Hell's Bells: A Radio History of the Telephone; No. 1

You're not Western Union said, they said, well, young Alexander Graham Bell, do you realize that a telegraph operator can key faster than you can talk? And do you think that people in the United States of America are going to want wires run through their homes? It was more than just an invention of a device. It was a vision of a world interconnected by wide, a world in which human speech, not the Morse code of telegraphy, was the form of communication. I never bought the idea that there should be a universal system. In fact, when they experimented with long distance Boston to Chicago, Boston, the San Francisco, they got teed off at him and fired him. Hell's bells. A radio history of the telephone. Probably 10 years ago, the world's largest corporation, American Telephone and Telegraph, was broken into eight separate companies.

This historic dissolution expanded the choices facing every consumer, and it set off a scramble in the business world for strategic opportunities undreamt of before then. This is the story of how we've come to where we are today, and this is the story of powerful forces which will continue shaping our world. From this day on, the Electronic Telegraph was invented here in the United States and patented in 1837. It was the first device to ever successfully use electricity, though scientists had long struggled to translate the dream of a sympathetic telegraph into reality. It was an artist in New York by the name of Samuel Morse, who stumbled across a design that actually worked. His remarkable invention broke through the barriers of time and space. Instantaneous long distance communication dramatically changed the character of business in America, and because telegraph connections could improve

the quality of life in every community, Morris passionately believed his invention should be a government owned public service. Yet he was unable to convince Congress to wire the nation with an electronic telegraph network. The infrastructure for the Telegraph more or less determined that the Telegraph would be a business instrument. Herb Dodik is a professor of communications at Temple University, was laid out by the postmaster, former postmaster general, who followed the path of major mail distribution systems. And it never really branched out into homes or branched out into businesses. Now, one of the reasons being once it was laid out that way, there was very little opportunity for it to even become a household device. Even when several inventions were made to make the Telegraph much easier to use a printing telegraph, a telegraph that used printers rule so that a person could actually, as the person writes or prints, the code is automatically created and sent.

Over time, the Telegraph gained popularity as a business application and control of the national network fell to one monopoly Western Union. By 1876, over 200 submarine cables extended the telegraph reach, creating a global communications network, science fiction writer and technology journalist Bruce Sterling. The Telegraph was very well spread throughout America. I mean, not only was there the regular telegraph network, but there were telegraphs and fire stations and police stations that they were specialized stockbrokers, telegraphs and so forth, and it was a big business. Automatic telegraphy could transmit 800 words per minute, outperforming Eskild Morse code operators, 25 words per minute by our nation's 101 birthday. The U.S. was wrapped in a quarter million miles of telegraph wire, delivering tens of millions of telegrams through well over 8000 Western Union telegraph offices. It seemed to everyone that nothing would ever stop

telegraphers explosive growth. Young inventors scrambled to strike it rich with the next big telegraphic breakthrough. When Bell invented the telephone, he was actually working on what's called a harmonic telegraph, which was a multichannel telegraph so that you could send he wouldn't really have to depend on two wires for one message. You could use really like a frequency modulated, a teletype or frequency modulated telegraph. But he was more interested in the human voice and in people that were deaf. In fact, Bell's wife was deaf, so he invented a telephone and his father in law, Gardner, who was a banker in New York, he saw he saw some prospect for the telephone, but he couldn't raise the money. The Boston bankers weren't interested in the telephone. I think they weren't convinced that it was going to be a good deal. They were more interested in the telegraph. He says, listen, Western Union, I've been working on the multiple telegraph, the harmonic telegraph. But, you know, I came of something by accident here.

I call it the telephone you can send you could talk over it. So I like to say this. The patent rights for I forgot the semba. Here's how it works. You put these two things on a copper wire, which you already have, and you talk over it. Isn't that great? You know, Western Union said they said, well, young Alexander Graham Bell, do you realize that a telegraph operator can be faster than you can talk? And you think that people in the United States of America are going to want wires run to the homes, put battery jars and complex scientific apparatus in their living rooms, and then on top of that, pay someone to do that? You have got to be kidding. What you've got here is a scientific marvel, a toy, no doubt one of the best inventions of the century from a scientific laboratory point of view. But from a practical point of view, your invention is absolutely worthless. So I tell you what, go back home and work on harmonic telegraph, because if we can send for telegraph messages at the same time on the same pair of wires, that's worth a million dollars to us. But your invention, well, it's valueless and it was dismissed.

