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Compiled and
edited from previously published material by Kenneth P. Todd, Jr.
Copyrighted (c) by the American Telephone & Telegraph Company (AT&T)
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Table of Contents
Preface
This booklet
provides background information about the history and performance of the Bell
System for Public Relations Department people.
Editors and writers,
advertising, film and press practitioners, radio and television people and men
and women skilled in public and environmental affairs enter the Bell System with
many talents and abilities, but without the background and corporate insight
born of Bell System experience. This history has been written, then to show how,
why, when and where the Bell System got the way it is.
It will illuminate other parts of the American business world as well. The scope
of the Bell System being what it is today, this history touches the lives of two
or three million people who work for the System directly or are employed by
companies with whom this business contracts for work. In addition, many millions
of Bell System customers are affected by the success or lack of success of this
enterprise.
The Bell System, from its beginning, has been demonstrably willing to tell its
own story. There have been, and are, books, booklets, films, magazines, radio
and television programs and "commercials" and, today, audio and video
tapes which do this job. Many of these are listed in the bibliography at the end
of this document. So this history by no means stands alone. It differs from
existing information, though, in that it is both a compilation and a
condensation of the Bell System story. Its style is consciously contemporary,
for the Bell System stands on the brink of some major institutional and
philosophical changes during the 1980's. If it can contribute to a successful
transition into these new times, then its value and its purpose will be
complete. Return to Table of Contents
The
Early Days of Mechanical Communication, or a Shout Is Not Enough
The Bell System's
success is based upon what appears to be a very basic human need to communicate
with other human beings. A Corporation dedicated to providing instant paths for
communication between people ought to stand in a pretty good position. And so it
does; the Bell System is engaged in supplying a necessity which, while perhaps
not so important to the support of life as food, shelter and clothing, is not
far behind. So long as the service provided is satisfactory, that is, responsive
to the actual needs of those who use it, the Bell System-or any other
communications-supplying organization should remain healthy and successful.
But, not
surprisingly, communications has taken a good deal longer to achieve its
recognition in the hierarchy of human needs than food, clothing or shelter. Not
until the means for instant communications were readily available to
everyone-not until the first quarter of the Twentieth Century-could recognition
of communications as a satisfiable need be believed and generally accepted.
Today, to say that man must communicate is so obvious a statement as to be
unnecessary, but the fact remains that civilization depends upon communications
and complex civilization depends upon complex communication.
At first, men talked to each other, beat on drums and drew pictures. Then they
erected buildings and built roads. They walked from town to town and from city
to city relating the latest news. They wrote letters, scrolls, books. They
trained horses to carry them faster than they could walk and they built boats to
carry them further than they could swim. And then, for several thousand years of
civilized history, while literature, architecture, art, warfare. physics,
chemistry, medicine and the whole multitude of human technological achievement
advanced, retreated and advanced again, the techniques of communication remained
static. A message moved only as fast as the fastest horse and carried only as
far as the eye could see.
Then, in 1753, the barrier was broken. Unfortunately for the memory of the
person who accomplished this, he will remain known to history only by the
initials "C.M." with which he signed a letter written to the Scotch
Times describing a wonderful idea. He described an electric telegraph based on
static electricity. The movement of "electric balls attached to the ends of
a set of wires corresponding to the letters of the alphabet" would, the
writer felt, improve the sending of messages from place to place. C.M.'s letter
was published and was followed by a 50-year silence.
The reason for the silence was that static electricity is too limited to be
effective in telegraphy, a fact apparently recognized but not verbalized at the
time. Not until people like Volta, Ampere, Oersted and Faraday came along to
develop and demonstrate electrical theory could the telegraph be invented. At
the time of C.M.'s letter, the only thing really known about electricity was
that amber-and certain other materials called "electricals" from the
Greek word for amber, elecktron - could be charged by rubbing it.
While Volta and his peers were at work unraveling the mysteries of electricity,
another development appeared. This was the last flowering of the mechanical, or
visual, telegraph. The visual telegraph traced its ancestry back to smoke
signals and hilltop bonfires and the towers used by Egyptians and Romans to pass
information along. Visual telegraphy reached its highest development in France
during and following the French Revolution. A weakened France, surrounded by her
enemies, was saved because the enemies - the English, the Spanish, the Dutch,
the Germans and the Italians - could not communicate with each other. Within
France, however, a series of visual telegraph towers, designed by Claude Chappe,
was built between cities to carry news and unify the revolution-torn country. By
1852, when the electric telegraph finally caught up with and passed it, the
Chappe system in France covered a total distance of more than 3,000 miles and
used a total of 556 telegraph towers with various semaphore arms for complicated
messages.
Visual telegraph systems were instituted in England and America as well when it
was found how well they worked in France. Today in the United States there are
still landmarks in or near towns, high hills often called Telegraph Hill, the
last legacy of the visual telegraph.
The electric telegraph developed slowly between 1753 and 1838, when the first
economically successful telegraph line was installed between Paddington and West
Drayton in England, along 13 miles of railroad right-of-way. In 1844 a telegraph
line was built between Washington, D.C. and Baltimore, using Samuel F.B. Morse's
recently redesigned telegraph key and receiver. First designed by Morse in 1835,
it also used Morse's system of dots and dashes to transmit letters and numbers.
During the next years, the growth and extension of electric telegraph progressed
rapidly, with companies forming and dissolving frequently. Finally, all
telegraph lines in the United States were amalgamated and the Western Union
Telegraph Company was incorporated.
The first successful
undersea cable was laid in September 1851, across the English Channel to France.
The first successful transatlantic cable was laid in 1866. These were great
times for the young telegraph industry. Western man was coming to understand
that immediate communication between distant points was not only an interesting
novelty it was economic necessity for a developing world. Western Union, eleven
years after its formation had, by 1867, increased its capital by eleven thousand
per cent. The young company was valued that year at $41,000,000. Western Union
had become a highly influential corporation, with a virtual monopoly on the
rapid transmission of information in (he United States. This included the news
flowing to the nation's newspapers, for Western Union controlled the Associated
Press.
The company became so powerful that in 1872 a new telegraph company was proposed
and accepted by the government, backed by, among others, Andrew Carnegie and a
man named Gardner G. Hubbard. Just over a year later Hubbard would become one of
the two men who offered financial support to Alexander Graham Bell, deep in his
early experiments to improve the message-bearing capacity of the electric
telegraph.
From 1838 to 1872 was only 34 years, but man's ability to communicate over
distances had changed markedly. The need for communication expanded as the
ability to communicate expanded. Information sent by telegraph moved as fast as
the speed of electricity. An unknown speed at the time, it was enough to be
called instantaneous.
Development of the telegraph was rapid and its acceptance was nearly as fast.
Some developments came along, in fact, before sufficient need was felt. In 1841,
for instance, Charles Wheatstone, the English designer of the Paddington-to-West
Drayton telegraph, came up with a telegraph instrument which would print
letters. It would be many years, however, before Teletype machines would be in
wide use.
The next logical step beyond the sending of non-vocal information in the form of
mechanical codes over long distances, was, of course, the instantaneous
transmission of man's words over wires. A word was already in existence to
describe this development: the telephone.
"Telephone" was applied to any device used in sending sound over a
distance. It had been a well-known fact for thousands of years that sounds could
be sent through solid bodies of water, or through short speaking tubes. Some
time after the first metal wire was manufactured it was discovered that sound
could be carried along taut wires or through waxed cord. (This technique is
still employed by children who speak to each other through tin cans tied
together by short lengths of string.) Robert Hooke wrote, toward the end of the
17th Century, after conducting experiments with direct vocal transmission over
taut wire, " 'Tis not impossible to hear a whisper a furlong's distance, it
having already been done; and perhaps the nature of the thing would not make it
more impossible though that furlong should be ten times multiplied." But
Robert Hooke did not know how to generate electricity, nor did he even know what
electricity was. His prophecy remained unfulfilled for two hundred years.
The first apparent transmission of modulated, or varying sound of which there is
any record, was accomplished in Frankfort-Am-Main in 1861 by J. Philip Reis.
Reis appears to have been able to transmit musical notes over a wire, but his
accomplishment was so far from intelligible speech that no one went any further
with it. His invention was to remain just another of the many scientific toys
developed during that time to demonstrate recently discovered scientific
principles.
The modulated properties of most sounds presented the biggest problem. Telegraph
systems transmitted sounds with single frequencies; it didn't matter what
frequency. What mattered in telegraphy was the interpretation of symbols
produced by a series of spaced bursts of electricity. Sending modulated
sounds-and the human voice is one of the most complex of these-was much more
difficult.
Another 15 years of experimentation were to pass after Reis' success, before a
workable electric telephone was to be invented. But, before examining the
invention, it would be well to take a good look at the man who came up with it,
for the man who invented the telephone was most influential in setting the
life-style of the corporation which later carried his name. Return
to Table of Contents
Alexander
Graham Bell and the Invention of the Telephone
Alexander Graham
Bell's grandfather, the first Alexander Bell, started his business career in
Protestant Scotland as a shoemaker, but his interests and talents soon led him
onto the Shakespearean stage. The stage was, however, no place for a property
brought-up young Scotsman, and Alexander soon left it to become what was then
known as a "reader." He stood upon the stage and declaimed passages
from Shakespeare in a noble voice to elevated audiences. It was a much more
respectable occupation than performing the actual plays. From these successful
histrionics, Alexander Bell proceeded into the teaching of elocution. This
started a family tradition which was to culminate two generations later in the
invention of the telephone. It was not a scientific road, but an educative one.
