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1885 One Hundred Years Ago

July 2024
2min read

On February 28 was born a business that would become over the next century one of the richest on earth: the American Telephone and Telegraph Company. Alexander Graham Bell had invented the telephone only nine years before, but since then one of the most sweeping technological revolutions of all time had occurred.

Bell had received the patent for his new device on March 7, 1876, three days before he actually got the phone to work and used it to summon his assistant, Watson. In June of the same year he displayed his invention at the Philadelphia Centennial Exhibition, and by the end of the year the device was known around the world. Nonetheless, Bell was unsuccessful in his attempt to sell all rights in the telephone to Western Union for one hundred thousand dollars.

In July 1877 the Bell Telephone Company was formed; two days later Bell was married, and he and his bride sailed off for England, where he demonstrated the apparatus for Queen Victoria. Back home the telephone was quickly becoming big business, and Western Union, in an abrupt about-face, was trying to get part of it any way it could, but mainly by challenging Bell’s patents. By now telephone wires were already darkening the skies above streets all across the nation.

By 1881—five years after the telephone was invented—only nine cities in America with populations of over ten thousand still lacked a telephone exchange. That year the first long-distance service began over wire stretched between Boston and Providence, and Bell bought the Western Electric company as a manufacturing arm. By 1884 one could pick up a phone in New York and talk to Boston.

American Telephone and Telegraph was founded in 1885, as a subsidiary of American Bell, the parent company. Its purpose was to develop the rapidly expanding long-distance lines. By 1899 Bell had prevailed in more than six hundred patent-infringement cases filed by would-be phone inventors and developers; had survived the crippling blizzard of ’88, which had wiped out most phone service throughout the Northeast; had introduced the pay phone, the automatic dial, and numerous other improvements in service; and was struggling to stay ahead of a growing legion of independent competitors springing up since the expiration of its original patents. Yet the company was still thwarted by the corporation laws of Massachusetts, under which the phone business had first been chartered. Bell needed vast amounts of capital to continue its expansion, but Massachusetts law required that any new capitalization be approved by the state legislature, and the company’s holdings in its subsidiaries were strictly limited. New York State, the home of AT&T, had much more liberal laws, so the directors of Bell, in a deft piece of corporate sleight of hand, simply transferred the parent’s assets to AT&T, folded American Bell into its former subsidiary, and moved their offices from Boston to New York. The switch took place on December 30,1899, and expansion proceeded unabated.

By the late twentieth century AT&T would become by many measures the biggest corporation on earth, the only major phone system anywhere not run by a government, and the subject of perhaps the most far-reaching antitrust agreement in history. Perhaps most tellingly, it would become the only major company known to millions by a familial, even intimate, but totally unofficial name, a name that makes light of the behemoth but at the same time hints at the complex relations one has with one’s closest of kin: Ma Bell.

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