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CHAPTER V.-THE EXPANSION OF THE BUSINESS 


The telephone business did not really begin to grow big and overspread the earth until 1896, but the keynote of expansion was first sounded by Theodore Vail in the earliest days, when as yet the telephone was a babe in arms. In 1879 Vail said, in a letter written to one of his captains:

"Tell our agents that we have a proposition on foot to connect the different cities for the purpose of personal communication, and in other ways to organize a GRAND TELEPHONIC SYSTEM."

This was brave talk at that time, when there were not in the whole world as many telephones as there are to-day in Cincinnati. It was brave talk in those days of iron wire, peg switchboards, and noisy diaphragms. Most telephone men regarded it as nothing more than talk. They did not see any business future for the telephone ex- cept in short-distance service. But Vail was in earnest. His previous experience as the head of the railway mail service had lifted him up to a higher point of view. He knew the need of a national system of communication that would be quicker and more direct than either the telegraph or the post office.

"I saw that if the telephone could talk one mile to-day," he said, "it would be talking a hundred miles to-morrow." And he persisted, in spite of a considerable deal of ridicule, in maintaining that the telephone was destined to connect cities and nations as well as individuals.

Four months after he had prophesied the "grand telephonic system," he encouraged Charles J. Glidden, of world-tour fame, to build a telephone line between Boston and Lowell. This was the first inter-city line. It was well placed, as the owners of the Lowell mills lived in Boston, and it made a small profit from the start. This success cheered Vail on to a master- effort. He resolved to build a line from Boston to Providence, and was so stubbornly bent upon doing this that when the Bell Company refused to act, he picked up the risk and set off with it alone. He organized a company of well- known Rhode Islanders--nicknamed the "Governors' Company"--and built the line. It was a failure at first, and went by the name of "Vail's Folly." But Engineer Carty, by a happy thought, DOUBLED THE WIRE, and thus in a moment established two new factors in the telephone business--the Metallic Circuit and the Long Distance line.

At once the Bell Company came over to Vail's point of view, bought his new line, and launched out upon what seemed to be the foolhardy enterprise of stringing a double wire from Boston to New York. This was to be not only the longest of all telephone lines, strung on ten thousand poles; it was to be a line de luxe, built of glistening red copper, not iron. Its cost was to be seventy thousand dollars, which was an enormous sum in those hardscrabble days. There was much opposition to such extravagance, and much ridicule. "I would n't take that line as a gift," said one of the Bell Company's officials.

But when the last coil of wire was stretched into place, and the first "Hello" leaped from Boston to New York, the new line was a victorious success. It carried messages from the first day; and more, it raised the whole telephone business to a higher level. It swept away the prejudice that telephone service could become nothing more than a neighborhood affair. "It was the salvation of the business," said Edward J. Hill. It marked a turning-point in the history of the telephone, when the day of small things was ended and the day of great things was begun. No one man, no hundred men, had created it. It was the final result of ten years of invention and improvement.

While this epoch-making line was being strung, Vail was pushing his "grand telephonic system" policy by organizing The American Telephone and Telegraph Company. This, too, was a master-stroke. It was the introduction of the staff-and-line method of organization into business. It was doing for the forty or fifty Bell Companies what Von Moltke did for the German army prior to the Franco-Prussian War. It was the creation of a central company that should link all local companies together, and itself own and operate the means by which these companies are united. This central company was to grapple with all national problems, to own all telephones and long-distance lines, to protect all patents, and to be the headquarters of invention, information, capital, and legal protection for the entire federation of Bell Companies.

Seldom has a company been started with so small a capital and so vast a purpose. It had no more than $100,000 of capital stock, in 1885; but its declared object was nothing less than to establish a system of wire communication for the human race. Here are, in its own words, the marching orders of this Company: "To connect one or more points in each and every city, town, or place an the State of New York, with one or more points in each and every other city, town, or place in said State, and in each and every other of the United States, and in Canada, and Mexico; and each and every of said cities, towns, and places is to be connected with each and every other city, town, or place in said States and countries, and also by cable and other appropriate means with the rest of the known world."

