Bell System and United States Essay

The formation of the Bell Telephone Company superseded an agreement between Alexander Graham Bell and his financiers, principal among them Gardiner Greene Hubbard and Thomas Sanders. Renamed the National Bell Telephone Company in March 1879, it became the American Bell Telephone Company in March 1880. By 1881, it had bought a controlling interest in the Western Electric Company from Western Union. Only three years earlier, Western Union had turned down Gardiner Hubbard's offer to sell it all rights to the telephone for $100,000 ($2.44 million in 2009 dollars[1]).
In 1880, the management of American Bell created what would become AT&T Long Lines. The project was the first of its kind to create a nationwide long-distance network with a commercially viable cost-structure. This project was formally incorporated into a separate company named American Telephone and Telegraph Company on March 3, 1885. Starting from New York, the network reached Chicago in 1892.
Bell's patent on the telephone expired in 1894, but the company's much larger customer base made its service much more valuable than alternatives and substantial growth continued.
On December 30, 1899, the American Telephone and Telegraph Company bought the assets of American Bell; this was because Massachusetts corporate laws (which limitedmarket capitalization to ten million dollars, preventing the direct growth of American Bell itself) were more restrictive than those of New York, where AT&T was headquartered.[2]With this transfer of assets, AT&T became the parent of the Bell System.[2]National long distance service reached San Francisco in 1915. Transatlantic services started in 1927 using two-way radio, but the first trans-Atlantic telephone cable did not arrive until Sept. 25, 1956, with TAT-1.
Monopoly[edit]
Further information: Bell System
The Bell System logo andtrademark as it appeared in 1969.[citation needed]
As a result of a combination of regulatory actions by government and actions by AT&T, the firm eventually gained what most regard as monopoly status. In 1907, AT&T president Theodore Vail made it known that he was pursuing a goal of "One Policy, One System, Universal Service." AT&T began purchasing competitors, which attracted the attention of antitrust regulators. To avoid antitrust action, in a deal with the government, Vail agreed to the Kingsbury Commitment of 1913. One of the three terms of the agreement forbade AT&T from acquiring any more independent phone companies without the approval of the Interstate Commerce Commission.[3]G.W. Brock says in The Telecommunications Industry: The Dynamics Of Market Structure, "[The] provision allowed Bell and the independents to exchange telephones in order to give each other geographical monopolies. So long as only one company served a given geographical area there was little reason to expect price competition to take place."[4] AT&T focused on purchasing companies within specific geographic areas that increased its effective control of the telephone system market, while selling its less-desirable and previously acquired companies to independent buyers. Also included in the Kingsbury Commitment was the requirement that AT&T allow competitors to connect through its phone lines, which reduced the incentive of these companies to build competing long-distance lines.[who?]
In 1913, after vacuum-tube inventor Lee De Forest began to suffer financial difficulties, AT&T bought De Forest's vacuum-tube patents for the bargain price of $50,000 ($1.19 million in 2009 dollars[1]). In particular, AT&T acquired ownership of the 'Audion', the first triode (three-element) vacuum tube, which greatly amplified telephone signals. The patent increased AT&T's control over the manufacture and distribution of long-distance telephone services, and allowed the Bell System to build the United States's first coast-to coast telephone line. Thanks to the pressures of World War I, AT&T

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