The telephone played a major communications role in American history from the 1876 publication of its first patent by Alexander Graham Bell onward. In the 20th century the American Telephone and Telegraph Company (AT&T) dominated the telecommunication market as the at times largest company in the world, until it was broken up in 1982 and replaced by a system of competitors. Originally targeted at business users and upscale families, by the 1920s the "phone" became widely popular in the general population. Ordinary people either subscribed to telephone service themselves, or used a telephone in the neighborhood, including public pay telephones. Long-distance service was metered and much more expensive than local, flat-rate calling. Ordinary Americans contacted businesses, friends, and relatives. Business-to-business communication was important, and increasingly displaced telegrams. The technology steadily advanced. Starting around the turn of the century, the dial telephone allowed users to place calls themselves without operator assistance. By mid-century, mobile radio telephone service became available to free users from fixed locations in some cities. The arrival of the smartphone in the early 21st century provided every user a small mobile computer with microphone and speaker, that was bundled with powerful features, such as cameras and Internet access by operation of apps. It could easily send text messages, which tended to displace voice calls. In 1945, forty-five percent of American households had a telephone. By 1957, that number had reached seventy-five percent, and by 1970, over 90 percent. In 2002, a majority of U.S. survey respondents reported having a mobile phone. In January 2013, a majority of U.S. survey respondents reported owning a smartphone. In 2024 the Pew Research Center reports that 98% of Americans own a cellphone of some kind, with 91% owning a smartphone.
AT&T and the Bell System
According to historian Robert W Garnet, in the six years after Bell's invention of the telephone in 1876, his new company managed to increase its capital from a small amount to US$10 million (equivalent to $330 million in 2025). Furthermore, the company struck a deal with Western Union, the giant telegram company, preventing them from entering the telephone market. It acquired a controlling interest in the Western Electric Manufacturing Company to manufacture telephone equipment and supplies exclusively. It invested in local exchanges throughout the country which led to standardization and more business for Western Electric. This dramatic transformation was primarily due to the backing of New England financiers, who not only supplied essential cash, but also recruited experienced managers, such as Theodore Newton Vail to construct and manage a nationwide system. Vail, for example, had been superintendent of the Post Office's Railway Mail Service, which was in charge of intercity movement of mail. Alexander Graham Bell moved back and forth to Canada, and his Bell Telephone Company of Canada, although nominally separate, was in practice largely dependent on American Bell/AT&T, for capital, equipment, policy, and priorities.
American Bell Telephone Company (1881–1899) In 1881, President William Hathaway Forbes of the newly renamed American Bell Telephone Company issued the first annual report indicating that the 1880 profits were over US$200,000 (equivalent to $6,672,000 in 2025), and it now operated 133,692 telephones. It set a policy that it leased telephones to customers (by the month) and retained ownership. It always installed (and removed) the telephones it owned. Only nine cities were left in the United States with populations over 10,000 that did not yet have a telephone exchange. The young company spent heavily on lawsuits over patents, which it usually won. It reported profits of over US$500,000 in 1881 and nearly US$1 million in 1882 (equivalent to $30 million in 2025). Typical charges for businesses were US$150 for a thousand messages (equivalent to $5,004 in 2025). Pay stations were being set up around the business district, charging 15 cents per call (equivalent to $5.81 in 2025). American Bell would send a team to make a pitch to business leaders in a city about starting a branch. They had advantages: Bell's national prestige guaranteed an attentive audience. Bell would provide the expertise and equipment. it manufactured the gear and sold only to affiliates. A Bell setup meant good local service and the very good long-distance service, which was otherwise unavailable in that city.
AT&T (1899–1982)
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