T1: A Survival Guide

Chapter 1. History of the U.S. Telephone Network

All is flux, nothing is stationary.

—Heraclitus

We live in a digital world.

By digital, I don’t mean the overused “digital economy” or anything remotely related to punditry. In the beginning, there was analog. Transmitted signals were subject to fading, interference, and noise. All that changed with digital encoding and transmission. Digital signals offer superior properties for information. Perfect regeneration is possible with sophisticated error detection and correction methods. Signals can be sent without loss or distortion over arbitrary distances. Think of all the digital systems people use on a daily basis: CDs are digitized audio, many cable systems are now digital, and the Internet cannot be overlooked. Then there is the telephone, which was one of the earliest experiments in digital technology.

Zeros and ones are not just the building blocks of the future—they are also the building blocks of the present.

It was not always so, of course. Telephony was initially all analog, and signal processing was not even a discipline. Social changes and increased mobility in the 1950s threatened to break the telephone system by swamping its capacity. Rescue came by way of digital technology and its increased capacity and quality. Telephone companies invested in the new digital technology to transmit digitized voices over long distances and, in doing so, laid the foundation for the long-distance data transmission so critical to the Internet. T1, though now used overwhelmingly for data transmission, found its roots in the U.S. telephone network in the digital upheaval of the 1960s.

1876-1950: Analog Beginnings

When Alexander Graham Bell invented the telephone in 1876, he followed a course of action familiar to many inventors today: he filed patent applications. His patent applications were approved in 1876-77, and he promptly sought financial backing to build a company to collect patent license fees. In 1877, he formed the Bell Telephone Company with two investors.

The year 1878 saw the construction of the first telephone exchange in New Haven, Connecticut. In the first exchanges, telephone calls were switched manually by operators using plugboards—a far cry from the modern central offices with computerized switching equipment. In the three years that followed, Bell Telephone licensed many local operators and constructed exchanges quickly in major cities.

Western Union attempted to enter the infant telephony market in 1861, after securing some patent ammunition of its own with the construction of the first transcontinental telegraph line.^[1] Bell Telephone, by this point renamed American Bell, fought Western Union’s entry tooth and nail in court until, eventually, Western Union agreed to stay out of telephony, provided that Bell did not compete in the telegraphy market. With the collapse of Western Union’s ambitions in the telephone market, its major supplier, the Western Electric Manufacturing Company, was financially hobbled. Western Electric was an engineering firm with a record of successfully manufacturing novel inventions (including the incandescent light bulb), but was forced to sell a controlling stake to American Bell in 1881 to survive. Western Electric subsequently became the manufacturing arm of American Bell. In 1883, Western Electric’s Mechanical department was founded. Ultimately, the Mechanical department grew into Bell Telephone Laboratories, a name interwoven with much of the technological developments later in this story.

In 1885, American Telephone and Telegraph (AT&T), founded to build and manage the long-distance network, started operations in New York; the long-distance network reached Chicago by 1892. Because electrical impulses degrade with distance, newer technologies were needed in order to reach farther. Loading coils, which reduce the decay of signal strength in the voice band (frequencies less than 3.5 KHz), enabled the long-distance network to reach Denver. Transcontinental service needed one more major enhancement, the addition of practical electronic amplifiers, which allowed AT&T to extend the long-distance network to San Francisco by 1915. In the midst of all this, AT&T became the parent company of American Bell in 1899.

After Bell’s patents expired in 1894, the company faced fierce competition from many upstart telephone companies. Theodore Vail, who had led American Bell’s patent fight against Western Union, took the helm of AT&T in 1907 and guided the company to the dominant position it would hold for much of the 20th century. Under Vail, AT&T acquired many upstart telecommunications companies and became a regulated monopoly under the theory that telecommunications would work best when operating as a regulated monopoly dedicated to universal service.

To a certain extent, Vail had a point. One of the major problems faced by the telephone network without the uniformity of Bell’s patents was interoperability. Different phone companies could choose different equipment manufacturers, and equipment from different vendors did not necessarily work together. With interoperability difficulties, interconnection was spotty, so it was not guaranteed that two telephone subscribers could call each other unless they were customers of the same telephone company!

The U.S. government accepted AT&T’s monopoly status, but required AT&T to allow all local telephone companies to connect to its long-distance network. Interoperability was easy—everybody bought Western Electric equipment and, presumably, liked it. By 1939, AT&T served 83% of U.S. telephones, manufactured 90% of U.S. telephones, and owned 98% of long-distance connections.

In this period of growing dominance, AT&T was able to devote substantial resources to research and development. In addition to the famed Nobel Prize-winning basic research carried out by Bell Labs, AT&T made a steady stream of improvements to the telephone network, many of which were direct results of Bell Labs research. AT&T began experimenting with radio as a means of enabling transatlantic communication in 1915. They made commercial radio service available in 1927, but for a hefty price: calls cost $75 for 5 minutes.^[2] During this time, Bell Labs researchers realized the potential of electromechanical relays for storing and processing information. In 1937, relays were first operated in a manner we would recognize today as being analogous to computer memory. In 1949, the U.S. government brought an antitrust suit against AT&T in an attempt to divest Western Electric. Seven years later, a consent decree restricted AT&T to running the nation’s telephone network.

---

^[1] Some technology industry observers are amused at the way technology goes in cycles. It is an old phenomenon: the telegraph, a digital network (dash or dot), was replaced by an analog network (the early Bell System), which was then replaced by a digital network (the digitalized Bell System).

^[2] To see the plummeting cost of telephony, it is interesting to adjust the 1927 rate for inflation. As measured by the consumer price index (CPI), the 1927 transatlantic telephone call would cost slightly more than $153 per minute in 2001 dollars. Thanks to the march of technology, today calls cost a mere fraction of that, even without signing up for a discount calling plan!