|Chronicles of America:The Age of Big Business|
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A distinguished English journalist, who was visiting the United States, in 1917, on an important governmental mission, had an almost sublime illustration of the extent to which the telephone had developed on the North American Continent. Sitting at a desk in a large office building in New York, Lord Northcliffe took up two telephone receivers and placed one at each ear. In the first he heard the surf beating at Coney Island, New York, and in the other he heard, with equal distinctness, the breakers pounding the beach at the Golden Gate, San Francisco. Certainly this demonstration justified the statement made a few years before by another English traveler. "What startles and frightens the backward European in the United States," said Mr. Arnold Bennett, "is the efficiency and fearful universality of the telephone. To me it was the proudest achievement and the most poetical achievement of the American people."
Lord Northcliffe's experience had a certain dramatic justice which probably even he did not appreciate. He is the proprietor of the London Times, a newspaper which, when the telephone was first introduced, denounced it as the "latest American humbug" and declared that it "was far inferior to the well-established system of speaking tubes." The London Times delivered this solemn judgment in 1877. A year before, at the Philadelphia Centennial Exposition, Don Pedro, Emperor of Brazil, picked up, almost accidentally, a queer cone-shaped instrument and put it to his ear, "My God! It talks!" was his exclamation; an incident which, when widely published in the press, first informed the American people that another of the greatest inventions of all times had had its birth on their own soil. Yet the initial judgment of the American people did not differ essentially from the opinion which had been more coarsely expressed by the leading English newspaper. Our fathers did not denounce the telephone as an "American humbug," but they did describe it as a curious electric "toy" and ridiculed the notion that it could ever have any practical value. Even after Alexander Graham Bell and his associates had completely demonstrated its usefulness, the Western Union Telegraph Company refused to purchase all their patent rights for $100,000! Only forty years have passed since the telephone made such an inauspicious beginning. It remains now, as it was then, essentially an American achievement. Other nations have their telephone systems, but it is only in the United States that its possibilities have been even faintly realized. It is not until Americans visit foreign countries that they understand that, imperfect as in certain directions their industrial and social organization may be, in this respect at least their nation is preeminent.
The United States contains nearly all the telephones in existence, to be exact, about seventy-five per cent. We have about ten million telephones, while Canada, Central America, South America, Great Britain, Europe, Asia, and Africa all combined have only about four million. In order to make an impressive showing, however, we need not include the backward peoples, for a comparison with the most enlightened nations emphasizes the same point. Thus New York City has more telephones than six European countries taken together--Austria-Hungary, Belgium, Norway, Denmark, Italy, and the Netherlands. Chicago, with a population of 2,000,000, has more telephones than the whole of France, with a population of 40,000,000. Philadelphia, with 1,500,000, has more than the Russian Empire, with 166,000,000. Boston has more telephones than Austria-Hungary, Los Angeles more than the Netherlands, and Kansas City more than Belgium. Several office buildings and hotels in New York City have more instruments than the kingdoms of Greece or Bulgaria. The whole of Great Britain and Ireland has about 650,000 telephones, which is only about 200,000 more, than the city of New York.
Mere numbers, however, tell only half the story. It is when we compare service that American superiority stands most manifest. The London newspapers are constantly filled with letters abusing the English telephone system. If these communications describe things accurately, there is apparently no telephone vexation that the Englishman does not have to endure. Delays in getting connections are apparently chronic. At times it seems impossible to get connections at all, especially from four to five in the afternoon--when the operators are taking tea. Suburban connections, which in New York take about ninety seconds, average half an hour in London, and many of the smaller cities have no night service. An American thinks nothing of putting in a telephone; he notifies his company and in a few days the instrument is installed. We take a thing like this for granted. But there are places where a mere telephone subscription, the privilege of having an instrument installed, is a property right of considerable value and where the telephone service has a "waiting list," like an exclusive club. In Japan one can sell a telephone privilege at a good price, its value being daily quoted on the Stock Exchange. Americans, by constantly using the telephone, have developed what may be called a sixth sense, which enables them to project their personalities over an almost unlimited area. In the United States the telephone has become the one all-prevailing method of communication. The European writes or telegraphs while the American more frequently telephones. In this country the telephone penetrates to places which even the mails never reach. The rural free delivery and other forms of the mail service extend to 58,000 communities, while our 10,000,000 telephones encompass 70,000. We use this instrument for all the varied experiences of life, domestic, social, and commercial. There are residences in New York City that have private branch exchanges, like a bank or a newspaper office. Hostesses are more and more falling into the habit of telephoning invitations for dinner and other diversions. Many people find telephone conversations more convenient than personal interviews, and it is every day displacing the stenographer and the traveling salesman.