The first Alexander Bell proclaimed himself a professor of elocution and moved
on to London where he opened and directed his own elocution school. It was a
successful one, not only assisting people in overcoming stammering and lisping
problems, but also teaching cockney girls to talk like ladies and foreign
gentlemen to speak well enough to fit into English society. Bell's school
continued after his death and Bernard Shaw used it, many years later, as the
model for his play Pygmalion.
The tradition of elocution teaching led Melville Bell, Alexander's son, further
into the field. Melville wrote textbooks on correct speech and invented a code
of symbols which he termed "Visual Speech." This remarkable code
indicated the exact positions and actions of the throat, tongue and lips during
the process of speech. Melville's idea was that Visible Speech could be used by
diplomatic and business people as a, key to the pronunciation of words in many
different languages; and it has been successfully used as such. But it was also
discovered that the symbols were a very reliable guide for training deaf people
to speak intelligibly. This was poignantly important in the Bell household,
where Melville's wife, Eliza, began to lose her hearing when Alexander Graham
Bell, one of Melville's three sons, was 12 years old.
Alexander Graham Bell was born on March 3, 1847 in Edinburgh. He grew up deeply
involved in the study of speech. He was also a talented musician able to play by
ear from a very early age, and, had he not been more interested in what his
father was doing to help people speak, he might have ended up as a professional
musician. He and his two brothers, an inventive trio, once built a model human
skull and filled it with a good enough reproduction of the human vocal
apparatus, which was worked with a bellows, so that it was reputed to be able to
say, "Ma-ma."
When Graham, as he preferred to be called, was 15 he joined his brothers in
assisting their father's public demonstrations of Visible Speech in Edinburgh.
The boys would leave the stage and the audience would call out the hardest words
or sounds they could come up with. Melville translated these sounds into Visible
Speech on a blackboard, whereupon Graham and his brothers would return to
simulate the sound of a kiss or a complex word in Serbian to the audience's
amusement and amazement. It was, no doubt, a good act.
Graham enrolled as a "student teacher" at Weston House, a boys' school
near Edinburgh. at about this time, where he taught music and elocution and. in
return, studied other subjects. He later attended the University of Edinburgh
and, for several varying periods of time, also attended the University of
London, where he used Visible Speech in teaching deaf children to talk.
This was the childhood and early manhood of the man who would invent the
telephone, a man who would add impetus to the budding technological revolution.
A. G. Bell was, by nature and training, a humanist and, more, a humanitarian. He
was a teacher who cared deeply about people, and he liked what he did.
From this point on, Graham Bell's story starts to take on the quality of a
motion picture scenario. In 1866, when Bell was still a teacher at Weston House,
he started a series of experiments on the changing resonancies within the human
vocal cavities as the tongue moves in producing vowel sounds. He showed a report
of his findings to his father. His father showed the report to his colleagues.
One of these, a learned scientist in London, told Graham about Hermann von
Helmhoiz, a German also working in the field of speech theory. Helmhoiz, in his
book, Sensations of Tone, had told about his experiments with
electrically-driven tuning forks and about how he had been able to produce vowel
sounds mechanically with them.
Bell didn't read German very well and he got the mistaken impression that
Helmholz had, somehow telegraphed these mechanical vowel sounds over a wire.
Although Bell was soon aware of his mistake he couldn't seem to get rid of the
idea. And that simple misunderstanding started the train of events which led the
humanist inexorably into the field of pragmatic electrical experimentation. Bell
became interested in electricity, a subject until that time totally outside his
interests.
And then tragedy hit the Bell family. Both of Graham Bell's brothers died of
tuberculosis and Graham himself was threatened. Melville Bell, at the advice of
doctors, cave up his career in London and moved his family to Brantford,
Ontario, where Graham soon recovered his health.
Melville's fame and the fame of his Visible Speech had preceded him to Canada
and the United States. In the course of this drama's development, in 1871, he
was asked by Sarah Fuller, who ran a deaf school in Boston, to show her teachers
how to use Visible Speech. Melville sent Graham instead, and Graham was a great
hit, not only at Sarah Fuller's school but also at the Clarke School for the
Deaf in Northhampton and the American Asylum in Hartford.
Graham Bell's success led him to become deeply involved in revolutionizing the
teaching of the deaf. Until this time, people had believed it was impossible to
teach deaf children to talk and the best thing to do with a deaf child was to
shut him away with other deaf people. It was one more manifestation of the
Victorian proclivity to hide social problems so they would go away.
Graham Bell disagreed entirely. So did Gardiner Green Hubbard, whose daughter,
Mabel, had been deaf since she suffered a scarlet fever attack when she was
four. Bell taught Mabel how to talk and later married her. Hubbard was president
of the Clarke School where Bell happened to be teaching. He grew interested in
Bell's work and Bell and he became close friends.
Bell's success as a teacher led him to open his own school in Boston to train
teachers in "Vocal Physiology and the Mechanics of Speech." Bell
trained teachers, but he continued to train deaf children to talk both for his
demonstration purposes and because he believed it to be his primary duty. The
next year Bell was appointed Professor of Vocal Physiology at Boston University,
continuing his work to bring deaf children into society to give them the
opportunity to live full and complete lives. One of these children was the five
year old son of a successful leather merchant from Salem named Thomas Sanders.
Sanders also became a friend and admirer of Bell and his work.
By this time, Bell's interest in electricity had led him to set up a little
laboratory where he worked at night, trying to find a way to send several
messages over a single telegraph wire simultaneously. Hubbard and Sanders
offered to support Bell in his experiments. Bell agreed to this, for he was
running out of funds. In addition, he agreed that all three would form a company
and share in whatever profits-however unlikely the possibility-came of it all.
The first thing they did was apply for two patents-which were granted-for
improvements in telegraphy.
Bell, by this time, had moved his experiments to Charles Williams' electrical
shop in Boston where Williams assigned young Thomas Watson to assist Bell in his
work. Bell was still working with what had developed from his mistaken
interpretation of Helmholz' tuning forks. He was attempting to activate several
different electrically produced tones on several different tuning forks at one
end of a wire at the same time to be received by several similar tuning forks at
the other end. Bell intended to call the result a "harmonic
telegraph." It was the device for which his first patents were issued, but
he was never able to make it work.
He kept at it, however, substituting metal organ reeds for tuning forks when he
decided that the forks were hopeless. Then, suddenly, there came the
breakthrough: The reeds could possibly, Bell reasoned, be made to vibrate
sympathetically, like the strings of a piano, in response to a human voice. This
vibration could cause a current to flow in a wire and this current could
reproduce the voice on other reeds at the other end.
At this point, Bell used his knowledge of the anatomy of the ear. He attached
one end of his reed to a diaphragm which he had deduced from the analogy of the
eardrum. As the reed vibrated in response to a modulated tone it should cause a
current to flow, and that current must vary in intensity.
This was late in 1874, and shortly thereafter, in February, 1875, while he was
in Washington, D.C., Bell, depressed by tack of progress, talked to Joseph
Henry, secretary of the Smithsonian Institution, describing his idea and
complaining that he had too little knowledge of electricity, being at heart a
speech teacher. Joseph Henry, responding like the pragmatic man of science he
was, answered, "Go get it!"
So Bell returned to
Watson, who had been assigned the job of building all experimental equipment
which Bell needed. One day in June, 1875, after many weeks of unproductive
experimentation with vibration reeds, Thomas Watson made the happy mistake of
connecting one of the reeds too tightly. When he plucked at it to free it,
another moment of scientific truth arrived. That plucking twanged along the wire
to be heard distinctly by Bell at the other end of the wire who just happened to
be holding another reed pressed tightly against his ear. Bell rushed into the
room and demanded that Watson move nothing. When they believed they knew exactly
what happened, Bell had Watson reproduce the situation exactly and then left for
the evening, no doubt rubbing his hands and thinking, that it had been a most
successful day. It had been. Watson's twanging message must stand as the first
Bell telephone.
Refinement followed refinement, through the summer and fall of 1875. On February
14, 1876, Bell filed specifications in Washington, D.C., of the set-up he and
Watson were working on, applying for his first patent just three hours before
Elisha Gray filed a caveat for a patent on a similar device. That particular
application's timing must stand as one of the great narrow squeaks and
coincidences of technological history. It was such a coincidence, in fact, that
Bell and Gray entered into considerable correspondence about it.
Bell's first patent was issued on March 7, 1876, four days after his 29th
birthday. Three days later, when he dropped a Liquid Transmitter, spilling acid
upon his trousers, Bell called out, "Mr. Watson, come here, I want
you!" Watson heard him over the wire and ran.
That was the first working telephone, sending the first understandable message
consisting of human words along a wire, and, interestingly enough, doing a
useful communications job right from the start. Perhaps even more appropriate,
Bell, the humanist, a man dedicated to helping disadvantaged and often discarded
deaf children lead normal lives, had produced an invention which would, when
applied to human society, produce enormous changes and Improvements in the
life-style of the world's peoples.
Bell was a dreamer, it is true, and he continued dreaming and inventing long
after he had invented the telephone. His dreams and his personality do not pass
entirely out of this history, however, but continue to color the corporation
that his interest in hearing and speech had started.
The story of that corporation and its early days makes just as exciting a
scenario as does the story of the invention of the telephone. Better, perhaps,
because it is less well known. Return to Table of
Contents
The
Corporation Is Born
The real birth of
the Bell System has, of course, already been recorded here. When Thomas Sanders
made his first verbal offer of partnership to Alexander Graham Bell, which he is
said to have followed with further blandishments until Bell agreed to go along
with him, the first "company" was born. For a company in its most
basic form is nothing more than two or more people joined together in some
enterprise.