They literally refused to buy his patent. They offered it to them for ten thousand dollars, which I guess today would be about a million dollars. But they just refused to do it. They referred to it as an electrical toy and actually with the telephone and its early days was not that impressive. I mean, it can only travel a very short distance, whereas Telegraph could travel extremely long distances and it didn't leave any permanent message. A telegraph left a message on paper and it had to be answered at the time by somebody waiting by the telephone at the other end, rather, the telegraph a sort of like a fax. I mean, it just arrives and you answer it at your leisure or somebody. You know, sent out to fetch it to you, and it just seemed like a much more businesslike technology. So you can see why this Western Union guy under the circumstances might have been so shortsighted as to dismiss it as a toy. Ultimately, Bell's patent would generate more income than any other patent in the history of the world.

Years later, it would become common practice for big companies to buy up new patents in related fields just to forestall the development of competing technologies. Since no one could see any obvious use for the telephone bell and his new business partners also had to invent its uses and sell both the invention and its uses to the public. The typical lecture performance demonstration with music, drama and news lasted two and a half hours before a large paying audience. While these little shows pay the rent, they weren't enough to give Bell the jumpstart. He really needed to see his vision come true. Bell's lucky break came when his father in law, a congressman, was able to get him a tiny booth at a very important trade show. Well, what happened is in July of 1876, Bell set up at the Centennial Exhibition in Philadelphia, and Emperor was the only notable person of the day who was there because it was such a hot day. And the weather has often affected history. So this notable person with his entourage and newspaper people, and that's it.

Remember, no radio, no television, they weren't invented yet. So this was the only news of the day. And for Don Pedro of Brazil walked up to Alexander Graham Bell for a little display, which was on a card table beneath a staircase in an exhibition building. And says Alexander Graham Bell, My son reads lips perfectly because Alexander Graham Bell taught us how to read lips. What do you have here? And Bell says, Well, I've got the telephone here. Take over there. Boy, he says the emphasis. I hear you perfectly. The newspaper people kept the building open after hours, taking turns talking on the phone. International headlines the next day wire big speech available over telephones. Bell's father in law got hold of Mark Twain, who's like the Johnny Carson today and gave him a telephone attached to his neighbor's house. There is no switchboard, remember, no central office, no long distance. All those things weren't invented yet. So Mark Twain wrote. He says, Of all the new inventions I've been given to try out, the biggest nuisance is the telephone. He says, my neighbor, when he sees someone coming over, interrupts my most intimate conversations in my parlor with this constant tap tap tapping at the

telephone. And I go answer the conference thing. And here's he is asking me who it is and what I'm doing and can he come over? He says, I wish I'd never had this instrument to try out instantly. Everyone ordered a telephone. So what his father in law did was essentially franchise the telephone. His father in law had been in the SHU machinery business and he knew about franchising was that is you hold on to the product and the patent and you make new developments to invent better machines and you sell the rights to the use of the machine. And that's the way he went around selling the franchise up the telephone. He would go into a community and say to the people there, you can have a franchise for a telephone system for 200 bucks. And every time you sell a telephone, you've got to give me 20 bucks or 20, whatever it is, and people who didn't know anything about technology but knew how to run wires or string wires, got a hold of the telephone and began to connect themselves up. And so you found very many early telephone

systems in small communities and in neighborhoods and in rural areas where people were connecting themselves up by running wires, on tree trunks, on fence posts and lots of other things. I think by 1888, there were telephones and as far south as Florida, as far west, they were even some telephones on Indian reservations where they were Gardner, where where his his father in law had been franchising the thing. And of course, when Bell was talking about the telephone and he was one hell of a salesman, he saw it as a something that would connect every home to every other home. And this respect, it was a lot different than the way Morse and his partner looked at the telegraph. In fact, he compared it to a water system in a city, pipes running down the street, delivering water to every household. He said there would be pipes running, wires running down the street, collecting every household to every other household with the telephone.

