History of the telephone part 2

The beginning

Meucci could not get people interested in his “Teletrophone”. Bell had the same problem but he had better connections and managed to find an excellent team to work with him on his new invention. He started the production of telephones on a very small scale, about 50 units, but found it difficult to market them. Nobody saw the tremendous potential of the telephone. People found it ridiculous, impractical and uninteresting. The idea of talking to a metal box was strange and unacceptable. The fact that in many cases it was necessary to shout because of the bad quality of the line did not add to the popularity of this new invention.

This situation was problematic for Bell. He did not have much money and could not find customers for funding or investors for funding that was necessary to improve the quality of the calls. Still he refused to give up. He was certain that the telephone would be a success and kept fighting for his idea.

In May 1877 he had his first customer – Mr. Emesy in Charleston. 3 Months later there were 771 telephones working and the “Bell Telephone Association” was established. Bell had 30% of the shares and his partners had 70%. The association had no capital.

The telephone services that the Bell Telephone Association offered to its customers were different to those that we would now expect from a modern telecom company. The biggest difference between now and 130 years ago was that in 1877 there were no telephone switches. The telephone was in its infancy and the concept of telephone switches did not yet exist. In order to understand this difference, let’s take a look at how a customer would order a telephone at that time.

First, the customer would give his name and address and also the name and address of the place he wanted to contact. For example; his office. Several days or weeks later, an installation team would come to his home and install a telephone there. Then they would go to his office and install a telephone there too. They would consequently then lay a telephone line between these two telephones and voila, the customer could call his office. Of course, he could only call his office and no place else.

Suppose the customer was very happy with his new telephone and decided that he wanted to have another line so he could also talk to his sister. This was possible but only if his sister lived in the same city. Inter local calls were not possible yet.

So for the second line the whole process would repeat itself. The installation team would install a telephone at his sister’s house, another telephone at his home and another line between them.

In spite of the long and complicated installation procedure and in spite of the high costs, demand was growing. There were many people that wanted a telephone. After several years there were so many telephone lines that the sky was almost obscured in the center of some cities.

Although the amount of customers was growing, the Bell Company still faced many difficulties. The biggest problem was capital. There was no money. The company could not find investors and could not get credit from the banks. In 1879 the situation was so drastic that Bell offered to sell his company to Western Union for 100.000 dollars. Western Union declined. “What can we do with such an electric toy” said Mr. Orton, president of Western Union. Bell had to go bijhimself. He managed somehow to keep his company afloat and continued to sell his telephone.

The breakthrough came when a company named “Gold and Stocks” replaced its telegraph machine with Bell’s telephone. Gold and Stocks was a big company, and Western Union woke up.

Western Union had a monopoly on telegraphy services in the United States. They were suddenly aware of the possibilities of the telephone and were afraid that the new telephone service would be a strong competitor to their telegraph services. So Western Union bought the telephone patents of Edison and Gray and started to offer telephone services to its customers as well.

A big battle ensued between the two companies. Bell sued Western Union for infringing on his telephone patent. Western Union, armed with both Edison and Grey’s patents, sued Bell. After a long juridical battle the two parties agreed to compromise. Bell would not offer telegraph services and Western Union would not offer telephone services. Everyone was satisfied. Bell had no intention of offering telegraph services and Western Union had little interest in the telephone. They were more interested in keeping their monopoly on telegraph services.

Western Union was a huge and powerful company but they did not realize the potential of the telephone. (Exactly as IBM one hundred years later failed to recognize the importance of software and concentrated only on hardware). The result was that Bell could now continue with his telephone services more successfully than before.

The telephone was not considered a ridiculous instrument anymore. More and more people were using it. The fact that Western Union has also started offering telephone services was for many people proof that the telephone was a serious instrument.

The recognition of the importance of the telephone brought many new customers and also many new businessmen that purchased rights from Bell to offer his telephone services in different cities. In 1881 there were 20.000 cities with telephone services. One year later there were 40.000 cities. The Bell Company was growing fast.

8 Years after the legal conflict with Western Union, the Bell Company became so powerful it bought Western Union. A new name was given to the new company: American Telephone & Telegraphy, better known as AT&T.

AT&T was a giant that had a monopoly on telephony in the United States for many years. Not only for telephone services but also for telephones, telephone lines and telephone switches.