In 1967, in France, an individual, or even a business, requesting a connection to the telephone network would have had to wait, on average, for three years before his demand was met. At the same date, in the United States, three days would have sufficed. The situation was hardly better in Britain. Why, in Europe's advanced industrial economies, was the national management of the telephone business profundly inefficient? To understand this economic failure, two sets of factors can be put forward. On the one hand, the problem largely derived from a pervasive lack of interest in phone technology. This 'cultural' factor was widespread among the masses, thus preventing the emergence of a large marketat least until the 1960sas well as within the political elites in power, thus preventing the expansion and modernization of the networks. On the other hand, the sectoral institutional arrangement in the two countriesa state monopoly run by a government department, the PTTshampered the rise of the telephone. This paper demonstrates how these two elements formed a synergetic vicious circle that led to economic backwardness, and how, in the end, the vicious circle was broken and business efficiency restored.