After Bell's exclusive patents expired, rival telephone companies sprang up all over America. Bell's company, American Bell Telephone, was soon in deep trouble. In 1907, American Bell Telephone fell into the hands of the rather sinister J.P. Morgan financial cartel, robber-baron speculators who dominated Wall Street.
At this point, history might have taken a different turn. American might well have been served forever by a patchwork of locally owned telephone companies. Many state politicians and local businessmen considered this an excellent solution.
But the new Bell holding company, American Telephone and Telegraph or AT&T, put in a new man at the helm, a visionary industrialist named Theodore Vail. Vail, a former Post Office manager, understood large organizations and had an innate feeling for the nature of large-scale communications. Vail quickly saw to it that AT&T seized the technological edge once again. The Pupin and Campbell "loading coil," and the deForest "audion," are both extinct technology today, but in 1913 they gave Vail's company the best LONG-DISTANCE lines ever built. By controlling long-distance—the links between, and over, and above the smaller local phone companies—AT&T swiftly gained the whip-hand over them, and was soon devouring them right and left.
Vail plowed the profits back into research and development, starting the Bell tradition of huge-scale and brilliant industrial research.
Technically and financially, AT&T gradually steamrollered the opposition. Independent telephone companies never became entirely extinct, and hundreds of them flourish today. But Vail's AT&T became the supreme communications company. At one point, Vail's AT&T bought Western Union itself, the very company that had derided Bell's telephone as a "toy." Vail thoroughly reformed Western Union's hidebound business along his modern principles; but when the federal government grew anxious at this centralization of power, Vail politely gave Western Union back.
This centralizing process was not unique. Very similar events had happened in American steel, oil, and railroads. But AT&T, unlike the other companies, was to remain supreme. The monopoly robber-barons of those other industries were humbled and shattered by government trust-busting.
Vail, the former Post Office official, was quite willing to accommodate the US government; in fact he would forge an active alliance with it. AT&T would become almost a wing of the American government, almost another Post Office—though not quite. AT&T would willingly submit to federal regulation, but in return, it would use the government's regulators as its own police, who would keep out competitors and assure the Bell system's profits and preeminence.
This was the second birth—the political birth—of the American telephone system. Vail's arrangement was to persist, with vast success, for many decades, until 1982. His system was an odd kind of American industrial socialism. It was born at about the same time as Leninist Communism, and it lasted almost as long—and, it must be admitted, to considerably better effect.
Vail's system worked. Except perhaps for aerospace, there has been no technology more thoroughly dominated by Americans than the telephone. The telephone was seen from the beginning as a quintessentially American technology. Bell's policy, and the policy of Theodore Vail, was a profoundly democratic policy of UNIVERSAL ACCESS. Vail's famous corporate slogan, "One Policy, One System, Universal Service," was a political slogan, with a very American ring to it.
The American telephone was not to become the specialized tool of government or business, but a general public utility. At first, it was true, only the wealthy could afford private telephones, and Bell's company pursued the business markets primarily. The American phone system was a capitalist effort, meant to make money; it was not a charity. But from the first, almost all communities with telephone service had public telephones. And many stores—especially drugstores—offered public use of their phones. You might not own a telephone—but you could always get into the system, if you really needed to.