Perhaps the most noteworthy achievement of the telephone is its transformation of country life. In Europe, rural telephones are almost unknown, while in the United States one-third of all our telephone stations are in country districts. The farmer no longer depends upon the mails; like the city man, he telephones. This instrument is thus the greatest civilizing force we have, for civilization is very largely a matter of intercommunication. Indeed, the telephone and other similar agencies, such as the parcel post, the rural free delivery, better roads, and the automobile, are rapidly transforming rural life in this country. In several regions, especially in the Mississippi Valley, a farmer who has no telephone is in a class by himself, like one who has no mowing-machine. Thus the latest returns from Iowa, taken by the census as far back as 1907, showed that seventy-three per cent of all the farms--160,000 out of 220,000--had telephones and the proportion is unquestionably greater now. Every other farmhouse from the Atlantic to the Pacific contains at least one instrument. These statistics clearly show that the telephone has removed half the terrors and isolation of rural life. Many a lonely farmer's wife or daughter, on the approach of a suspicious-looking character, has rushed to the telephone and called up the neighbors, so that now tramps notoriously avoid houses that shelter the protecting wires. In remote sections, insanity, especially among women, is frequently the result of loneliness, a calamity which the telephone is doing much to mitigate.
In the United States today there is one telephone to every nine persons. This achievement represents American invention, genius, industrial organization, and business enterprise at their best. The story of American business contains many chapters and episodes which Americans would willingly forget. But the American Telephone and Telegraph Company represents an industry which has made not a single "swollen fortune," whose largest stockholder is the wife of Alexander Graham Bell, the inventor (a woman who, being totally deaf, has never talked over the telephone); which has not corrupted legislatures or courts; which has steadily decreased the prices of its products as business and profits have increased; which has never issued watered stock or declared fictitious dividends; and which has always manifested a high sense of responsibility in its dealings with the public.
Two forces, American science and American business capacity, have accomplished this result. As a mechanism, this American telephone system is the product not of one but of many minds. What most strikes the imagination is the story of Alexander Graham Bell, yet other names--Carty, Scribner, Pupin--play a large part in the story.
The man who discovered that an electric current had the power of transmitting sound over a copper wire knew very little about electricity. Had he known more about this agency and less about acoustics, Bell once said himself, he would never have invented the telephone. His father and grandfather had been teachers of the deaf and dumb and had made important researches in acoustics. Alexander Graham Bell, born in Edinburgh in March, 1847, and educated there and in London, followed the ancestral example. This experience gave Bell an expert knowledge of phonetics that laid the foundation for his life work. His invention, indeed, is clearly associated with his attempts to make the deaf and dumb talk. He was driven to America by ill-health, coming first to Canada, and in 1871 he settled in Boston, where he accepted a position in Boston University to introduce his system of teaching deaf-mutes. He opened a school of "Vocal Physiology," and his success in his chosen field brought him into association with the people who afterward played an important part in the development of the telephone. Not a single element of romance was lacking in Bell's experience; his great invention even involved the love story of his life. Two influential citizens of Boston, Thomas Sanders and Gardiner G. Hubbard, had daughters who were deaf and dumb, and both engaged Bell's services as teacher. Bell lived in Sanders's home for a considerable period, dividing his time between teaching his little pupil how to talk and puttering away at a proposed invention which he called a "harmonic telegraph." Both Sanders and Hubbard had become greatly interested in this contrivance and backed Bell financially while he worked. It was Bell's idea that, by a system of tuning different telegraphic receivers to different pitches, several telegraphic messages could be sent simultaneously over the same wire. The idea was not original with Bell, although he supposed that it was and was entirely unaware that, at the particular moment when