How the Bell System was formed
The commercial development of the telephone had begun and the time had come for a more definite organization than the rather informal arrangement that had been made between Bell, Sanders and Hubbard, into which Watson had by this time been admitted.
This took the form of a trusteeship, instituted in July, 1877, by these four owners of the patents. Hubbard was trustee and virtual executive head of the enterprise. It was he who introduced the policy of leasing instruments instead of selling them and who introduced the system of licenses to authorized agents or licensees throughout the country for the commercial development of the telephone, laying the foundation for the Bell System of today.
Telephones first were leased in pairs. The lessee put up his own wire to connect his telephone with that of a friend or neighbor, or ran the line between his home and place of business. There was no way he could talk by telephone with others in the community who leased instruments.
“Mr. Bell, I heard every word you said—distinctly!”
The interconnection of these individual subscribers awaited the development of the telephone switchboard. The first switchboard was installed in the office of E. T. Holmes, in Boston, in May, 1877, and connected four banks and a manufacturing concern. It connected these few telephones in the daytime by wires that were used for a burglar alarm system at night. New Haven, Conn., became the first city in the world to have a commercial telephone exchange. A switchboard connecting eight lines and 21 subscribers went into service there in January, 1878.
Two years later in April, 1880, the American Bell Telephone Company was organized. It greatly developed the telephone organization and business throughout the country. A line from Boston to Providence was built in 1881. Service between Boston and New York, 235 miles, opened in 1884.
An important step in the attainment of a nation-wide telephone service was the organization of American Telephone and Telegraph Company in 1885. This company was formed to build and operate long distance lines to interconnect the regional companies that had developed, by merger and growth from early licensee companies.
To attain the ideal of universal telephone service, it became increasingly important to extend the long distance lines even farther, to carry on continuous investigation in the practical development of the telephone art, to make further progress toward the standardization of apparatus, equipment and methods and to handle economically and efficiently the many general problems shared by the telephone companies. In 1900, therefore, the American Telephone and Telegraph Company took over the assets of the American Bell Telephone Company and became the headquarters company of the Bell System.
Artist’s conception of the first commercial switchboard, placed in service in New Haven, Conn., 1878. In the early days of the telephone industry, operators were men.