Shortly after Bell
and Sanders reached agreement, Gardiner G. Hubbard made Bell a similar offer and
the three of them then got together. They finally put it in writing in the form
of an agreement dated February 27, 1875.
The terms of this
agreement were simple and straightforward. Sanders and Hubbard were each to
furnish half the money for Bell to continue his experimentation and perfection
of his ideas about the multiple telegraph. Bell was to do the work. Bell also
had the responsibility to apply for and maintain patents on his inventions. His
first patent was No. 161,739 for "Improvements in Transmitters and
Receivers for Electric Telegraph." This patent, when it was issued, was the
first of the tangible assets of what had come to be called the "Bell Patent
Association." The Bell Patent Association was the first formalized
expression of what was to be the Bell System.
Since both Sanders
and Hubbard thought the multiple telegraph would be the real money-maker, no
mention of the telephone was made in the agreement. But when Bell's February 14,
1876, patent application was granted on March 7 of that year for an
"Improvement in Telegraphy" but which was, in fact for the speaking
telephone itself, the old agreement had to be brought up-to-date. The number of
Bell's second patent was No. 174,465 and has been called, with good reason,
"the most valuable patent ever issued."
Bell, it seems, had
thought that all his "telegraph" experiments and patents were covered
by the agreement but Hubbard, especially, thought that only multiple telegraph
patents were covered. He even went so far as to urge Bell to pay more attention
to the matter at hand and to stop fooling around with that speaking telephone
nonsense. Bell, fortunately, like many other creative geniuses, paid little
attention to the voice of practicality, and persevered. His interpretation of
the Bell Patent Association's coverage was agreed upon finally. That
interpretation made the three-way agreement the first legal instrument of
corporate telephone ownership and organization. A far cry from today's giant
institution, but there were no rules at the time for forming nationwide
telephone networks.
By January, 1877,
Bell had applied for and been issued two further patents. Both were also
nominally based upon improvements in telegraphy, but taken together with his
first two patents, they acted as the technological foundation of the early
telephone development of the Bell System, just as the Bell Patent Association
formed the base of future Bell System organizational development. It would be
interesting to know whether any of these three men ever had an inkling of what
was to follow.
If they did not
foresee the Bell System, at least they foresaw the value of the speaking
telephone itself. They also saw the difficulty of making anyone believe in what
Bell had invented. Even Hubbard, only six months before, had believed firmly
that spoken words could never be carried over a wire.
Publicity was
needed, although it was not called publicity at the time. Hubbard urged Bell to
demonstrate his new instrument as well as the further improvements Thomas Watson
had produced at the Philadelphia Centennial Exposition that summer: Bell thought
not, and here's where Bell's love for Mabel Hubbard firmly intrudes into Bell
System corporate history. Thomas Watson had worked weeks polishing up his
telephones and Mabel Hubbard thought that a trip to Philadelphia to display and
demonstrate them was a certainty. Further, she thought that Bell was going to go
with her and her father and her uncle to do this. Bell went down to the station
to see them off, fully intending to return to the Boston Deaf School to continue
working. But when Mabel discovered that Bell was not going, she burst into
tears. And Bell, a true if impulsive lover, jumped aboard what one hopes for
dramatic context was a moving train, and arrived in Philadelphia without baggage
of any kind.
What happened at the
Philadelphia Centennial was colorful, but also vital to the success of Bell's
invention. The real drama occurred on June 25, 1876. It was hot and muggy in
Philadelphia and not many people were attracted to Dr. Bell and his complex
scientific experiment setup. This disinterest extended to the group of
distinguished persons moving slowly through the steaming hall, judging exhibits.
But the party happened to include Dom Pedro do Alcontara, the Emperor of Brazil,
whom Bell had met several weeks before at the School of the Deaf in Boston. The
emperor recognized Bell and, apparently, was delighted to see an old friend, for
he stopped the entire judging group and lured them over to Bell's exhibit just
as the group was disbanding for the day. This was most fortunate - another
moment of truth in the history of the telephone - for Bell was on the point of
returning to his real work with the deaf in Boston and would not have been on
hand to demonstrate his invention the next day when the judges planned to
return.
The judges listened
in amazement as Bell recited all of Hamlet's soliloquy, and Dom Pedro exclaimed
in wonder, "My God! it talks!"
And it was, in
truth, a wonder. This demonstration caused a surge of interest in the telephone.
It also rekindled the enthusiasm of Bell, Hubbard and Sanders. That successful
exhibition also showed the Bell Patent Association a new way to attract needed
operating capital. Sanders, who had put up more than $100.000, was running out
of money, and people back home in Hartford were beginning to call the telephone
"Sanders' Folly." The answer was public demonstrations with paid
audiences.
In the
pre-television and movie world, readings, lectures and scientific demonstrations
were high in the lists of public amusements suitable for both ladies and
gentlemen, and Bell's telephone proved to be among the better attractions. Bell
would appear upon one stage and Thomas Watson and a man named Fred Gower who was
hired briefly as their business manager would appear on two other stages, each
with its paid audience. Then they would talk and sing to each other.
Occasionally, Watson would be at home rather than on stage. It was in the course
of one of these demonstrations that Watson built the first telephone booth,
constructed of blankets and barrel hoops, to protect the tender ears of his
fellow-tenants from his amateur trumpet-playing and singing.
Alexander Graham
Bell married Mabel Hubbard on July 11, 1877 and shortly afterward passed out of
the telephonic picture, other than to place a few demonstration calls on
important occasions. Bell's interests moved onward. He and Mabel went to Europe
on their honeymoon, and while there Bell showed off the telephone to more
audiences, all enchanted with its uniqueness. One of these audiences was with
Queen Victoria and she, it is said, was impressed by the new instrument. Bell
also continued his work with the deaf while in Europe and returned from the trip
fully convinced that he must spend the rest of his life scrimping and saving on
the salary of a poor teacher and lecture-demonstrator.
One major reason for
Bell's depression stemmed from the fact that, although the public was both
bemused and amused by the telephone during the first year of its public life, it
was not inflamed by its economic possibilities. Nevertheless, just before Mr.
and Mrs. Bell left for Europe, on August 4, 1877, the three members of the
patent agreement met to form the Bell Telephone Company to look after the
telephone's interests, with Hubbard as Trustee. This company had one full-time
employee, Thomas Watson, who was paid $3.00 a day in wages, and, somewhat more
importantly, was given a one-tenth interest in all the patents the company
owned. While Bell sailed to Europe to promote his invention and work with the
deaf, Watson stayed at home. His was the honor of being the first research and
development arm of the Bell System-forerunner of the vaunted Bell Telephone
Laboratories.
As Watson improved
and improvised the art of telephony, Hubbard and Sanders went about tying to
make it pay.
Gardiner G. Hubbard
had been for some time the attorney for the Gordon-McKay Shoe Machinery Company,
a firm which manufactured shoemaking machines. That firm had the policy of not
selling its machines, but leasing them instead, retaining title and collecting a
royalty on each pair of shoes produced. This was not a unique policy, but it
convinced Hubbard that here was the best way to make Bell's invention pay off.
Hubbard stuck by his conviction in the face of great pressures, both economic
and familial, for even Mabel wanted her father to make some money quickly by
selling instruments. Mabel's pressure was not entirely familial, for her husband
had assigned to her his stock in the Bell Telephone Company as soon as it was
issued. The first 5,000 shares of stock were distributed among the company in
this manner: ten shares for Mr. Bell; 1,497 shares for Mrs. Bell; 1,387 to
Gardiner Hubbard; 100 shares to Mrs. Hubbard; 1,497 shares to Thomas Sanders;
499 shares to Thomas Watson, and ten shares to Hubbard's brother, C. E. Hubbard.
On August 10, R. W. Devonshire was hired to do the bookkeeping, becoming the
second full-time employee of the corporation and the first commercial manager.
Shortly after Bell
left for Europe, and soon after the company was formed, Hubbard's spirits
dipped, and the Bell System almost stopped before it started. Hubbard offered to
sell all the Bell patents to William Orton, president of the powerful and rich
Western Union Company, for just $100,000. This was less than Sanders'
investment, but at least it was something.
Western Union would
have none of the "electrical toy," seeing no possibility of the
telephone's aiding Western Union. That decision must stand as one of the
greatest corporate blunders of all time, even outshining Hubbard's decision to
try to sell. His offer rejected, Hubbard held firmly to his policy of not
selling telephones. That proved as wise a decision as Orton's was unwise.
Both are examples of
business decisions made relatively quickly, but which have had great impact on
millions of people over many decades. Corporate decisions frequently prove to be
as important to the world at large as they are to the corporation. But since
they are made by human beings they possess the potential for human fallibility.
Thus, Orton, chose wrong and Hubbard chose right, and the Bell System's history
continued.
Another critical
corporate decision was made at this time -- to organize still another
corporation to operate Bell's telephones locally. When the Bell Telephone
Company was formed on August 1, 1877, there were only 778 telephones in
operation, and more money was needed for operating them and adding to their
number. This time it was Sanders' decision that made the difference. He
convinced a number of men from Massachusetts and Rhode Island to put their money
into a firm dedicated to development of the telephone in New England. And so the
New England Telephone Company was formed. There is no direct connection between
this firm and the present New England Telephone and Telegraph Company, but,
still, this firm, incorporated February 12, 1878 -- two days less than two years
after Bell's first telephone patent application -- was, in fact, the forerunner
of Bell System's operating telephone companies.
The articles of
incorporation committed the new company to follow Hubbard's stated policy of
leasing rather than selling and also required it to buy its telephone
instruments from the Bell Telephone Company only, at a price of $3.00 for
telephones and $10 for "magneto calls."
