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Home -> Burton J. Hendrick -> The Age of Big Business, A Chronicle of the Captains of Industry -> CHAPTER IV

The Age of Big Business, A Chronicle of the Captains of Industry - CHAPTER IV










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

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.

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