Bell saw the telephone immediately as a household, as a household device. But then the stock exchange people realized that if they could get word from the trading floor up to their offices quicker that this would be no joke. So they realized that Bell's early telephones were somewhat primitive and didn't work very well. They went to Western Union, who was already supplying their telegraph, says Western Union, if you can make an improved telephone, will buy them from you. So WGAN did. They made an excellent telephone. They put the stock exchange. Western Union's entry into telephony came just two years after refusing to purchase BellSouth patents. And the giant Western Union wouldn't be content to just deliver phone service to the stock market. It had hatched a plan to quickly overpower its new young rival and set about building a national telephone system led then by financier William H. Vanderbilt. Western Union bought up competing telephone patents, most notably those of Alija Gray. Gray was a respected inventor who lost his claim as inventor of the telephone in

a photo finish at the patent office. To this day, no one really knows who really filed their papers first. Michael Noel is a professor at the Annenberg School for Communications at the University of Southern California. There's still controversy over some of this is interesting that over 100 years later, there is this continuing controversy on this issue. A lot of these other people who claim to invent the phone, the telephone, the concept, whatever, before BELL. Well, all of these cases end up in lawsuits dragged through the courts. Some of these ultimately went to the Supreme Court there about maybe four or five of them that went up to the Supreme Court. In the end, the Supreme Court ruled in favor of Bell was a split decision, was not unanimous. I think it was five to four in favor of Bell. And, you know, you don't know what to make of that either. You know, here we are many, many years later, as my colleague John Pierce said. Does it really matter right now? You know, looking at this, you know, the key thing in terms of the telephone was the vision, again, was more than just an invention of a device.

It was a vision of a world interconnected by wire, a world in which human speech, not the Morse code of telegraphy, was the form of communication, was a vision of the most natural way that people communicate. They speak of a way to carry those speech signals over great distances. That was the vision and that was Bill's vision and his financial backers. That was essential because that's what created the industry. That's what created the vision. Let us say that Elijah Gray perhaps had invented the phone first, but he didn't have the vision of the business. He didn't have the vision of this interconnected universe to bolster its legal and competitive position in the telephone business. Western Union fanned the flames of this controversy over whose invention it really was. In his book Telephone, John Brooks wrote that Western Union had the financial clout necessary to dominate telephony, and it already had wires connected to

offices in every town and village in the land. American Bell was ready to do battle in court once again to defend its patents when Western Union itself the target of a hostile takeover attempt, hesitated. Instead of destroying its rival, Western Union decided to settle, turning over all its telephone patents and a network of 56000 telephones in 55 cities. In return, Bell was to give Western Union a 20 percent cut of all telephone rentals for the next 17 years, the time at which Bell's patents would expire. On news of this generous settlement, AT&T stock shot from fifty dollars a share to 1000 dollars a share. The future of the young telephone monopoly was assured. At the same time, Bell's father in law, Hubbard, was a member of Congress and he sat on the postal committee. There he observed a brilliant young executive who supervised the nation's rail delivery system. They became friends and had long talks about the potential impact

of Bell's brand new invention. In June of 1878. Frustrated with constant government meddling in postal business, the young executive, Theodore M. Vaile was lured away by Hubbard to take a key post in the fledgling Bell telephone company. Vail's first task was to defend the company against the Western Union attack. There were always the professional managers who were brought in frequently from the outside on the most important one of all, Theodore Vail was an outside manager who was brought in to, in essence, develop and invent the idea of the Bell system, the idea, the vertically integrated monopoly that consisted of research and development, your own manufacturing, your own service provider at the local level and your own long distance company just total and and control. Those were the days when the telephone in your home was owned by the Bell system, the telephone receiver you picked up that Western Electric manufactured on it. Western Electric to this day is the manufacturing arm of AT&T.