As telephonic jargon
begins to pile up now, it may help to pause for a closer look at what Watson had
created from what Bell had invented, and to find out how the telephone worked.
Had Bell's telephone not worked successfully, or successfully for its day, the
next installments could never have followed. Return
to Table of Contents
Sound
Waves and the Early Telephone
Once one understands
what Bell caused to happen when he invented the telephone, one wonders why it
took him so long to get around to it. And not only Bell, but Elisha Gray, or
Thomas Edison, or any of the other many men of science who were inventing
technological wonders during, the Nineteenth Century.
The reasoning behind
the telephone was simple enough. The first step toward it, the telegraph, was
simplicity itself, since it consisted only of breaking an electrical circuit
between two telegraph instruments in a pre-decided manner, thus allowing it to
be translated into words. As soon as men had demonstrated that current flows
along a wire, long before they had demonstrated why it does so, it was a simple
step to make it stop flowing. The next step was much more difficult. Bell, and
all the other people who cared to consider it, knew that the voice -- and, for
that matter, all sounds -- were carried to the ear through varying sound waves
which vibrated the eardrum. The eardrum vibrated other small bones until a nerve
picked up the vibration, and sent the result off to the brain where it was
translated into intelligence. But a voice, Bell knew, vibrates everything around
it as well as ear drums. The vibration is slight, but with sensitive equipment
it could be picked up. The question was, how could this vibration be picked up
and superimposed upon a current flowing along a wire and then be picked up again
at the other end?
Bell reasoned that
any sensitive diaphragm could act like the eardrum. He and Watson, after months
of frustrating experiments, discovered that these vibrations could be
transmitted. On the evening of June 2, 1875, that point was proved, although, as
already told, it was proved by accident. The result was that Bell then knew that
when he fastened a thin magnetic reed to a small drumhead and placed a
battery-powered electromagnet behind it, the reed vibrated back and forth in
response. First it had vibrated at the twang of a reed, and later to the sound
of his voice. The reed vibrated first toward the magnet and then away, causing a
current to flow in the coil around the magnet, first in one direction and then
in another. A wire connected to the coil of the electromagnet on one end and to
a similar device on the other end carried these vibrations and caused, finally,
a second reed to vibrate identically with the one at the sending end.
Bell and Watson
revised and refined for nearly a year until, on March 10, 1876, the first
intelligible words were transmitted. Watson kept on working, to improve the
instrument, but always it worked on the same principles. A telephone user held
the instrument to his mouth when speaking and quickly placed it to his car to
listen. Volume was controlled solely by vocal power.
One of the early
instructions to customers published by the New York Telephone Company just a few
years later, stated, "After speaking, transfer the telephone from the mouth
to the ear very promptly. When replying to a communication from another, do not
speak too promptly, give your correspondent time to transfer, as much trouble is
caused from both parties speaking at the same time. When you are not speaking,
you should be listening." Good advice!
Telephones worked
for 13 more years before Sir J. J. Thompson, an English physicist, isolated the
electron and scientists finally understood why electrical current flows and,
therefore, why the telephone worked. Very simply, electrons "flow"
along a wire, almost analogously to water flowing in a pipe. The flow of
electrons can be varied by using one or a number of devices, like valves in a
water system. The telephone instrument is, of course, one variety of electrical
valve. The English still call radio and television tubes, valves, which, in
fact, they are.
One early
advertisement reads thus: "Oh! no, the telephone wires are not hollow; the
voice is transmitted by waves of electricity." And, as a matter of general
interest, the ad continues, "Telephones are rented only to persons of good
breeding and refinement. There is nothing to be feared from your conversation
being overheard. Our subscribers are too well-bred to listen to other people's
conversations".
Thomas Watson
remarks in his memoirs, apropos of the next step in the development of
telephony, "It began to dawn on us that people engaged in getting their
living on the ordinary walks of life couldn't be expected to keep telephones at
their ear all the time while waiting for a call, especially as it weighed about
ten pounds then and was as big as a small packing case, so it devolved on me to
get up some sort of a call signal. We used to call by thumping the diaphragm,
through the mouthpiece with the butt of a lead pencil. If there was someone
close to the telephone at the other end, and it was very still, it did pretty
well, but it seriously damaged the vitals of the machine and therefore I decided
it wasn't really practical for the general public; besides, we might have to
supply a pencil with every telephone and that would be expensive. Then I rigged
a little hammer inside the box with a button on the outside. When the button was
thumped the hammer would hit the side of the diaphragm where it could not be
damaged, the usual electrical transformation took place, and a much more modest
but still unmistakable thump would issue from the telephone at the other end.
"...But the
exacting public wanted something better, and I devised the Watson 'Buzzer"
-- the only practical use we ever made of the harmonic telegraph relics. Many of
these were sent out. It was a vast improvement on the Watson 'thumper' but it
still didn't take the popular fancy. ... It brought me only a fleeting fame for
I soon superseded it by a magneto-electric call bell that solved the problem,
and was destined to make a long-suffering public turn cranks for the next 15
years or so."
The crank generated
a current which made an indicator flop at the central office, or, if two
telephones were simply connected together, rang at the other telephone. And that
explains the reference to a $10 charge for the mysterious magneto call mentioned
earlier.
And now we come to a
new term, "central office." Obviously, the value of the telephone
network to the user increases in direct proportion to the number of telephones
connected to it, and only two telephones connected don't make much of a network.
Therefore, the central office, or exchange, as it was called during the early
days, was opened. Here, all locally installed telephones were terminated on a
switch, very simple at first, but growing increasingly complex as more and more
telephones were connected. This switch, grown large, became a switchboard.
Five days after
agreement had been reached to form the New England Telephone Company and more
than two weeks before its legal incorporation, the first telephone exchange
opened on January 28, 1878, in New Haven, Connecticut.
The persons employed
to operate the switchboards were quickly dubbed operators. A New York paper's
editorial declared, "Telephones will throw the messengers and errand boys
out of their jobs!" Then it asked, "And what will all the poor widowed
mothers do then?" The answer was obvious when these boys were hired as the
first operators. Their usually unrefined, uneducated voices slashed upon the
"well-bred" ears of the telephone customers. Great relief was felt
when young ladies began to replace the boys at the switchboards and speak with
cultured tones to the customers. The first female operator, hired September 1,
1878, was Miss Emma M. Nutt, and she was a big hit.
By 1881, to skip
ahead a bit, a telephone company report stated, only nine cities of more than
10,000 inhabitants in the United States and one of more than 15,000 are without
a telephone exchange."
In short, the
telephone, though still not without its detractors, was a success. It worked and
was found to be very useful, indeed. It was also found to be vulnerable. For it
was only a few months after Hubbard had offered the whole thing to Western Union
for $100,000 that Western Union people came to realize what a truly unwise
decision they had made. And this opened the door for the next major drama in the
corporate development of the Bell System. The scene is reminiscent of the battle
between David and Goliath. And, hard as it is to imagine, the Bell System played
the part of David. Return to Table of Contents
Western
Union Reacts Vigorously
By 1878, Western
Union, then at its greatest peak of success and power, had grown accustomed to
absorbing smaller telegraph-related companies voraciously. One of these was
called the Gold and Stock Telegraph Company and operated the device which was
the direct ancestor of the stock ticker. When Western Union bought it in 1871,
the Gold and Stock Telegraph Company operated 729 instruments. Western Union
increased the number yearly until 1878 when, to its alarm, the company
discovered that stockbrokers preferred two-way conversations over the telephone
to one-way stock tickers and were, therefore, busily ordering telephones
installed.
Western Union, aware
finally that the telephone might have some use after all, immediately organized
the American Speaking Telephone Company as a subsidiary of the Gold and Stock
Telegraph Company. Western Union bought Elisha Gray's patents and commissioned
Thomas A. Edison to get busy and invent some better telephones.
There are many
historians who firmly believe that Gray, and not Bell, invented the telephone.
Gray certainly thought he had invented it.
As was noted
earlier, Elisha Gray filed a caveat at the Patent Office in Washington only a
few hours after Alexander Graham Bell applied for his patent. A caveat was a
declaration by an inventor that he was working on an invention which he has not
yet perfected. Caveats are no longer permitted at the Patent Office, but at that
time they counted as a patent. Since, in truth, neither Bell nor Gray had
actually produced a device to "transmit the tones of the human voice,"
as Gray's caveat read, those few hours were very important to Bell and to the
Bell Patent Association.
Gray and Bell later
corresponded with understandable heat on the subject of which one of them had
actually invented the telephone, and perhaps Gray conceded to Bell. Whether one
believes that he did so depends upon what connotation one places on the words
Gray wrote to Bell on March 5, 1877:
"Of course
you have no means of knowing what
I have done in transmitting musical sounds.
When, however, you see the specification you
will see that the fundamental principles are
contained therein. I do not, however, claim even
the credit of inventing it, as I do not believe a
mere description that has never been reduced
to practice in the strict sense of the phrase
should be dignified by the name 'invention.'"
Elisha Gray's story
did not end with this defeat, incidentally. By the time he filed his caveat he
had already invented a superior telegraph repeater and earlier, in 1869, he had
established with Enos Barton, the firm of Gray and Barton, Electrical Appliance
Manufacturers. Shortly thereafter, General Anson Stager, vice president and
general manager of Western Union, became a silent partner. Stager, who had been
Lincoln's communications officer in the Civil War, had Gray and Barton move
their firm from Cleveland to Chicago in December 1869. In 1872, Stager worked
out a merger with a Western Union instrument shop in Ottawa, Illinois. Under the
reorganization the company became the Western Electric Manufacturing Company.
