The Bell Telephone System was once called "Ma Bell" or "the telephone company." The system consisted of 24 Bell operating companies that became the "Baby Bells," comprising a huge network of telecommunications equipment. They provided service to the majority of the people living in the United States, and the center of the Bell System network was once the largest computer in the world. Bell System was known for providing the highest-quality telephone parts in the United States, but that ended in 1984. The telephone components were then manufactured by foreign companies for Western Electric, a leading telephone company.
In the beginning
On March 10th, 1876, when Alexander Graham Bell spoke into the transmitting instrument, "Mr. Watson, come here, I want to see you," he could already envision a great national telephone system. As he wrote to his father that evening, "I feel that I have at last found the solution of a great problem, and the day is coming when telegraph wires will be laid on to houses just like water or gas is, and friends will converse with each other without leaving homes."
All of this and more would come true, of course, but even the optimistic inventor could not have predicted what would grow to be an association of companies that held his name, the Bell System. By the time of its breakup nearly 108 years later, the Bell System would have assets of $150 billion and more than one million employees — becoming the largest private business enterprise in the world.
The company`s birth
Although his ingenious ideas sowed in many businessmen thoughts of wealth and prosperity, Alexander Graham Bell became simply a low-end stockholder whose primary interests resided in other scientific and humanitarian avenues.
On February 27, 1875, the first business venture had begun before the invention with an agreement among Thomas Sanders, Gardiner G. Hubbard, and Bell. Formed as a basis for financing Bell`s experiments, the agreement came to be called the Bell Patent Association.
The only appreciable assets of the association were an early Bell patent, "Improvements in Transmitters and Receivers for Electric Telegraph," an "Improvement in Telegraphy" (his basic telephone patent), and two additional patents that followed. In July 1877, the three members of the patent agreement formed the Bell Telephone Company, a Massachusetts association.
A franchise is born
In the year 1878, the first telephone exchange in the United States opened its doors in New Haven, Connecticut, under license from Bell Telephone. Within only a few years, licensed telephone exchanges began to open in every major city in the country.
Those franchises, together with the parent company, eventually become known as the Bell System. Because of much demand for supply in 1882, the American Bell Telephone Company became the sole supplier of telephone equipment, equipping the quickly advancing communication company, Western Electric.
First main line and end of Bell`s patent A few years later, the American Telephone and Telegraph Company formed as a subsidiary of then parent American Bell Telephone Company, with a agreement to build and operate the original long-distance network. By year`s end, in 1885, the company completed its first line — between New York and Philadelphia.
Alexander Graham Bell`s second telephone patent expired in 1894, which opened the telephone industry door to more than 6000 kindred telephone businesses across the nation.
By 1899, a corporate reorganization began to take place with the introduction and development of the company`s loading coils invention. American Telephone and Telegraph acquired the assets of its parent, American Bell Telephone — becoming the parent of the Bell System.
Litigation
For much of its history, Bell System functioned as a legally organized, regulated monopoly. Responding to small-company complaints, a theory was developed by AT&T president Theodore Vail in 1907. That theory held that the telephone, by nature of its technology, would operate most efficiently as a monopoly providing universal service.
In 1956, AT&T and the U.S. Justice department agreed upon a consent decree to end an antitrust suit brought against AT&T in 1949. AT&T had to restrict its activities to those related to running the national telephone system, and special projects for the federal government. They would not be able to "bully" their way into full custody of the nationwide phone system for some time.
Bell breaks up
Numerous changes in telecommunications eventually led to an antitrust suit by the U.S. government against AT&T. The suit began in 1974 and was settled in January 1982 when AT&T agreed to divest itself of the wholly owned Bell operating companies that provided local exchange service. That would, from the government`s standpoint, separate those parts of AT&T (the local exchanges) where the natural monopoly theory was still seen as valid, from those parts (long distance, manufacturing, research and development), where competition was appropriate.
In return, the U.S. Department of Justice agreed to lift the constraints of the 1956 decree. Divestiture took place on January 1, 1984, and the Bell System was dead. In its place was a new AT&T and seven regional Bell operating companies. Those regional companies collectively became known as the RBOCs.
On September 20th, 1995, AT&T restructured itself into three separate companies: a services company, retaining the AT&T name; a products and systems company (later named Lucent Technologies); and a computer company, which re-assumed the NCR (National Cash Register) name.
A new era in technology -- the Information Age
Throughout AT&T`s existence in the world of technology, they have been able to lead the way by consistently "sky-rocketing" the diversified industry of telecommunications. From 1984 to the present, AT&T has provided the nation with such major advancements as: