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How AT&T Works

One Policy, One System: Universal Service

After a long power struggle, J.P. Morgan finally won control of American Telephone & Telegraph in 1907. (Bell Telephone's new name as of 1899.) One of his first acts was to return Theodore Vail to the position of chairman. Even at 62, Vail was fully committed to making his vision a reality. This time he had Morgan to stave off any mischief from the board. Of course, he also had to do what Morgan told him to do.

Vail returned to a company that scarcely resembled the efficient organization he had built. Long-distance service had grown, but slowly. Conditions for workers had become dangerous, and their morale had fallen. Vail's response was to set what many considered an impossible goal: a transcontinental telephone line stretching from New York to San Francisco. He demanded that it be finshed by 1914 -- the same time that the Panama Canal was scheduled to be completed.

This was no mean feat. Long-distance lines had been plagued by a phenomenon called attenuation. The electrical signal traveling down a copper line will weaken as the length of that line increases. Long distance lines compensated for this by increasing line thickness. The New York to Chicago line was one-sixth of an inch thick. The distance needed to achieve a New York to San Francisco connection was impossible to overcome with available technology. In order for the transcontinental line to work, AT&T would have to invent something which would amplify the signal as it went. Vail had proposed an achievement requiring technology that did not yet exist, and he knew it.

A group of high-level AT&T engineers put the word out that whoever developed a method to amplify phone signals would recieve a huge reward. Dr. Lee de Forest presented his invention, the audion, to the engineers. It was the first three-element vacuum tube. Though it needed some work to be effective for telephony, it was the key technology AT&T needed to make good on its promise.

It was also an example of the many tremendous, if occasionally inadvertent, contributions that AT&T has made to technological innovation in its 130 years. Until it was replaced by the transistor, the vacuum tube enabled the development of radio, television, radar and computers.

For AT&T, these potential uses were secondary to their basic aim: "One policy, one system, universal service." This was Vail's ambition for AT&T, and the transatlantic line realized this ambition. Much the same way the Panama Canal brought two oceans together, AT&T's New York to San Francisco line would bring America's two coasts together.

Not only did AT&T achieve this goal, but it finished ahead of schedule. As this milestone was nearing completion, Morgan acquired Western Union for AT&T. The idea of this emerging superpower now having access to Western Union's network became a concern for lawmakers known as trustbusters. Trustbusters sought to use government power to limit the ability of giant companies like US Steel and Standard Oil to control their markets by fixing prices and eliminating competition. In 1912, they took aim at AT&T.

At the time, AT&T was developing into a monopoly. Its national local and long distance network excluded independent phone services from its use, and it had already grabbed enough of the market to dictate prices and contain the growth of its competitors. Morgan wanted to fight the anti-trust charges all the way to the end, and he did. JP Morgan died in 1913 at the age of 76.

Vail was never a "robber baron." The former head of the U.S. Post Office did not see the objectives of his company and those of his government as being mutually exclusive. Without Morgan to disagree, Vail settled with the U.S. government; AT&T agreed to allow some independent telephone companies to use their network. In return for the government's demands, AT&T became another kind of monopoly: one sanctioned by the government. After the Kingsbury Commitment, AT&T had a mandate to function like a national utility and expand its service to every corner of the union.