General Stager was principal stockholder but Western Union also had an interest.
Later, the Western Electric Manufacturing Company became Western Union's sole
source of supply for instruments.
The first thing
Thomas Edison did for Western Union was to invent a telephone transmitter that
was far better than anything in use by the Bell Companies; and it was a hard
blow to take, as can well be imagined. It was also a very good selling point for
Western Union's American Speaking Telephone Company. Not only did Western Union
offer better equipment, it also offered a great network of existing wires, a
very strong financial position and a huge reputation with a loyal following. The
outlook looked dim indeed for the Bell people, who had, at the time, none of the
above advantages. Western Union even went so far as to buy a controlling
interest in several local Bell exchanges, particularly in the Middle West.
What the struggling
Bell organization needed was a man to move mountains. And Gardiner Hubbard knew
one -- a young railroad mail superintendent down in Washington, D.C. named
Theodore Newton Vail. Hubbard hired Vail away from the Post Office and brought
him up to Boston and into the telephone business to serve as general manager,
organizer and promoter of a company newly formed to provide telephone service
outside of New England. The new corporation was called the Bell Telephone
Company after its predecessor and was incorporated on July 30, 1878 in
Massachusetts, as the other two Bell companies had been. Vail's job was
gigantic, but he swung into action with a will. Vail's previous employer, the
Assistant Postmaster General, incidentally, was not pleased and wondered
publicly why a man of "Vail's sound judgment" should throw up a good
job with the Post Office "for a damned old Yankee notion (a piece of wire
with two Texas steer horns attached to the ends, with an arrangement to make the
concern bleat like a calf) called a telephone."
The first thing Vail
did was to send a copy of Bell's patent to every Bell agent in the country,
along with a fighting letter asking them to hold the fort against all attacks.
"We have the original telephone patents," he stated. "We have
organized and introduced the business and do not propose to have it taken from
us by any corporation." In another letter he wrote, "We must organize
companies with sufficient vitality to carry on a fight, as it is simply useless
to get a company started that will succumb to the first bit of opposition it may
encounter."
About five months
after Vail arrived, the Bell Telephone Company was at its lowest ebb. The Bell
treasury -- as well as Sanders' pocketbook -- was empty and many salaries had to
go unpaid. Bell himself returned discouraged, tired and sick from his trip to
Europe and was admitted to the Massachusetts General Hospital. And then Francis
Blake invented, and Emile Berliner improved upon, a transmitter which they
offered to the Bell interests. The Blake transmitter was at least equal to, if
not better than Edison's transmitter. Shortly afterward another instrument was
developed for the Bell companies and made available to Bell subscribers which
had its transmitter and its receiver separate so the user no longer had to be a
juggler to carry on a conversation. With new blood in its veins, the Bell
enterprise was back in the battle.
In the spring of
1879 the New England Telephone Company was merged with the new Bell Telephone
Company to form the National Bell Telephone Company, with Vail as the general
manager.
And then, just when
things were looking up, Western Union struck back by attacking what had been
considered a Bell stronghold, Massachusetts. So Vail returned the fire with a
suit for infringement of patents against the Massachusetts Western Union agent.
Thus did David face
Goliath in a showdown: a relatively small ($450,000) corporation with little
more than great faith in its ability to do the best job, with little history,
prestige, power or influence arrayed against a giant ($41,000,000) firm
controlled by two of the biggest financial tycoons in the United States, William
H. and Cornelius Vanderbilt. It looked bad for Bell, but the tide of battle
turned when Jay Gould attacked the other flank in an attempt to gain control of
Western Union. Gould, like the Vanderbilts, was one of the financial giants of
the day and those giants delighted in attacking one another. Gould did finally
gain control of Western Union, but not for several years after the Western
Union-Bell fray.
Western Union
leadership looked at the odds, at its problems, at its priorities and weighed
the advantages and disadvantages of a court battle with Bell to decide if Bell
was to get what Western Union considered a minor segment of its total business.
Western Union retreated before a court decision was reached, agreeing to sell
all its telephones and systems-about 56,000 telephones in 55 cities-and leave
the telephone business alone from that time on. Return
to Table of Contents
The
Corporation Grows:
The First Few Years with Vail
A. G. Bell's
inventive genius and basic involvement in people's problems, Thomas Watson's
Yankee ingenuity, Gardiner Hubbard's organizational abilities and Thomas
Sanders' business acumen had joined to bring the Bell organization through its
first hard months, the formative ones. The time had now come for the Bell
Company to achieve organization, to make its first tentative moves toward
attaining the corporate heights it was to reach after the turn of the century. A
new mentality was needed to bring this about, a new kind of man; for successful
corporations, unlike successful inventions, are never the result of pure
serendipity. They are the result of planning and thought, judgment and action by
men, and usually by one man leading others.
In Theodore Newton
Vail, the Bell Company found its leader. Vail was at heart a Westerner, willing
to fight hard for what he believed and not adverse to applying a little
unconventionality in making his point when he knew he was right. His authority,
wisdom, and far-sightedness changed the Bell organization from a struggling
little firm. Boston-based and New England oriented, to a vital, huge,
nation-wide System. But Vail didn't do all this at once. He did it in two bites.
He worked to build the Bell companies from 1878 to 1887, then, finding the old
guard too deeply entrenched to use him adequately, left the business. He
returned in 1907 to lead the enterprise through another period of drastic
change. Both times he was invited to join by men on the inside looking for help.
Theodore Newton Vail
was born in Carroll County, Ohio, near the town of Minerva, but his parents
moved to Morristown, New Jersey, when he was a small boy. He grew up in
Morristown and worked in the local drugstore during the early years of the Civil
War. Vail's parents, it seems, installed their bright son in the drugstore with
the intention of interesting him in medicine so that he might pursue a
successful career as a doctor. Vail, on the other hand, was fascinated instead
with the telegraph sending and receiving office located in the drugstore. He
spent much of his time studying it, learning how it operated and, finally,
operating the instrument.
This state of
affairs came to an end when Vail's parents advised him they had decided his
career should be medicine. Strong-minded in early life as well as later, Vail
advised them, in turn, that he would have none of medicine, wanted to work in
telegraph and that if they didn't like it, he would leave home. His parents, it
turned out, didn't like it; so Theodore Vail stormed off to New York City where
he got a job as a telegrapher with Western Union.
A year or so later,
Vail and his parents, having patched up their quarrel, moved out west to
Waterloo, Iowa. Little is known of Vail's life in Waterloo, except that while he
was there he organized a baseball team. The records show that on at least one
afternoon, Vail's future organizational abilities were apparent. That memorable
day Waterloo beat Cedar Rapids 84 to 30, with 33 runs being scored in one inning
alone. Such success had to be a harbinger of future greatness.
Later, Vail got a
job further west, in Wyoming, again as a telegrapher. Then, with a boost from a
locally influential uncle, he moved up to the post of mail clerk. Vail found
that nothing he had done so far in life, including baseball, was as interesting
and all-consuming as solving the organizational problems of mail scheduling.
Vail introduced new concepts, developed new charts and systems of scheduling. He
made such a name for himself, in fact, that he was brought back to Washington,
D.C. where he rose to the post of Chief of the United States Railway Mail
Service. As has already been disclosed, that is where Gardiner Hubbard met him
and became highly impressed with Vail's management abilities.
In May, 1878, Vail
agreed to take charge of the small telephone company up in Boston. He gave up a
secure, $5,000 a year job in Washington to take on a $3,500 a year job with a
highly uncertain new firm. Congressman "Uncle Joe" Cannon, then a
young member of Congress, wrote to friends that he was very sorry that the
upstart telephone backers had "got hold of a nice fellow like Vail."
It was, had Cannon realized the truth, closer to say that Vail had got hold of
the telephone business. And he continued to manage it for the next nine years in
the name of various groups of Boston-based financiers.
Vail's biggest
problem initially as general manager of the telephone company was, of course,
money. Where to get it, when the whole world knew that within months, maybe
days, Western Union was going to take over? Hubbard had tried to raise money,
but had not raised enough. Exhausted and discouraged, he was on the verge of
relinquishing his control of the firm. In an attempt to build national business,
he had given away telephone franchises in Chicago, Philadelphia and New York.
Vail discovered almost immediately that the New York franchise holders had done
little more than open offices. Sales and service were next to nothing. Vail's
idea then was to sell stock in the New York Company, with a percentage to be
held by the Bell Company in Boston as payment for the franchise. Once the local
company was in operation, further income would be realized through dividends
paid from income derived from local rental charges.
Vail extended this
practice to other franchise companies, setting a pattern which, when refined and
broadened, would result in the present Bell System associated company
organization.
Vail's second major
triumph occurred during the bargaining with Western Union after the patent
infringement case had been instituted in 1879. Rather than give up the telephone
business entirely, Western Union first agreed to accept the proposition that
Bell and not Elisha Gray had invented the telephone. Then Western Union proposed
to share the nation's telephone business with the Bell Company on a 50-50 basis.
Vail, with the rest of the Bell Company management's agreement, refused the
offer. Then Western Union offered to leave the local business to the Bell
telephone companies, but suggested that because of its own wire network
stretching across the country, Western Union should connect the local exchanges
with long distance service.
The proposal seemed
to make sense and some Bell company managers urged that it be accepted. But Vail
hesitated. He saw only too well the logic of Western Union's offer, but he also
foresaw that long distance toll service would eventually be highly profitable.
Vail also reasoned that if the thousands of Bell exchanges around the country
were cut off from each other, then the Bell organization would be weakened to
the point of becoming powerless. It would be a communication company without
internal communications. In the end, Vail's objection and reasoning prevailed.