So ran Vail's dream, and for nine years he worked mightily to make it come true. He remained until the various parts of the business had grown together, and until his plan for a "grand telephonic system" was under way and fairly well understood. Then he went out, into a series of picturesque enterprises, until he had built up a four-square fortune; and recently, in 1907, he came back to be the head of the telephone business, and to complete the work of organization that he started thirty years before.

When Vail said auf wiedersehen to the telephone business, it had passed from infancy to childhood. It was well shaped but not fully grown. Its pioneering days were over. It was self-supporting and had a little money in the bank. But it could not then have carried the load of traffic that it carries to-day. It had still too many problems to solve and too much general inertia to overcome. It needed to be conserved, drilled, educated, popularized. And the man who was finally chosen to replace Vail was in many respects the appropriate leader for such a preparatory period.

Hudson--John Elbridge Hudson--was the name of the new head of the telephone people. He was a man of middle age, born in Lynn and bred in Boston; a long-pedigreed New Englander, whose ancestors had smelted iron ore in Lynn when Charles the First was King. He was a lawyer by profession and a university professor by temperament. His specialty, as a man of affairs, had been marine law; and his hobby was the collection of rare books and old English engravings. He was a master of the Greek language, and very fond of using it. On all possible occasions he used the language of Pericles in his conversation; and even carried this preference so far as to write his business memoranda in Greek. He was above all else a scholar, then a lawyer, and somewhat incidentally the central figure in the telephone world.

But it was of tremendous value to the telephone business at that time to have at its head a man of Hudson's intellectual and moral calibre.

He gave it tone and prestige. He built up its credit. He kept it clean and clear above all suspicion of wrong-doing. He held fast whatever had been gained. And he prepared the way for the period of expansion by borrowing fifty millions for improvements, and by adding greatly to the strength and influence of the American Telephone and Telegraph Company.

Hudson remained at the head of the telephone table until his death, in 1900, and thus lived to see the dawn of the era of big business. Under his regime great things were done in the development of the art. The business was pushed ahead at every point by its captains. Every man in his place, trying to give a little better service than yesterday--that was the keynote of the Hudson period. There was no one preeminent genius. Each important step forward was the result of the cooperation of many minds, and the prodding necessities of a growing traffic.

By 1896, when the Common Battery system created a new era, the telephone engineer had pretty well mastered his simpler troubles. He was able to handle his wires, no matter how many. By this time, too, the public was ready for the telephone. A new generation had grown up, without the prejudices of its fathers. People had grown away from the telegraphic habit of thought, which was that wire communications were expensive luxuries for the few. The telephone was, in fact, a new social nerve, so new and so novel that very nearly twenty years went by before it had fully grown into place, and before the social body developed the instinct of using it.

Not that the difficulties of the telephone engineers were over, for they were not. They have seemed to grow more numerous and complex every year. But by 1896 enough had been done to warrant a forward movement. For the next ten-year period the keynote of telephone history was EXPANSION. Under the prevailing flat-rate plan of payment, all customers paid the same yearly price and then used their telephones as often as they pleased. This was a simple method, and the most satisfactory for small towns and farming regions. But in a great city such a plan grew to be suicidal. In New York, for instance, the price had to be raised to $240, which lifted the telephone as high above the mass of the citizens as though it were a piano or a diamond sunburst. Such a plan was strangling the business. It was shutting out the small users. It was clogging the wires with deadhead calls. It was giving some people too little service and others too much. It was a very unsatisfactory situation.

How to extend the service and at the same time cheapen it to small users--that was the Gordian knot; and the man who unquestionably did most to untie it was Edward J. Hall. Mr. Hall founded the telephone business in Buffalo in 1878, and seven years afterwards became the chief of the long-distance traffic. He was then, and is to-day, one of the statesmen of the telephone. For more than thirty years he has been the "candid friend" of the business, incessantly suggesting, probing, and criticising. Keen and dispassionate, with a genius for mercilessly cutting to the marrow of a proposition, Hall has at the same time been a zealot for the improvement and extension of telephone service. It was he who set the agents free from the ball-and- chain of royalties, allowing them to pay instead a percentage of gross receipts. And it was he who "broke the jam," as a lumberman would say, by suggesting the MESSAGE RATE system.