Originally it was co-founded by none other than Bell's chief rival, Elijah Gray. That that time you already had AT&T and Vale was operating it with the Boston bankers. And they were mainly interested in the business system. They wanted to make a lot of money and make it fast. But the investors didn't really care about building the business and investing in infrastructure. They were lavishing themselves and their shareholders with quick profits. But Vaile knew the technology patents were the backbone of the business. And with only six more years to go before the patents expired, Vaile wanted to reinvest profits in the long distance network and reliable underground cabling. As a former postal official, he believed in public service. Nevertheless, he was a shrewd businessman and knew that universal service presented an opportunity for AT&T to dominate new markets before the onset of widespread competition. They never bought the idea that this should be a universal system. In fact, when Vaile experimented with long distance Boston to Chicago or Boston to San Francisco, they got teed off at him and fired him because

they wanted they figured that if they could run the system from Boston to New York to Philadelphia to Baltimore to Washington and charge very high rates for businesses, they'd make a mint. They didn't need to spread it anywhere else. And in fact, they had a student one time. Look at some of the early records in the early books, and he calculated out that they would have made a fortune. American Bell was so angered with Vale that his departure was never mentioned in the annual report, and he was given no credit for having masterminded the Bell system. Meanwhile, the company enjoyed steady, profitable growth as the executives milked their cash cow. When the fierce blizzard of 1888 knocked down thousands of miles of wire in New York City, Vail's secret supporters knew his plan for underground cables would have saved a fortune. Then, when key telephony patents expired in 1893, AT&T was suddenly vulnerable to widespread competition all across the nation.

Vale had seen this day coming. But instead of investing in innovation and broad expansion, American BHEL tried unsuccessfully to maintain its monopoly grip through the control of more patents. After struggling into existence under the shadow of a Telegraph monopoly, defending its patents in court 600 times, then rising itself to become a much feared monopoly, American Bell was again on the battlefield of competition. In these early days, one must realize that the whole bell system as one entity did not exist. There were a number of independent phone companies, non cell phone companies, in some cases an independent phone company and a bell company, both in the same area, not interconnected. So if you want to reach everybody in that area, had to have two phones, two phone lines, one for the independents and one for the Bell Company. Businesses used to advertise both phones and the telephone company wouldn't

wire the farmers. They wouldn't wire the farmers because they said they're too dumb to know how to use it. Wives would get all their wives would get on the phone and compare recipes using up valuable telephone lines that could otherwise be used for business. So the farmers built their own systems. That's why you go to a place like Iowa and you'll find there something like 168 telephone companies in Iowa. Even today, at one time, there were more independent phones than cell phones out there. These independent companies were doing very, very well. Even though the telephone began in Boston and New York when the monopoly patents expired, independent growth exploded in the West. The highest percentage of subscribers per capita could be found in Iowa, Nebraska, Washington, California and Nevada. Just after the turn of the century when competition was at its peak, the number of telephones grew nearly fivefold in just five years. And in this time frame, Morgan had seized financial control

of the bell system of AT&T and the Bell system. He had total control of that, and Morgan also had control telegraphy and Morgan had this vision. And the vision was that telephony and telegraphy, all these things fit together all the same. They all were signals sent over wires. There should be a complete monopoly of the whole thing. Morgan was the great monopolist, believed in it and came across Veil. And I guess they had similar beliefs. And Morgan then bought their back to AT&T to, in essence, finalized the vision to marry the two together, namely AT&T and Western Union. Vale moved aggressively, cutting costs, raising capital, recruiting top people and establishing a research lab, the precursor of Bell Labs. Well, in the earliest days of telephony, there were no regulators. There was just no way around. You could say set whatever rate you wished. You know, this was the DNA of the robber barons and, you know, do whatever

you want, you know, get away with, you know, who cares about what do whatever. These are the days of Morgan and things of this variety, the great monopolies and things, practices that today we would consider quite unfair. So there weren't any Morgan with his financial backing, with his financial empire and control of it. And Vale, now in charge of AT&T, went through an active acquisition program to acquire these independent phone companies and bring them into the bell system, get rid of any competition either within the same area or even nearby. And I've read stories. I don't know if they're true, but I've read some of the more cynical histories of the Bell system that would say that some of the tactics used weren't exactly, by today's standards, fair business. If the independent phone company needed money to buy new equipment, more phones, they had to go to the bank. Who controlled the banks? Morgan and Morgan just simply wouldn't make the money available so they would bankrupt