he started work, about twenty other inventors were struggling with the same problem. It was one of these other twenty experimenters, Elisha Gray, who ultimately perfected this instrument. Bell's researches have an interest only in that they taught him much about sound transmission and other kindred subjects and so paved the way for his great conception. One day Hubbard and Sanders learned that Bell had abandoned his "harmonic telegraph" and was experimenting with an entirely new idea. This was the possibility of transmitting the human voice over an electric wire. While working in Sanders's basement, Bell had obtained from a doctor a dead man's ear, and it is said that while he was minutely studying and analyzing this gruesome object, the idea of the telephone first burst upon his mind. For years Bell had been engaged in a task that seemed hopeless to most men--that of making deaf-mutes talk. "If I can make a deaf-mute talk, I can make iron talk," he declared. "If I could make a current of electricity vary in intensity as the air varies in density," he said at another time, "I could transmit sound telegraphically." Many others, of course, had dreamed of inventing such an instrument. The story of the telephone concerns many men who preceded Bell, one of whom, Philip Reis, produced, in 1861, a mechanism that could send a few discordant sounds, though not the human voice, over an electric wire. Reis seemed to have based his work upon an article published in "The American Journal of Science" by Dr. C.G. Page, of Salem, Mass., in 1837, in which he called attention to the sound given out by an electric magnet when the circuit is opened or closed. The work of these experimenters involves too many technicalities for discussion in this place. The important facts are that they all involved different principles from those worked out by Bell and that none of them ever attained any practical importance. Reis, in particular, never grasped the essential principles that ultimately made the telephone a reality. His work occupies a place in telephone history only because certain financial interests, many years after his death, brought it to light in an attempt to discredit Bell's claim to priority as the inventor. An investigator who seems to have grasped more clearly the basic idea was the distinguished American inventor Elisha Gray, already mentioned as the man who had succeeded in perfecting the "harmonic telegraph." On February 14, 1876, Gray filed a caveat in the United States Patent Office, setting forth pretty accurately the conception of the electric telephone. The tragedy in Gray's work consists in the fact that, two hours before his caveat had been put in, Bell had filed his application for a patent on the completed instrument.
The champions of Bell and Gray may dispute the question of priority to their heart's content; the historic fact is that the telephone dates from a dramatic moment in the year 1876. Sanders and Hubbard, much annoyed that Bell had abandoned his harmonic telegraph for so visionary an idea as a long distance talking machine, refused to finance him further unless he returned to his original quest. Disappointed and disconsolate, Bell and his assistant, Thomas A. Watson, had started work on the top floor of the Williams Manufacturing Company's shop in Boston. And now another chance happening turned Bell back once more to the telephone. His magnetized telegraph wire stretched from one room to another located in a remote part of the building. One day Watson accidentally plucked a piece of clock wire that lay near this telegraph wire, and Bell, working in another room, heard the twang. A few seconds later Watson was startled when an excited and somewhat disheveled figure burst into his room. "What was that?" shouted Bell. What had happened was clearly manifest; a sound had been sent distinctly over an electric wire. Bell's harmonic telegraph immediately went into the discard, and the young inventor--Bell was then only twenty-nine--became a man of one passionate idea. Yet final success did not come easily; the inventor worked day and night for forty weeks before he had obtained satisfactory results. It was on March 10, 1876, that Watson, in a distant room, picked up the first telephone receiver and heard these words, the first that had ever passed over a magnetized wire, "Come here, Watson; I want you." The speaking instrument had become a reality, and the foundation of the telephone, in all its present development, had been laid. When the New York and San Francisco line was opened in January, 1915, Alexander Graham Bell spoke these same words to his old associate, Thomas Watson, located in San Francisco, both men using the same instruments that had served so well on that historic occasion forty years before.