Western Union's bargainers came to understand that the businessmen and company
directors in Boston were the financiers, but Vail was the operating head with
whom they must do business.
The final agreement
which was reached -- almost entirely of Vail's forming -- was that Western Union
would get out of the telephone business and stay out, that it would let the Bell
companies have access to all the patents Western Union had developed and owned
dealing with the telephone, and that Western Union would pay 20 per cent of all
the costs of any new telephone patents developed. In return for this one-sided
agreement, Western Union would receive 20 per cent of all rentals or royalties
of the Bell Company. Vail also committed the Bell Company to staying out of the
telegraph business entirely, and the Western Union people thought they had
really pulled one off.
There can be no
doubt that Vail was a shrewd and hard bargainer; but there can also be no doubt
that he was either very lucky or was equipped with an ability to see into the
future which none of his peers possessed. For example, Vail seemed to understand
the future importance and potential of the nationwide telephone network only two
years after Bell invented the telephone. Vail must also have foreseen that the
telephone was bound to eclipse the telegraph in importance and size after it had
been further developed and perfected. Finally, Vail must have known that the
development of a holding company with its resulting stock sales and dividend
payments would ultimately supersede the current Bell Company policy of rentals
and royalties. Such policy was then the primary means by which local telephone
companies fulfilled their financial obligations to the holder of Bell's patents
and licenses. When that policy changed, the 20 per cent royalty payment to
Western Union soon approached the minimal. This displeased the folks at the
telegraph company, who came to see that once again they had made the wrong
decision.
On all three of these points, Vail was proved right and Western Union wrong.
Vail later admitted, in 1912, that he and his fellow Bell managers knew that the
status of Bell's patents was "somewhat uncertain: What we wanted to do was
to get possession of the field in such a way that, patent or no patent, we could
control it. No exchange could exist without being tied up with every other
exchange."
One wonders why the
Western Union people did not realize the same thing. For, as soon as Western
Union gave up its telephone patent rights to Bell, the last uncertainty
disappeared until 1893 and 1894 when the patents were due to expire. Meanwhile,
the Bell companies had a clear field for more than ten years, long enough to
establish a well-based national system.
The immediate result
of all this success at the bargaining table was that the National Bell Telephone
Company no longer had a large enough capitalization to operate the business.
Demand for new telephones, plus the addition of 56,000 Western Union telephones,
increased immensely the firm's need for money. It was then that the Bell
management went to the Massachusetts legislature and asked it to pass a
legislative act allowing the incorporation of the American Bell Telephone
Company, capitalized at $10 million. The legislation was necessary because
Massachusetts law limited the capitalization of incorporated entities to below
what was needed to operate the Bell companies as they stood in 1880. W. H.
Forbes and R. S. Fay, both Boston financiers and leaders of the old National
Bell Telephone Company, were named trustees of the new company. It was formed on
April 17, 1880, for "the purpose of owning, operating and licensing
electric-speaking telephones and other apparatus and appliances pertaining to
the transmission of intelligence by electricity."
The American Bell
Telephone Company was granted one more thing by the Massachusetts legislature,
and that was the power to own stock in its licensees and in other companies as
well. Such ownership was not to exceed 30 per cent of the capital stock of a
corporation doing business in Massachusetts.
Theodore N. Vail was
still there, running the new company, for he was retained as General Manager.
His old mentor, Gardiner Hubbard had stepped down to become a director, no
longer involved in active leadership of the Bell companies.
Vail, operating head
of a new, bigger organization, proceeded with his plans to strengthen it still
further. He saw beyond 1894 when Bell's original patents ran out and the
corporation's legal protection from competition disappeared. Somehow, Theodore
Vail, in 1880, was able to see the far-future potential of the telephone, a
potential seemingly limited only by the growth of the American population.
Today's great population growth is one thing Vail did not foresee, however, and
the problems coincident with that growth cause difficulties as serious to
today's managers as those of Vail's time were to him. Return
to Table of Contents
A
Little Engineering...
Vail understood the
problems of growth even before the construction of the first successful
"long line" was completed and in use between Boston and New York City
in 1884. The definition of a "long line," for the purpose of history
is any long distance telephone line connecting points within different operating
telephone companies.
This would appear to
be an excellent spot to pause briefly in order to inspect a most basic point in
telephone engineering. It's a simple point, but easy to overlook. Alexander
Graham Bell, for example, overlooked it when he dreamed of the day when all
Americans would sing The Star-Spangled Banner together, over the telephone,
across the breadth of the land.
It does not work
like that, because: It takes one line to interconnect two telephones. It takes
three lines to interconnect three telephones; it takes six lines to interconnect
four telephones; it takes ten lines to interconnect five telephones; it takes 15
lines to interconnect six telephones; it takes 21 lines to interconnect seven
telephones; it takes 27 to interconnect eight telephones; and that's how it
keeps on going and growing.
When there are more
lines required than it is economically or physically possible to interconnect
directly, another answer must be found: the central office. Each telephone is
interconnected through a switching system of some kind in the central office
with all other telephones working out of the central office. Central offices
can, in turn, be interconnected, just as telephones, but the same sort of
engineering progression occurs. This makes it necessary, finally, to develop
"central offices for central offices" in densely populated areas and,
for that matter, central offices even for those central offices. It follows
then, that the more interconnections are added, the more expensive the
installation, it's the opposite of "cheaper by the dozen."
All this was far in
the future, of course, but Vail became increasingly aware that future success
would force greater expenses as the system grew during the 1880's. Telephone
systems today are engineered to be able to handle service requirements during
the busiest hour of the day. But even during that busiest hour, not nearly all
the telephones in a central office are in use at a given instant of time. If
everyone in the United State picked up his phone simultaneously in order to sing
the National Anthem, as Bell dreamed, none of the phones would work, for all the
central offices across the country would be busy. It would be economically
impossible to allow for that moment of absolutely total use to come about
through the telephone system because all of that extra equipment would have to
sit idle after the song was done. Even on a more realistic level. it would be
economically unreasonable to engineer telephone systems beyond the needs of what
telephone operating and engineering people call "busy hour."
Fortunately, there are other answers available today to satisfy nation-wide
instantaneous communication for the entire population: radio and television.
Vail and his fellow
telephone people discovered, as the 1880's continued and more and more
telephones were installed, that more and more equipment became necessary if
telephone service was to continue its growth and high quality service was to
endure and improve. This fact led to some basic policy discussion and
disagreement in 1885. But first let's review an event that occurred in 1881 -- a
direct result of the Massachusetts legislature's allowing the American Bell
Telephone Company to acquire other firms-an event which would forever change the
face of the fledgling communications company. Return
to Table of Contents
Research,
Manufacture and Western Electric
The first period of
Bell System research and development could be said to have taken place in
Alexander Graham Bell's head -- as well as in the heads of Elisha Gray and
Thomas Edison, who were also hard at work on the problem of how to make the
human voice carry over long distances. But when Bell moved into his attic to
work and later, with the backing of Hubbard and Sanders, when he moved into
larger quarters at the Charles Williams, Jr., electric factory and shop in
Boston, the long Bell System tradition of research and development commenced.
The Bell System has, by its very nature, always operated on the theory that a
better way is possible through research and development and that from this
approach will come better communications. Bell worked on his invention to this
end, and the Bell Telephone Laboratories work toward this end today.
It would be an
impossible task to separate the concept of good service from the concept of
technological experimentation and innovation within the Bell System. There were
a few years, notably from 1887 to 1907 when Bell's (and Vail's) point of view
was submerged by corporate financing. In fact, the prevailing attitude held by
most businessmen during the last half of the 19th Century and well into the 20th
Century was one of profitability first. This attitude has changed today.
American commerce has become much more consumer-oriented as enlightened
corporate self-interest, consumer advocate groups, and governmental supervision
and regulation have resulted in a more aware and enlightened consumer body.
No doubt Thomas
Watson's strongest motive to improve the basic instrument Bell had invented was
to come up with a telephone instrument which worked well enough for people to
want or rent it. When that goal had been reached, the company's next motive for
improvement was to find a transmitter which could be patented and which would be
as good or better than the one Thomas Edison had invented for Western Union. The
Bell company motive to continue to improve technologically was a combination of
scientific curiosity and a corporate objective outlined by Theodore Vail's
previously quoted remark: to progress in the field of telephony in such a way
that when Bell's original patent ran out the Bell companies would retain the
leading role in providing communications in America.
Of course, the best
way to ensure success was to search for more and better means of transmitting
and receiving the human voice -- a search which combined both motives -- and
then to patent them, after which they could be made available to the public at a
price which would return a profit and one which the public would be willing to
pay. To this end, Thomas Watson worked as did his first assistant, Emile
Berliner, the man who had adapted the Blake transmitter for public use, thereby
letting the Bell companies catch up with Western Union's technology. Berliner
was joined by George L. Anders. Watson left the telephone business after two
years, and these two men, Berliner and Anders, were joined by others to continue
the work at the Boston electrical factory. This was the small beginning of the
Bell Laboratories of today. The group's name was changed, in 1883, to the
Mechanical Department when development rather than patents became of primary
importance.
The first telephones
were made in the Charles Williams, Jr. factory but demand quickly outgrew his
capacity. In the spring of 1879 the Bell Company licensed Ezra T. Gilliland of
Indianapolis among other firms to manufacture the telephones and
telephone-related equipment which Watson and his associates designed. Then, in
November, 1881, the Western Electric Manufacturing Company of Chicago, the firm
which Western Union had built out of Gray's original electrical company,
shortened its name to Western Electric and was reorganized, still under the laws
of Illinois. This name change was suggested by the management of the American
Bell Telephone Company, possibly by Vail. American Bell was able to direct this
change because it had recently acquired the controlling stock previously held in
Western Electric by Western Union and Anson Stager.