the independent phone companies. Now we had a bankrupt phone company and would come the Bell Empire and the Bell Empire would buy them out and acquire them. This would be certainly kind of illegal today or. Well, then again, I guess these things go on today, too, under new disguises, don't they? But there's been no change in that world either. People invent new ways to do illegal things, so that just continues. So in that environment, the local phone companies, as we know them today, were put together. And now the government ultimately screamed over this because the independents, the ones that were left watching what was happening, were saying, oh, my God, we're going down, we're going under. This is incredibly unfair. They were going to the government and complaining about these acquisitions and also complaining that the Bell companies, the AT&T empire, wouldn't give them long distance service. And this got settled, didn't go to court. But the threat of government court action was enough to bring AT&T to a halt and AT&T stop. These practices agreed to leave the rest

of the independents alone, as they were then, and also to agreed to allow them to get access to the AT&T long distance network. That is why in some parts of the country today, we'll take the Los Angeles area. You will find there are parts of L.A. which are served by General Tell. That's because it's been served for General Tell for a hundred years or so. That was. One of the independents that the Bell Empire failed to acquire a long, long time ago, Vail's great problem was that states and cities were getting their fingers into the regulatory pie. He recognized that states would always play a role in regulating the telephone. But he did not want the cities involved or you going to do is look at how the cities messed around with cable. So you know what problems you can have. So his proposal was that the federal government established AT&T as their long distance monopoly in return for which he agreed not to buy up a lot of other smaller systems.

He had already bought up a hell of a lot of them anyway. And so in order to do that, he recommended a regulatory structure system court and that nationwide cost averaging. And he really sold it on the idea of universal service. The idea of regulation was an invention of Vaile. There was concerned about the rights of the public, the protection of the public. I would imagine in the back of his mind, he probably was not thinking of effective adversarial regulation, but some sort of regulation that in essence, would do pretty much what the phone companies wanted to do was sort of more image regulation, that there was a mechanism there to be pointed to that had the job of protecting the public. But that really would be kind of friendly to the phone companies. And you could argue today whether most state regulatory bodies follow that philosophy, that some of them in some states seem to be much more friendly to the local phone companies than in other states.

California, for example, was noted as having a regulatory system that is extremely adversarial, that asks a lot of hard questions of Pacific Bell. And you can see a lot of rate rollbacks and the difficulties of getting caller ID implemented in California or because of questions asked on the behalf of the public by California's Regulatory Commission. Other states you can find examples, nameless examples, where regulatory commissions don't seem to ask many questions at all and just simply are perhaps rubber stamps for what the local phone companies want to do. We tend to overlook history as a very, very important source of knowledge, not only about why we do things the way we do today, but also what's likely to happen in the future. For example, people talking about communications policy or any other policies as if they drop out of the air, but they don't drop out of the air. There are certain things that determine what a policy should be. It comes up because of certain things that are happening in society.

And one of the factors that determines the policy is history itself. Other factors or, of course, technology, economics, political and social pressures and things of that sort. But probably the reason I bring up this topic is because the only social policy of this country or one of the few social policies this country has ever developed, which is the policy of universal service at affordable costs, is an historical accident. In the 1980s, divestiture radically transformed our telecommunications environment, ushering out some of the old practices and values. A decade later, the game is once again as wide open as it was in the beginning. Through telecommunications, a complete upheaval is occurring in the very DNA of our world economy, and each of us has a stake in shaping the next chapter in the history of the telephone. Hell's Bells, a radio history of the telephone, was written

and produced by Gregg McVicar of Pacific Multimedia with research by Tom Read and original theme music by Larry Council. The project director was Leo Lee. Funding was provided by the Telecommunications Education Trust, established by the California Public Utilities Commission. To order audiocassettes or written transcripts of the series, send us a fax at five one zero nine three eight 28 15 and thanks for listening. This is Western Public Radio.