Though Bell's first invention comprehended the great basic idea that made it a success, the instrument itself bore few external resemblances to that which has become so commonplace today. If one could transport himself back to this early period and undergo the torture of using this primitive telephone, he would appreciate somewhat the labor, the patience, the inventive skill, and the business organization that have produced the modern telephone. In the first place you would have no separate transmitter and receiver. You would talk into a funnel-shaped contrivance and then place it against your ear to get the returning message. In order to make yourself heard, you would have to shout like a Gloucester sea captain at the height of a storm. More than the speakers' voices would come over the wire. It seemed to have become the playground of a million devils; moanings, shriekings, mutterings, and noises of all kinds would constantly interrupt the flow of speech. To call up your "party" you would not merely lift the receiver as today; you would tap with a lead pencil, or some other appliance, upon the diaphragm of your transmitter. There were no separate telephone wires. The talking at first was done over the telegraph lines. The earliest "centrals" reminded most persons of madhouses, for the day of the polite, soft-spoken telephone girl had not arrived. Instead, boys were rushing around with the ends of wires which they were frantically attempting to peg into the holes of the primitive switchboard and so establish "connections." When not knocking down and fighting each other, these boys were swearing into transmitters at the customers; and it is said that the incurable profanity of these early "telephone boys" had much to do with their supersession by girls. In the early days of the telephone, each instrument had to carry its own battery, usually installed in a little box under the transmitter. The early telephone wires, even in the largest cities, were strung on poles, as they are in country and suburban districts today. In places like New York and Chicago, these thousands of overhanging wires not only destroyed the attractiveness of the thoroughfare, but constantly interfered with the fire department and proved to be public nuisances in other ways. A telephone wire, however, loses much of its transmitting power when placed under ground, and it took many years of experimenting before the engineers perfected these subways. In these early days, of course, the telephone was purely a local matter. Certain visionary enthusiasts had foreseen the possibility of a national, long distance system, but a large amount of labor, both in the laboratory and out, was to be expended before these aspirations could become realities.
The transformation of this rudimentary means of communication into the beautiful mechanism which we have today forms a splendid chapter in the history of American invention. Of all the details in Bell's apparatus the receiver is almost the only one that remains now what it was forty years ago. The story of the transmitter in itself would fill a volume. Edison's success in devising a transmitter which permitted talk in ordinary conversational tones--an invention that became the property of the Western Union Telegraph Company, which early embarked in the telephone business--at one time seemed likely to force the Bell Company out of business. But Emile Berliner and Francis Blake finally came to the rescue with an excellent instrument, and the suggestion of an English clergyman, the Reverend Henry Hummings, that carbon granules be used on the diaphragm, made possible the present perfect instrument. The magneto call bell--still used in certain backward districts--for many years gave fair results for calling purposes, but the automatic switch, which enables us to get central by merely picking up the receiver, has made possible our great urban service. It was several years before the telephone makers developed so essential a thing as a satisfactory wire. Silver, which gave excellent results, was obviously too costly, and copper, the other metal which had many desirable qualities, was too soft. Thomas B. Doolittle solved this problem by inventing a hard-drawn copper wire. A young man of twenty-two, John J. Carty, suggested a simple device for exorcising the hundreds of "mysterious noises" that had made the use of the telephone so agonizing. It was caused, Carty pointed out, by the circumstance that the telephone, like the telegraph, used a ground circuit for the return wire; the resultant scrapings and moanings and howlings were merely the multitudinous voices of mother earth herself. Mr. Carty began installing the metallic circuit in his lines that is, he used wire, instead of the ground, to complete the circuit. As a result of this improvement the telephone was immediately cleared of these annoying interruptions. Mr. Carty, who is now Chief Engineer of the American Telephone and Telegraph Company, and the man who has superintended all its extensions in recent years, is one of the three or four men who have done most to create the present system. Another is Charles E. Scribner, who, by his invention of that intricate device, the multiple switchboard, has converted the telephone exchange into a smoothly working, orderly place. Scribner's multiple switchboard dates from about 1890. It was Mr. Scribner also who replaced the individual system of dry cells with one common battery located at the central exchange, an improvement which saved the Company 4,000,000 dry cells a year. Then Barrett discovered a method of twisting fifty pairs of wires--since grown to 2400 pairs-into a cable, wrapping them in paper and molding them in lead, and the wires were now taken from poles and placed in conduits underground.