By this plan, which U. N. Bethell developed to its highest point in New York, a user of the telephone pays a fixed minimum price for a certain number of messages per year, and extra for all messages over this number. The large user pays more, and the little user pays less. It opened up the way to such an expansion of telephone business as Bell, in his rosiest dreams, had never imagined. In three years, after 1896, there were twice as many users; in six years there were four times as many; in ten years there were eight to one. What with the message rate and the pay station, the telephone was now on its way to be universal. It was adapted to all kinds and conditions of men. A great corporation, nerved at every point with telephone wires, may now pay fifty thousand dollars to the Bell Company, while at the same time a young Irish immigrant boy, just arrived in New York City, may offer five coppers and find at his disposal a fifty million dollar telephone system.

When the message rate was fairly well established, Hudson died--fell suddenly to the ground as he was about to step into a railway carriage. In his place came Frederick P. Fish, also a lawyer and a Bostonian. Fish was a popular, optimistic man, with a "full-speed-ahead" temperament. He pushed the policy of expansion until he broke all the records. He borrowed money in stupendous amounts--$150,000,000 at one time--and flung it into a campaign of red- hot development. More business he demanded, and more, and more, until his captains, like a thirty-horse team of galloping horses, became very nearly uncontrollable.

It was a fast and furious period. The whole country was ablaze with a passion of prosperity. After generations of conflict, the men with large ideas had at last put to rout the men of small ideas. The waste and folly of competition had everywhere driven men to the policy of cooperation. Mills were linked to mills and factories to factories, in a vast mutualism of industry such as no other age, perhaps, has ever known. And as the telephone is essentially the instrument of co-working and interdependent people, it found itself suddenly welcomed as the most popular and indispensable of all the agencies that put men in touch with each other.

To describe this growth in a single sentence, we might say that the Bell telephone secured its first million of capital in 1879; its first million of earnings in 1882; its first million of dividends in 1884; its first million of surplus in 1885. It had paid out its first million for legal expenses by 1886; began first to send a million messages a day in 1888; had strung its first million miles of wire in 1900; and had installed its first million telephones in 1898. By 1897 it had spun as many cobwebs of wire as the mighty Western Union itself; by 1900 it had twice as many miles of wire as the Western Union, and in 1905 FIVE TIMES as many. Such was the plunging progress of the Bell Companies in this period of expansion, that by 1905 they had swept past all European countries combined, not only in the quality of the service but in the actual number of telephones in use. This, too, without a cent of public money, or the protection of a tariff, or the prestige of a governmental bureau.

By 1892 Boston and New York were talking to Chicago, Milwaukee, Pittsburg, and Washington. One-half of the people of the United States were within talking distance of each other. The THOUSAND-MILE TALK had ceased to be a fairy tale. Several years later the western end of the line was pushed over the plains to Nebraska, enabling the spoken word in Boston to be heard in Omaha. Slowly and with much effort the public were taught to substitute the telephone for travel. A special long-distance salon was fitted up in New York City to entice people into the habit of talking to other cities. Cabs were sent for customers; and when one arrived, he was escorted over Oriental rugs to a gilded booth, draped with silken curtains. This was the famous "Room Nine." By such and many other allurements a larger idea of telephone service was given to the public mind; until in 1909 at least eighteen thousand New York-Chicago conversa- tions were held, and the revenue from strictly long-distance messages was twenty-two thousand dollars a day.

By 1906 even the Rocky Mountain Bell Company had grown to be a ten-million-dollar enterprise. It began at Salt Lake City with a hundred telephones, in 1880. Then it reached out to master an area of four hundred and thirteen thousand square miles--a great Lone Land of undeveloped resources. Its linemen groped through dense forests where their poles looked like toothpicks beside the towering pines and cedars. They girdled the mountains and basted the prairies with wire, until the lonely places were brought together and made sociable. They drove off the Indians, who wanted the bright wire for ear-rings and bracelets; and the bears, which mistook the humming of the wires for the buzzing of bees, and persisted in gnawing the poles down. With the most heroic optimism, this Rocky Mountain Company persevered until, in 1906, it had created a seventy- thousand-mile nerve-system for the far West.