At this time also,
the manufacturing licenses held by Gilliland in Indianapolis and by Charles
Williams, Jr., in Boston were transferred to Western Electric. Western Electric
became, at that time, the only manufacturer of Bell equipment. Several other
licenses issued earlier by the Bell Company to smaller firms had already
expired.
Two months later, on
February 6, 1882, an agreement was signed by both the American Bell Company and
Western Electric formalizing the relationship. This affiliation had continued
fundamentally unchanged since then. Today, Western Electric continues to
manufacture Bell System equipment, although its operations have expanded far
beyond that. There is no longer a written agreement limiting the Bell Companies
to buy only from Western Electric, nor is Western Electric restricted today to
sell to the Bell System exclusively.
Western Electric has
assumed other important roles in the provision of communication service. In 1901
Western Electric signed a contract with the Bell Telephone Company of
Philadelphia under which it undertook to buy and warehouse all telephone and
office supplies for that operating company. This contract formalized Western
Electric's supply activities which it had been carrying on for some time and led
to the formation of an organization which now encompasses distribution centers
all across the country. Western Electric also installs new telephone equipment
in central offices as it is needed and as new offices are opened, and is a major
government contractor.
In 1907 Western
Electric formed a new engineering division by a consolidation of Western's own
engineering staff, engaged in normal manufacturing problems and the central
engineering staff of AT&T. The latter was the direct successor of the
original Alexander Graham Bell laboratory.
The formation of
this new and stronger division was a policy pronouncement of importance. It
stated that the Bell System regarded itself as a technologically based industry.
It also implied a tacit commitment by the Bell System to supply its own
technology, if necessary, without waiting for haphazard contributions from the
outside. The newly formed organization would in time become the Bell
Laboratories.
The 1907
consolidation brought in close contact the engineering groups specifying new
apparatus with those of Western Electric charged with its manufacture. The use
of scientists to help solve industrial problems was not quite unprecedented in
1907. There had been a few scientists in the predecessor telephone laboratories,
and use of scientific method was well established. Nevertheless, technological
progress had, on the whole, very little contact with pure science. It was
largely in the hands of the individual inventor or "engineer" whose
primary training was likely to have been in drafting and shop processes. As a
result, technological progress often lagged advances in pure science by many
decades. Return to Table of Contents
AT&T
(Long Lines) Appears and Mr. Vail Exits
Between the years
1880 and 1884 a project had been underway which became more important and more
complex each year. This was the construction and use of the first long distance
telephone line to operate on a commercially acceptable level. This long line was
a project particularly dear to Theodore Vail. The line was first built from
Boston to Providence, Rhode Island, 45 miles away. This section was opened on
January 12, 1881. It was then run across Connecticut, through New Haven and
then, finally, down into New York City, 292 miles away. Theodore Vail and Emile
Berliner were present there to talk to a group in Boston at opening ceremonies
on March 27, 1884.
This long distance
line worked fine -- for an hour and a half -- before it went bad, knocked out by
a cable failure at a river crossing in Connecticut. But it proved beyond a doubt
that commercial long distance telephony was possible. The line was repaired
within two months and was finally opened for commercial public use on September
4, 1884. Prices were $2 for use in the daytime and $1 at night.
Theodore Vail had
come to believe more and more firmly that long distance lines were of prime
importance to the Bell Company's success, but long distance lines crossed the
territory of licensed telephone companies and had to use poles belonging to
them. This caused bookkeeping confusion and cost money. To solve the problem,
Vail and the other managers of the American Bell Telephone Company organized a
subsidiary corporation to render toll telephone service. This special company
was called the American Telephone and Telegraph Company and was incorporated
with an initial capitalization of $100,000 on March 3, 1885. The date is unique,
and appears again and again throughout Bell System history, for it is Alexander
Graham Bell's birthday.
The new company's
charter stated that it had been organized with the intent of "constructing,
buying, owning, leasing or otherwise obtaining, lines of electric telegraph
partly within and partly beyond the limits of the State of New York, and of
equipping, using, operating or otherwise maintaining, the same." The term
telegraph was used interchangeably with telephone for several years after the
telephone's invention.
Vail's strong hand
can be seen most firmly behind another statement in the new company's charter:
". . . the lines of this association . . . will connect one or more points
in each and every city, town or place, in the State of New York with one or more
points in each and every other city, town or place in said State, and in the
rest of the United States, Canada and Mexico, and also by cable and other
appropriate means with the rest of the known world as may hereafter become
necessary or desirable in conducting the business of the association."
And there was Vail's
dream in black and white. But it was still just a dream. Reality would follow in
time.
Surprisingly,
Theodore Vail was not a happy man at this time. His displeasure stemmed from a
basic disagreement between him and the Boston financiers who ran the company,
especially between Vail and Forbes, the American Bell president. Forbes was a
money man and he deemed dividends to be the most important output of a
corporation. Vail, on the other hand, said that expanded service was the way to
success and that the corporation's surplus money should be spent toward that end
and not distributed, nearly exclusively, among the corporate stockholders.
Vail's attitude was unique in its day. To believe that service was more
important than dividends just didn't set well. It made the men in Boston
uncomfortable, for they shared the generally held attitude in the 1880's and
1890's that the primary business of business was to make money, and that the job
of paying corporate bills should be reserved for the customers and certainly not
be undertaken by the capitalists who owned the shares. Vail felt that
bill-paying was a joint responsibility, but he was in the minority. Rather than
compromise his ideals he resigned, in 1887, for "ill health" and
immediately bought a yachts an ostrich farm and an interest in a centralized
steam heating company recently formed to supply heat to downtown office
buildings in New York.
Thus the man who
designed the organization which was to become the Bell System felt compelled to
resign because he was ahead of his time. He will reappear in 1907 when the
polities of Forbes and those who followed him in the presidency of the American
Bell Telephone Company of Boston proved to be outdated. This is not to intimate
that nothing positive happened in telephony during the intervening years. The
Mechanical Department, for example, staffed by a group of energetic and
curiosity-ridden young men, started building the awesome image of Bell Telephone
Laboratories.
The phantom circuit
was proposed in 1886 and later perfected and patented. Phantom circuits were
created by an arrangement of wires and coils, the result of which was to make it
possible to use four wires to carry three telephone conversations and one
telegraph message at the same time. The phantom circuit, and its patent, would
come in handy after 1894 when the original telephone patent ran out.
In 1888 the first
workable pay telephone was developed, and the first common battery switchboard
was patented. The latter was important because until its invention all
telephones had to be equipped with batteries. The common battery switchboard
allowed the current to be supplied from the central office. This, obviously,
made it easier to install and use a telephone.
In 1889 Angus S.
Hubbard, the general superintendent of the AT&T company in New York,
submitted a design for use in advertising long distance service. His design
consisted of a blue bell.
And then in 1891, an
undertaker in Kansas City, irritated beyond endurance because he thought he was
being given wrong numbers by central office operators, decided to take the
matter in hand and do something about it. Return to
Table of Contents
Mr.
Strowger and His Electric Telephone Switch
The Kansas City
undertaker's full name was Almon B. Strowger, and he had some good reasons for
being disgruntled with his telephone service. As the telephone business grew
faster and faster in America's larger cities, telephone central offices grew
more and more complex. The switchboards were something to behold, with many,
many operators sitting in long rows plugging countless plugs into countless
jacks. The cost of adding new subscribers had risen to the point foreseen in the
earlier days, and that cost was continuing to rise, not in a direct, but in a
geometric ratio. One large city general manager wrote that he could see the day
coming soon when he would go broke merely by adding a few more subscribers.
There was need for a
break-through of some kind, and Mr. Strowger went a long way towards providing
it. For he claimed to have invented the dial telephone system.
To be fair, he did,
but to be entirely truthful, Bell Company engineers and inventors had laid the
groundwork for him. In 1879 an engineering firm called Connolly, Connolly and
McTighe patented the first automatic telephone switch. It was the first of some
2500 such patents which would follow it, but it did not work successfully.
Neither did the others, although there is evidence that a dial was used to set
up connections on inter-office lines between Worcester and Gloucester,
Massachusetts in late 1885.
In 1884, Gilliland,
now head of the Mechanical Department, devised a customer-operated switching
technique called the village system. It was good for no more than 15 telephones,
however, and was replaced when the town, or the telephone demand in the town,
grew beyond the system's capacity. The village system, too, was considered to be
automatic when it was in use, although by today's standards it would be
considered only a complex wiring plan.
But Strowger's
system did work. It made use of many features already patented, but it worked.
Strowger kept his costs down, too. The first working model was constructed
inside a circular collar box. Strowger moved into telephony from the undertaking
business because, as the near-legend has it, he was convinced that some local
telephone operators, their power over him having cone to their heads, were
deliberately giving wrong numbers and busy signal reports to his customers in
order to drive him out of business. Without trying to find the truth behind the
suspicion, it seems, Strowger determined to find a way to rid the world of those
pesky operators, once and for all. He made a pretty good try.
The first Strowger
office could serve only 99 telephones, used buttons instead of a dial and each
telephone needed a strong battery and five wires to connect it to the central
office. During the next few years, however, these and other problems were
solved. In 1896 the first system, this time using a dial, was built by the
Automatic Electric Company of Chicago, based on Strowger's patents. It went into
operation at the City Hall in Milwaukee, Wisconsin.