But perhaps the most romantic figure in telephone history, next to Bell, is that of a humble Servian immigrant who came to this country as a boy and obtained his first employment as a rubber in a Turkish bath. Michael I. Pupin was graduated from Columbia, studied afterward in Germany, and became absorbed in the new subject of electromechanics. In particular he became interested in a telephone problem that had bothered the greatest experts for years. One thing that had prevented the great extension of the telephone, especially for long distance work, was the size of the wire. Long distance lines up to 1900 demanded wire about one-eighth of an inch thick--as thick as a fairsized lead pencil; and, for this reason, the New York-Chicago line, built in 1893, consumed 870,000 pounds of copper wire of this size. Naturally the enormous expense stood in the way of any extended development. The same thickness also interfered with cable extension. Only about a hundred wires could be squeezed into one cable, against the eighteen hundred now compressed in the same area. Because of these shortcomings, telephone progress, about 1900, was marking time, awaiting the arrival of a thin wire that would do the work of a thick one. The importance of the problem is shown by the fact that one-fourth of all the capital invested in the telephone has been spent in copper. Professor Pupin, who had been a member of the faculty of Columbia University since 1888, solved this problem in his quiet laboratory and, by doing so, won the greatest prize in modern telephone art. His researches resulted in the famous "Pupin coil" by the expedient now known as "loading." When the scientists attempt to explain this invention, they have to use all kinds of mathematical formulas and curves and, in fact, they usually get to quarreling among themselves over the points involved. What Professor Pupin has apparently done is to free the wire from those miscellaneous disturbances known as "induction." This Pupin invention involved another improvement unsuspected by the inventor, which shows us the telephone in all its mystery and beauty and even its sublimity. Soon after the Pupin coil was introduced, it was discovered that, by crossing the wires of two circuits at regular intervals, another unexplainable circuit was induced. Because this third circuit travels apparently without wires, in some manner which the scientists have not yet discovered, it is appropriately known as the phantom circuit. The practical result is that it is now possible to send three telephone messages and eight telegraph messages over two pairs of wires--all at the same time. Professor Pupin's invention has resulted in economies that amount to millions of dollars, and has made possible long distance lines to practically every part of the United States.
Thus many great inventive minds have produced the physical telephone. We can point to several men--Bell, Blake, Carty, Scribner, Barrett, Pupin --and say of each one, "Without his work the present telephone system could not exist." But business genius, as well as mechanical genius, explains this achievement. For the first four or five years of its existence, the new invention had hard sailing. Bell and Thomas Watson, in order to fortify their finances, were forced to travel around the country, giving a kind of vaudeville entertainment. Bell made a speech explaining the new invention, while a cornet player, located in another part of the town, played solos, the music reaching the audience through several telephone instruments placed against the walls. Watson, also located at a distance, varied the program by singing songs via telephone. These lecture tours not only gave Bell the money which he sorely needed but advertised the innovation. There followed a few scattering attempts to introduce the telephone into every-day use and telephone exchanges were established in New York, Boston, Bridgeport, and New Haven. But these pioneers had the hostility of the most powerful corporation of the day--the Western Union Telegraph Company--and they lacked aggressive leaders.
In 1878, Mr. Gardiner Hubbard, Bell's earliest backer, and now his father-in-law, became acquainted with a young man who was then serving in Washington as General Superintendent of the Railway Mail Service. This young man was Theodore N. Vail. His energy and enterprise so impressed Hubbard that he immediately asked Vail to become General Manager of the company which he was then forming to exploit the telephone. Viewed from the retrospection of forty years this offer certainly looks like one of the greatest prizes in American business. What it signified at that time, however, is apparent from the fact that the office paid a salary of $3500 a year and that for the first ten years Vail did not succeed in collecting a dollar of this princely remuneration. Yet it was a happy fortune, not only for the Bell Company but for the nation, that placed Vail at the head of this struggling enterprise. There was a certain appropriateness in his selection, even then. His granduncle, Stephen Vail, had built the engines for the first steamship to cross the Atlantic. A cousin had worked with Morse while he was inventing the telegraph. Vail, who was born in Carroll County, Ohio, in 1845, after spending two years as a medical student, suddenly shifted his plans and became a telegraph operator. Then he entered the Railway Mail service; in this service he completely revolutionized the system and introduced reforms that exist at the present time. A natural bent had apparently directed Vail's mind towards methods of communication, a fact that may perhaps explain the youthful enthusiasm with which he took up the new venture and the vision with which he foresaw and planned its future. For the chief fact about Vail is that he was a business man with an imagination. The crazy little machine which he now undertook to exploit did not interest him as a means of collecting tolls, floating stock, and paying dividends. He saw in it a new method of spreading American civilization and of contributing to the happiness and comfort of millions of people. Indeed Vail had hardly seen the telephone when a picture portraying the development which we are familiar with today unfolded before his eyes. That the telephone has had a greater development in America than elsewhere and that the United States has avoided all those mistakes of organization that have so greatly hampered its growth in other lands, is owing to the fact that Vail, when he first took charge, mapped out the comprehensive policies which have guided his corporation since.
