construction, Sibley sent a lieutenant to California to organize the small companies there into the California State Telegraph Company, which in turn set up the Overland Telegraph Company and began building from Carson City to Salt Lake City. Meanwhile, Sibley tackled the eastern end, organizing the Pacific Telegraph Company to build from Omaha to Salt Lake City. Financial improprieties marred the completion of the project, both companies engaging freely in stock watering and wildly inflating the costs of construction as they sold the line to Western Union. But in addition to making Sibley and his associates millions of dubious dollars, it made Western Union in geographic terms the largest network and private business in the world. Sibley retired in 1865 and devoted the remainder of his career to railroad and western land investments and a seed-and-nursery business in Rochester.