AT&T The Early 20th Century

Towards a Monopoly

AT&T 1908 advertising slogan

In 1907 Theodore Vail begain his second term as President of AT&T (he had previously been president in 1885&x2013;1887). Most would agree that it was he who developed the philosophy and strategy that would guide AT&T for the next seventy years. In 1908 Vali begain a series of national advertising campaigns and introduced the by-now infamous slogan of 'One System, One Policy, Universal Service' (see left).

Under his guidance AT&T began aggressively purchasing competitors a strategy that attracted the attention of the antitrust regulators. To avoid antitrust action in 1913 settled the first federal anti-trust suit against AT&T with a document known as the Kingsbury Commitment. This effectively established AT&T as a government-sanctioned monopoly. In return, AT&T agreed to divest the controlling interest it had acquired in the Western Union telegraph company, and to allow non-competing independent telephone companies to interconnect with the AT&T long distance network. In addition terms of the agreement allowed AT&T to purchase independent phone companies as long as it sold just as many. G.W. Brock says in Telephone: The First Hundred Years, "This 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."

In the early 1900s, AT&T engaged in businesses that ranged well beyond the national telephone system. Through the Western Electric Company, its manufacturing subsidiary, AT&T affiliated and allied companies around the world manufactured equipment to meet the needs of the world's telephone companies. These firms also sold equipment imported from the United States. By 1914, International Western Electric Company locations included Antwerp, London, Berlin, Milan, Paris, Vienna, St. Petersburg, Budapest, Tokyo, Montreal, Buenos Aires, and Sydney.

In 1913 AT&T further strengthened their hold on the telecommunications business due to a stroke of luck. During this year the inventor of the vacuum tube, Lee De Forest began to suffer financial difficulties. As a result AT&T managed to buy De Forest's vacuum tube patents for a bargain price of $50 000. Most importantly AT&T acquired ownership of the 'Audion', the first triode (three-element) vacuum tube, which greatly amplified telephone signals. This purchase directly increased ncreased 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.

AT&T 1919 dial telephone

in 1919 AT&T installs the first dial telephones in the Bell System, which are installed in Norfolk, Virginia. Though the final few manual telephones in the system were not converted to dial until 1978!

In 1925, Walter Gifford, now president of AT&T took both AT&T and Bell Systems in a new shared direction with his decision that both companies should concentrate on the shared goal of an universal telephone service in the United States. As a result the International Western Electric Company was divested and sold to the newly-formed International Telephone and Telegraph Company (ITT) for $33 million. Effectively AT&T withdrew from international manufacture though it retained an international presence through its drive to provide a global telephone service to customers in the United States.

1925 also saw the creation of a new unit, the Bell Telephone Laboratories, commonly known as Bell Labs. This research and development unit proved highly successful, pioneering, among other things, radio astronomy, the transistor, the photovoltaic cell, the Unix operating system, and the C programming language. However, its parent company did not always capitalize on these achievements.

Two further milestones for AT&T occurred in 1927 with the inauguration of a commercial two-way translantic telephone service to London using two-way radio. Initially the capacity was restricted to one call at a time and cost an amiazing $75 for the first three minutes. This did not prevent the service from spreading to other countries and a radio-telephone service to Hawaii began in 1931, and to Tokyo in 1934. AT&T also presented the first demonstration of a television in the US during this year where the image of Secretary of Commerce, Herbert Hoover, was transmitted over cable to New York.

The 1920s also saw a number of patent disputes between AT&T and RCA. This resulted directly from the pressures of the first world war which effectively meant that between them AT&T and RCA owned all the useful patents on vacuum tubes. Initially RCA staked a position in wireless communication; AT&T pursued the use of tubes in telephone amplifiers. Inevitably, however, the two companies' research on tubes began to overlap and this angered a number of patent allies and partners in RCA. It wasn't until 1929 that T&T, RCA, and their patent allies and partners finally settled their disputes. This was done by a compromise where AT&T decided to focus on the telephone business as a communications common carrier, and sold its broadcasting subsidiary Broadcasting Corporation of America to RCA. The assets included station WEAF, which for some time had broadcast from AT&T headquarters in New York City. In return, RCA signed a service agreement with AT&T, ensuring any radio network RCA started would have transmission connections provided by AT&T. Both companies agreed to cross-license patents, ending that aspect of the dispute.