Vail early adopted the "slogan" which has directed the Bell activities for forty years--"One System! One Policy! Universal Service." In his mind a telephone company was not a city affair, or even a state affair; it was a national affair. His aim has been from the first a universal, national service, all under one head, and reaching every hamlet, every business house, factory, and home in the nation. The idea that any man, anywhere, should be able to take down a receiver and talk to anyone, anywhere else in the United States, was the conception which guided Vail's labors from the first. He did not believe that a mass of unrelated companies could give a satisfactory service; if circumstances had ever made a national monopoly, that monopoly was certainly the telephone. Having in view this national, universal, articulating monopoly, Vail insisted on his second great principle, the standardization of equipment. Every man's telephone must be precisely like every other man's, and that must be the best which mechanical skill and inventive genius could produce. To make this a reality and to secure perfect supervision and upkeep, it was necessary that telephones should not be sold but leased. By enforcing these ideas Vail saved the United States from the chaos which exists in certain other countries, such as France, where each subscriber purchases his own instrument, making his selection from about forty different varieties. That certain dangers were inherent in this universal system Vail understood. Monopoly all too likely brings in excessive charges, poor service, and inside speculation; but it was Vail's plan to justify his system by its works. To this end he established a great engineering department which should study all imaginable mechanical improvements, with the results which have been described. He gave the greatest attention to every detail of the service and particularly insisted on the fairest and most courteous treatment of the public. The "please" which invariably accompanies the telephone girl's request for a number--the familiar "number, please"--is a trifle, but it epitomizes the whole spirit which Vail inspired throughout his entire organization. Though there are plenty of people who think that the existing telephone charges are too high, the fact remains that the rate has steadily declined with the extension of the business. Vail has also kept his company clear from the financial scandals that have disgraced so many other great corporations. He has never received any reward himself except his salary, such fortune as he possesses being the result of personal business ventures in South America during the twenty years from 1887 to 1907 that he was not associated with the Bell interests.
Vail's first achievement was to rescue this invention from the greatest calamity which would have befallen it. The Western Union Telegraph Company, which in the early days had looked upon the telephone as negligible, suddenly awoke one morning to a realization of its importance. This Corporation had recently introduced its "printing telegraph," a device that made it possible to communicate without the intermediary operator. When news reached headquarters that subscribers were dropping this new contrivance and subscribing to telephones, the Western Union first understood that a competitor had entered their field. Promptly organizing the American Speaking Telephone Company, the Western Union, with all its wealth and prestige, proceeded to destroy this insolent pigmy. Its methods of attack were unscrupulous and underhanded, the least discreditable one being the use of its political influence to prevent communities from giving franchises to the Bell Company. But this corporation mainly relied for success upon the wholesale manner in which it infringed the Bell patents. It raked together all possible claimants to priority, from Philip Reis to Elisha Gray, in its attempts to discredit Bell as the inventor. The Western Union had only one legitimate advantage--the Edison transmitter--which was unquestionably much superior to anything which the Bell Company then possessed. Many Bell stockholders were discouraged in face of this fierce opposition and wished to abandon the fight. Not so Vail. The mere circumstance that the great capitalists of the Western Union had taken up the telephone gave the public a confidence in its value which otherwise it would not have had, a fact which Vail skillfully used in attracting influential financial support. He boldly sued the Western Union in 1878 for infringement of the Bell patents. The case was a famous one; the whole history of the telephone was reviewed from the earliest days, and the evidence as to rival claimants was placed on record for all time. After about a year, Mr. George Clifford, perhaps the best patent attorney of the day, who was conducting the case for the Western Union, quietly informed his clients that they could never win, for the records showed that Bell was the inventor. He advised the Western Union to settle the case out of court and his advice was taken. This great corporation war was concluded by a treaty (November 10, 1879) in which the Western Union acknowledged that Bell was the inventor, that his patents were valid, and agreed to retire from the telephone business. The Bell Company, on its part, agreed to buy the Western Union Telephone System, to pay the Western Union a royalty of twenty per cent on all telephone rentals, and not to engage in the telegraph business. Had this case been decided against the Bell Company it is almost certain that the telephone would have been smothered in the interest of the telegraph and its development delayed for many years.
Soon after the settlement of the Western Union suit, the original group which had created the telephone withdrew from the scene. Bell went back to teaching deaf-mutes. He has since busied himself with the study of airplanes and wireless, and has invented an instrument for transmitting sound by light. The new telephone company offered him $10,000 a year as chief inventor, but he replied that he could not invent to order. Thomas Sanders received somewhat less than $1,000,000 and lost most of it exploiting a Colorado gold mine. Gardiner Hubbard withdrew from business and devoted the last years of his life to the National Geographic Society. Thomas Watson, after retiring from the telephone business, bought a ship-building yard near Boston, which has been successful.
