AT&T's story is one of innovation, conquest, endurance and revival. Since its birth in 1876, AT&T started a communications revolution, established an invincible monopoly, was dismantled by the government and rose again as a major player in a new era of digital communications. In this article, we'll learn exactly how AT&T works.

At the time of its breakup in 1984, AT&T had been in business for 107 years. As the largest company on earth, AT&T employed more than a million people. Despite its size and age, AT&T remained an engine of innovation, developing world-changing technologies like the transistor, the solar cell and Unix. Throughout much of its existence, AT&T's total dominance of its core business was constantly challenged by its only true rival: the government of the United States of America.

"Ma Bell," as the company was known, was a monopoly in two senses of the word. Its aim was to remove all competition to make way for its national telephone system. It also enjoyed government sanction for much of the 20th century. That policy ended in 1984, when the Department of Justice forced AT&T to split into eight different companies. The 1984 settlement separated local phone service from long-distance service. AT&T took long distance, while the other seven companies -- commonly known as the "Baby Bells" -- managed regional, local phone service. The break up rendered AT&T's prior mission irrelevant, and the new companies had to discover new reasons for being. To know how AT&T works now, it's important to see how AT&T worked in the past.

The Beginning

The company that eventually became AT&T began with the telephone's inventor, Alexander Graham Bell. Bell was born in Edinburgh, Scotland, in 1847. His father, Melville, was a speech instructor specializing in teaching the deaf to speak. Alexander followed his father in the family business and took his expertise to the United States at Boston University's School of Oratory in 1873. There, Bell was given more opportunities to explore his interests in the transmission of speech via electric signal. The fathers of two of his students, Thomas Sanders and Gardner Hubbard, encouraged Bell's investigations and financed his project. With Thomas Watson as his research assistant, Bell went to work. At the time, the telegraph was the only means of electrical communication available. It functioned on an intermittent electrical signal, carrying electrical charges in short bursts of Morse code. Bell guessed that for speech to travel through wires as an electric charge, it would have to be a continuous, undulating signal.

On March 10, 1876, Bell's intuition became reality. As the story goes, Bell and Watson were at work in separate rooms. Bell had a simple microphone to pick up his voice and Watson had the speaker to recieve the signal. Bell spilled liquid on his desk and said reflexively, "Watson come here, I need you." Watson wasn't within earshot, but he heard the request just the same. He received the call from the telephone. A patent attorney, Hubbard had already filed patents in Bell's name for the device. Now he and Sanders formed a company to sell this new invention to the world: the Bell telephone.

At first the telephone got quite a bit of attention as a technological wonder, debuting at the Philadelphia Centennial Exhibition on July 25, 1876. But the initial excitement waned and customers were scarce. Bell returned to Scotland and left the business operations to Hubbard. Without visionary leadership, Bell Telephone looked as if it wouldn't last the decade, much less conquer the next century. Hubbard offered the company to William Orton, then president of Western Union, for $100,000. Orton passed, dismissing the telephone as an electrical toy.

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