II.

Origins

AT&T traces its roots to Alexander Graham Bell, who invented the telephone in Boston, Massachusetts, in 1876. One year later Bell founded the Bell Telephone Company and began licensing telephone exchanges to route telephone calls throughout New England. Bell Telephone Company quickly became embroiled in a dispute with the Western Union Telegraph Company, which had filed a patent for the telephone just hours after Alexander Graham Bell. As part of a compromise reached in 1879, Western Union sold its 55-city telephone system to Bell Telephone Company and backed out of the telephone business. Bell Telephone agreed to abandon the telegraph business and pay royalties to Western Union. In 1882 Bell acquired Western Electric Company, the largest manufacturer of electrical equipment in the United States, from Western Union.

In 1885 Bell Telephone created the American Telephone and Telegraph Company to finance, build, and operate the parent company’s rapidly expanding long-distance system. Many technological advances followed, including the pay telephone, an automatic dial system, and party lines that allowed several people to share a telephone line. In 1899 AT&T itself became the parent company for the entire Bell system. AT&T owned almost all of the long-distance circuits in the United States, while its subsidiary, the Western Electric Company, manufactured most of the telephone equipment. Although heavily burdened with debt, the system had more than 3 million telephones in operation by 1907. That year a group of investors led by American financier J. P. Morgan took control of the company. Morgan appointed Theodore Vail, a former associate of Alexander Graham Bell, as president. In 1909 AT&T purchased Western Union. This acquisition raised complaints that AT&T had become a trust, an illegal corporate monopoly organized to eliminate competition. In 1913 the U.S. government forced AT&T to sell Western Union and grant independent local telephone companies the right to connect to its long-distance lines. AT&T, however, maintained its monopoly on long-distance service and retained control of Western Electric. In return, AT&T president Vail agreed to accept government regulation.

AT&T developed many technological innovations, such as the first long-distance television transmission in the United States (1927), the invention of the transistor (1948), and the first transatlantic telephone cable (1956). In 1962 AT&T launched Telstar I, the first Earth-orbiting commercial communications satellite. In 1964 the company developed the Touch-Tone phone, which featured push buttons rather than a rotary dial. Beginning in 1949, AT&T faced a new series of antitrust suits. Federal officials banned AT&T from entering unregulated businesses in 1956, took away the company’s telephone equipment monopoly in 1968, and gave microwave-based long-distance companies the right to access AT&T’s lines in 1969.