If you asked anyone who the most influential company in the telephony industry was: they would almost all answer with “Bell.” But how did Bell go from being a company formed to support a new invention to a monopoly with shady business practices and a household name, to just another forgotten name?
The Bell System started out in 1876 after Alexander Graham Bell invented the telephone. Bell founded the company in order to support his new invention, as well as joining the established (yet growing) telegraph industry. Telegraph lines were already a “big thing”, but the telephone was the “next big thing.”
With people still relying on horses-and-buggy systems to get around at local levels – and trains and steamboats for more long-distance traveling – the telegraph and telephone can be compared to the internet. It allowed for near-instant communication, regardless of how far apart you lived. The telephone was a groundbreaking inventon that could’ve been likened to the automobile.
However, telephones needed a system to operate. Much like telegraphs and the internet, a company had to be formed to install and maintain the telephone system. Enter the Bell Telephone Company – later renamed to American Telephone and Telegraph (AT&T) in 1885.
All was great for AT&T and Bell until his patent expired in 1894. This opened up an opportunity for many who wanted a piece of a pie in the telephone industry. Over 6,000 telephone countries popped up nationwide following the patent expiration. It wasn’t good news for AT&T.
A decade later, under new leadership, conditions favorable of forming a monopoly came into existance at AT&T. Theodore Newton Vail, the president of AT&T at the time, believed that there should only be one telephone company. In other words, Vail believed that his company should have a complete monopoly on the American telephone industry at the time. Vail went to work by buying up competitors – small and large.
In addition to buying up competing telephone companies, AT&T also bought out telegraph companies. Western-Union, a large corporation who had a virtual monopoly on the telegraph industry only decades prior, was now a part of AT&T’s empire. However, executives were worried that the US Government may come down hard on enforcing antitrust laws, divesting the company. With the Kingsbury Commitment, AT&T could continue swallowing small companies without any interference from the Interstate Commerce Commission.
In addition to AT&T purchasing competing companies, they also endulged in vertical integration. AT&T purchased Western Electric, who produced majority of their equipment – from telephones to switchboards to towers and waveguides. AT&T would later form Bell Labs, from which would come many key technologies we use everyday.
AT&T also took the effort to split their operations into several different regions. These regional operations, nicknamed “Regional Bell Operating Companies” (RBOCs), were parts of AT&T responsible for just one region.
Like many monopolies, bad things grew from AT&T’s business practices. AT&T started charging high prices for telephone service. Even worse, customers of the Bell System (nearly everyone) had to lease a telephone from AT&T – which was made by Western Electric (no surprise there.) AT&T would charge customers for buying their own telephones.
AT&T was known for having a standardized and strict way of operating their business. Everything, including sweeping/mopping floors, handwashing, and even changing lights, was documented in the Bell System procedures guidebook.
Divestiture
Throughout decades of gouging customers and practicing other poor business practices, the Department of Justice finally realized that AT&T was doing more harm than good.
In the early 1980s, AT&T – one of the largest businesses in the world at the time – was brought to the stand. The company was broken up into eight smaller companies – nicknamed “Baby Bells.” The original AT&T, likewise named “Ma Bell” or “Mother Bell”, had dwindled by the wayside.
For two more decades, AT&T would struggle to stay alive. AT&T, now faced with major competitors, was deemed expensive and nothing special. Their landline telephones had become an option rather than necessary to use their services. AT&T would dabble into computing – mainly with their Unix technology (more later) – but wouldn’t be successful enough to compete with the big dogs like HP, DEC, or IBM. AT&T did, however, purchase NCR – National Cash Register – which was another giant company turned microcomputer manufacturer.
Are they doing it again?
AT&T has made headlines, especially recently, about trying to return to their old habits. The company attempted to purchase media juggernaut Time Warner, causing AT&T to grow massive, once again. AT&T has recently bought other companies, such as DirecTV, Cricket Wireless, and others.
This entry was written in response to the news that the White House had shut down AT&T’s wishes to acquire Time Warner.
Lasting Implications?
The Bell System proved that any company can get big enough if given the power to do so. The Bell System is perhaps one of the largest monopolies in American history.
Many of the Baby Bells went on to be big telecommunications juggernauts that you see today. As previously mentioned, AT&T (Ma Bell) and Southwestern Bell merged to form the modern AT&T. Bell Atlantic would later become Verizon after merging with GTE. US West, later Qwest, would become CenturyLink.
Huge technological breakthroughs were a result of research at Bell Labs. UNIX, transistors, solar cells, hearing aids, the teletype, radar, and the C (and C++) programming language were all developed at Bell Labs. AT&T would later use their UNIX operating system as a foothold in an attempt to get into the computing industry, but they were only marginally successful.
AT&T was also known for their development in transcontinental, international, and satellite communications. The AT&T Long Lines network allowed telephone calls, as well as TV and radio broadcasts, to be transmitted from one coast to the other via microwave technology. AT&T co-developed Telstar, the first communications satellite to be deployed by NASA and other governments. At Bell Labs, Arno Penzias and Robert Wilson discovered Cosmic Microwave Background Radiation (CMBR) using a horn antenna.
For More Information
Internally…
AT&T Long Lines – A Forgotten System
Externally…
- AT&T’s History Pages
- Beatrice Company – Bell System History
- Long-Lines.net
This post was originally published February 22, 2018 but was removed and republished on March 20, 2018.
Updated June 19, 2023, to correct a typo.
This page written on T42, pictures/links added on T420.