Strowger's dial
system was the first in operation, but the Bell companies, too late to be
considered truly innovative -- a shortcoming which too often typified them
between 1887 and 1907 -- took over the idea and improved it vastly. They changed
the system beyond recognition and made it commercially acceptable.
In 1902 the
Mechanical Department was merged with the Engineering Department and went to
work producing an automatic office which could serve up to 10,000 customers and
which would come to the rescue of both telephone companies and their customers.
This work was done at the instigation of Frederick P. Fish, a brilliant patent
lawyer who was then president of AT&T and who was more interested in patents
than finance. The results of this work on automatic exchanges produced the
foundation of what has come to be a large part of the information carried over
the Bell System's network today: Data. Years before the computer was possible,
Bell scientists and inventors developed what they called a "sender"
which, in effect, took note of the pulses caused by the dial's rotation and sent
the information to automatic switches of various kinds. It was the first data
transmission. Return to Table of Contents
Time
Runs Out on Bell's Patents
By the end of 1892
there were nearly 240,000 telephones in use in the United States and there were
some 10,000 Bell telephone people working at running them. The Bell companies
were operating the telephones, at varying degrees of efficiency, in nearly all
large cities, leaving rural communities without service or with only one
telephone, located down at the drugstore or at the livery stable along with the
telegraph key.
As the fateful day
approached when the original Bell patents expired, conjecture rose about what
would happen next. Western Electric's newspaper, The Western Electrician,
foresaw exciting times and a positive future in competition:
Owing to the
business depression there is much unemployed capital, and
many idle factories. Many manufacturers will be eager to utilize their
plants in the production of telephones, once the patent restriction is removed.
. . .
We are on the eve of an era of active production of cheap telephones and
of a healthy competition.
But the competition
did not prove to be really healthy, or very good for the customer, the company
or even Western Electric. The American Bell Telephone Company had paid $18 a
year dividends during the years 1889-1893, due to the operating philosophy of
its management. This led outsiders to consider the telephone business a great
and easy way to make money without having to do much work. The patents would no
longer work to keep the price of equipment high and there were thousands of
towns without telephones just waiting for service. Not only that, but telephone
growth in big cities was still far below maximum. So the cities where,
presumably, it would be easier and cheaper to provide service were also ripe for
the plucking, for nearly everyone complained about his telephone service.
During the six years
following the patents' expiration more than 6,000 telephone companies were
inaugurated in the United States alone. These companies were and still are
called "independent" telephone companies. The name designates that
they are not Bell telephone companies. It somehow also carries the semantic
implication that the Bell System is not independent. It is.
The Independent
Telephone Association was formed in 1897 in order to solve mutual problems, and
has continued solving them ever since, although the problems have changed
considerably. There have been periods of stress between Bell and independent
companies, but never were relationships less friendly and more competitive than
they were during the first 20 years or so after 1893. Today cooperation and
friendship mark the relationship between Bell and independent companies.
Second, and even
third, telephone systems were introduced in some cities, and although the new
companies started with new equipment, they usually had too little financial
backing. When the new system became an old system, and during periods of high
growth like the 1890's this happened very quickly, there was no money in the
treasury for replacement. Further, the new independent companies had to offer
telephone service at lower prices than the Bell Companies in order to compete at
all successfully. Bell prices had always ("always" here encompassing
some 1-5 years) been quite high. Forbes felt that, since the costs of providing
telephone service increased with the number of subscribers, the price of service
should be based upon the number of telephones a subscriber was able to reach. In
the 1890's typical Bell charges had been between $125 and $150 a year for a
business telephone and around $I00 a year for a residence telephone, although
this varied widely between cities. The independents offered service at
considerably lower rates, some as low as $40 a year, but not usually for long.
This time of trial
and confusion for telephone companies and users was also a time of great growth
in telephone usage. By 1900, there were 855,900 telephones in service in Bell
companies alone, compared to the 240,000 in use only eight years before. It
became increasingly apparent that not only was technological help immediately
needed in the Bell companies but that financial help was also necessary. The $I0
million capitalization allowed the American Bell Telephone Company by
Massachusetts law was not enough for the growing company. Massachusetts
corporation laws were very restrictive, not only in limiting capitalization, but
also in other matters, such as the ownership of stock in associated companies
and the price at which stock could be sold.
By 1899 the
capitalization of the American Telephone and Telegraph Company, the special
company formed to provide long distance service; had increased from $100,000 to
$20,000,000. The obvious answer was to transfer the assets of the American Bell
company to AT&T in New York. On December 31, 1899 the transfer was made and
AT&T became the parent company of the Bell System, ending up at that time
with a capitalization of nearly $71 million and total assets of over $120
million. American Bell continued in existence for a few more years as a
patent-holding company, and then passed out of existence.
In 1900 the
directors of AT&T asked Theodore Vail to come back from South America where
he had gone to perform wonders in starting street car companies, but Vail was
having too much fun. Besides, he was still unhappy with his previous treatment
at the hands of the Bostonians.
So, in 1901, F. P.
Fish, the patent lawyer, became president of AT&T and was immediately faced
with problems far outside his immediate interests and talents. For one thing,
over the years most Bell management had cared little for what the public thought
of the company, preferring to deal in financial matters or do battle with the
troublesome independent companies rather than bother about public attitudes.
This had made customers and the general public less than sympathetic with
telephone company problems.
And there were some
big problems. Between 1902 and 1907, the Bell companies continued to grow at an
alarming rate. Debt grew from just over $65 million to more than $202 million.
Management found that they could no longer finance the business from earnings as
earlier management had been able to do during the simpler, happy days of the
1880's and 90's. They also found few takers when they went out looking for more
money.
This financial
problem put the Bell companies in a vulnerable position, especially as 1907 got
underway and the country hit one of its recurrent "panics," then the
name for economic depressions. Money was tight, as the saying goes, and a number
of very sturdy bankers, lead by J. P. Morgan sought to gain control of the Bell
companies. Through some complex dealings in bonds, these banking interests did
indeed gain control of AT&T debt financing, at least, and in 1907, that was
all that was needed to control the company. The first thing these banking
interests did after gaining control was to convince Theodore Vail to return.
Vail needed very
little convincing, since he had sold his interests in his South American
companies for $3.5 million, and was looking for something to do. He wrote to his
sister when she tried to tell him he was too old at 62 to start all over again,
"No, I must take it. It is the crowning thing of my life. I refused it six
years ago; I am in a position to take it now. Besides they need me." Not
only that, but a fortune teller in Paris had told Vail years before that his
greatest work would be done after the age of 60.
Vail was needed
badly. The Bell companies did not serve the public well and the public was
responding negatively. The company was in financial trouble and, worst of all,
it lacked aggressive and creative leadership. Vail took over on May 1, 1907, as
president of AT&T again, but this time at the head of the Bell companies,
and the Vail years started again.
It was another
moment of rebirth for the Bell enterprise. Return to
Table of Contents
Mr.
Vail Goes To Work
Newspapers of the
day called Theodore Vail the "Cincinnatus of Communications,"
referring to his supposedly having torn himself reluctantly from his Vermont
farm and rushing heroically down to New York to save the Bell System. There was
nothing much wrong with the simile except for the reluctance factor. Later, in
1920, the New York Times changed the line and called Vail the "Napoleon of
communications." This would have been all right, too, except that Vail was
six-feet-two.
Vail knew the
telephone business thoroughly; as we have seen, he had been in no small measure
responsible for its early growth. Had he remained with the firm from the start,
instead of taking a 20-year leave of absence, no doubt things would have gone
differently. Vail had the future of the company in his hands, but he had known
for 20 years what should be done to shape the Bell telephone companies into the
vital, growing, powerful and successfully unified organization he wanted them to
be. He wasted no time wondering what to do; he got to work.
The title of the
first section of Vail's first AT&T Annual Report to shareholders, published
in 1908 for the year 1907, is "Public Relations." This term meant to
Vail what it has almost ceased to mean today in the broader world of advertising
and public relations: Relations between the public and the corporation. Theodore
Vail was the first major business leader in America to recognize that good
public relations will build the proper climate in which to build a successful
business. To Vail "good" public relations meant honest reporting.
"If we don't tell the truth about ourselves, somebody else will," he
wrote.
Everything which had
gone before into building the Bell companies was, to Vail, over. The entire
business was in for a major re-evaluation, to be followed by major chances.
Reports from his co-workers indicates that Vail's enthusiasm affected everyone
and put new life into the company. Vail was to form the entire Bell
organization, define it and bring it back to that which he had foreseen 20 years
before.
In that same
AT&T Annual Report, Vail looked back and wrote, "during the first year
(after the telephone was invented) such of the many imaginations . . . as were
demonstrably practical were assimilated and the business was established on the
lines now followed which makes our company with its associated companies a
national system.
"Each year has
seen some progress in annihilating distance and bringing people closer to each
other. Thirty years more may bring about results which will be almost as
astonishing ... To the public, this 'Bell System' (and that's the first known
use of the phrase) furnishes facilities, in its 'universality' of infinite
value, a service which could not be furnished by disassociated companies.
"The strength
of the Bell System lies in this 'universality.'"
This last was to
become Vail's favorite phrase: "One policy, one system, one universal
service," he said. And Vail worked with that idea in mind to build the
business, to catch it up with the growth of the country, for telephony had
fallen behind during its years of financial unstability.
During the period
1907-1918 Vail molded the Bell System into its present organization or close to
it. The changes which have occurred since his retirement have been generally a
continuation of his plans. But Vail was responsible for forming more than Bell
System organization. He developed the company's public positions on the major
corporate problems of the day: Competition from independent telephone companies,
financing, governmental regulation, monopoly, governmental take-over, corporate
areas of interest (although Vail left this one the l |