In making this settlement with the Western Union, the Bell interests not only eliminated a competitor but gained great material advantages. They took over about 56,000 telephone stations located in 55 cities and towns. They also soon acquired the Western Electric Manufacturing Company, which under the control of the Western Union had developed into an important concern for the manufacture of telephone supplies. Under the management of the Bell Company this corporation, which now has extensive factories in Hawthorne, Ill., produces two-thirds of the world's telephone apparatus. With the Western Electric Vail has realized the fundamental conception underlying his ideal telephone system--the standardization of equipment. For the accomplishment of his idea of a national telephone system, instead of a parochial one, Mr. Vail organized, in 1881, the American Bell Telephone Company, a corporation that really represented the federalization of all the telephone activities of the subsidiary companies. The United States was divided into several sections, in each of which a separate company was organized to develop the telephone possibilities of that particular area. In 1899 the American Telephone and Telegraph Company took over the business and properties of the American Bell Company. The larger corporation built toll lines, connected these smaller systems with one another, and thus made it possible for Washington to talk to New York, New York to Chicago, and ultimately--Boston to San Francisco. An enlightened policy led the Bell Company frequently to establish exchanges in places where there was little chance of immediate profit. Under this stimulation the use of this instrument extended rapidly, yet it is in the last twenty years that the telephone has grown with accelerated momentum. In 1887 there were 170,000 subscribers in the United States, and in 1900 there were 610,000; but in 1906 the American Telephone and Telegraph Company was furnishing its service to 2,550,000 stations, and in 1916 to 10,000,000. Clearly it is only since 1900 that the telephone has become a commonplace of American existence. Up to 1900 it had grown at the rate of about 13,000 a year; whereas since 1900 it has grown at the rate of 700,000 a year. The explanation is that charges have been so reduced that the telephone has been brought within the reach of practically every business house and every family. Until the year 1900 every telephone subscriber had to pay $240 a year, and manifestly only families in affluent circumstances could afford such a luxury. About that time a new system of charges known as the "message rate" plan was introduced, according to which the subscriber paid a moderate price for a stipulated number of calls, and a pro rata charge for all calls in excess of that number. Probably no single change in any business has had such an instantaneous effect. The telephone, which had hitherto been an external symbol of prosperity, suddenly became the possession of almost every citizen.
Other companies than the Bell interests have participated in this development. The only time the Bell Company has had no competitor, Mr. Vail has said, was at the Philadelphia Centennial in 1876. Some of this competition has benefited the public but much of it has accomplished little except to enrich many not over-scrupulous promoters. Groups of farmers who frequently started companies to furnish service at cost did much to extend the use of the telephone. Many of the companies which, when the Bell patents expired in 1895, sprang up in the Middle West, also manifested great enterprise and gave excellent service. These companies have made valuable contributions, of which perhaps the automatic telephone, an instrument which enables a subscriber to call up his "party" directly, without the mediation of "central," is the most ingenious. Although due acknowledgment must be made of the honesty and enterprise with which hundreds of the independents are managed, the fact remains that they are a great economic waste. Most of them give only a local service, no company having yet arisen which aims to duplicate the comprehensive national plans of the greater corporation. As soon as an independent obtains a foothold, the natural consequence is that every business house and private household must either be contented with half service, or double the cost of the telephone by subscribing to two companies. It is not unlikely that the "independents" have exercised a wholesome influence upon the Bell Corporation, but, as the principle of government regulation rather than individual competition has now become the established method of controlling monopoly, this influence will possess less virtue in the future. In addition to these independent enterprises, the telephone has unfortunately furnished an opportunity for stockjobbing schemes on a considerable scale. The years from 1895 to 1905 witnessed the growth of many bubbles of this kind; one group of men organized not far from two hundred telephone companies. They would go into selected communities, promise a superior service at half the current rates, enlist the cooperation of "leading" business men, sell the stock largely in the city or town to be benefited, make large profits in the construction of the lines and the sale of equipment--and then decamp for pastures new. The multitudinous bankruptcies that followed in the wake of such exploiters at length brought their activities to an end.