Chicago, in this year, had two hundred thou- sand telephones in use, in her two hundred square miles of area. The business had been built up by General Anson Stager, who was himself wealthy, and able to attract the support of such men as John Crerar, H. H. Porter, and Robert T. Lincoln. Since 1882 it has paid dividends, and in one glorious year its stock soared to four hundred dollars a share. The old- timers--the men who clambered over roof-tops in 1878 and tacked iron wires wherever they could without being chased off--are still for the most part in control of the Chicago company.

But as might have been expected, it was New York City that was the record-breaker when the era of telephone expansion arrived. Here the flood of big business struck with the force of a tidal wave. The number of users leaped from 56,000 in 1900 up to 810,000 in 1908. In a single year of sweating and breathless activity,65,000 new telephones were put on desks or hung on walls--an average of one new user for every two minutes of the business day.

Literally tons, and hundreds of tons, of telephones were hauled in drays from the factory and put in place in New York's homes and offices. More and more were demanded, until to-day there are more telephones in New York than there are in the four countries, France, Belgium, Holland, and Switzerland combined. As a user of telephones New York has risen to be unapproachable. Mass together all the telephones of London, Glasgow, Liverpool, Manchester, Birmingham, Leeds, Sheffleld, Bristol, and Belfast, and there will even then be barely as many as are carrying the conversations of this one American city.

In 1879 the New York telephone directory was a small card, showing two hundred and fifty-two names; but now it has grown to be an eight-hundred-page quarterly, with a circulation of half a million, and requiring twenty drays, forty horses, and four hundred men to do the work of distribution. There was one shabby little exchange thirty years ago; but now there are fifty-two exchanges, as the nerve-centres of a vast fifty- million-dollar system. Incredible as it may seem to foreigners, it is literally true that in a single building in New York, the Hudson Terminal, there are more telephones than in Odessa or Madrid, more than in the two kingdoms of Greece and Bulgaria combined.

Merely to operate this system requires an army of more than five thousand girls. Merely to keep their records requires two hundred and thirty-five million sheets of paper a year. Merely to do the writing of these records wears away five hundred and sixty thousand lead pencils. And merely to give these girls a cup of tea or coffee at noon, compels the Bell Company to buy yearly six thousand pounds of tea, seventeen thousand pounds of coffee, forty-eight thousand cans of condensed milk, and one hundred and forty barrels of sugar.

The myriad wires of this New York system are tingling with talk every minute of the day and night. They are most at rest between three and four o'clock in the morning, although even then there are usually ten calls a minute. Between five and six o'clock, two thousand New Yorkers are awake and at the telephone. Half an hour later there are twice as many. Between seven and eight twenty-five thousand people have called up twenty-five thousand other people, so that there are as many people talking by wire as there were in the whole city of New York in the Revolutionary period. Even this is only the dawn of the day's business. By half-past eight it is doubled; by nine it is trebled; by ten it is multiplied sixfold; and by eleven the roar has become an incredible babel of one hundred and eighty thousand conversations an hour, with fifty new voices clamoring at the exchanges every second.

This is "the peak of the load." It is the topmost pinnacle of talk. It is the utmost degree of service that the telephone has been required to give in any city. And it is as much a world's wonder, to men and women of imagination, as the steel mills of Homestead or the turbine leviathans that curve across the Atlantic Ocean in four and a half days.

As to the men who built it up: Charles F. Cutler died in 1907, but most of the others are still alive and busy. Union N. Bethell, now in Cutler's place at the head of the New York Company, has been the operating chief for eighteen years. He is a man of shrewdness and sympathy, with a rare sagacity in solving knotty problems, a president of the new type, who regards his work as a sort of obligation he owes to the public. And just as foreigners go to Pittsburg to see the steel business at its best; just as they go to Iowa and Kansas to see the New Farmer, so they make pilgrimages to Bethell's office to learn the profession of telephony.

This unparalleled telephone system of New York grew up without having at any time the rivalry of competition. But in many other cities and especially in the Middle West, there sprang up in 1895 a medley of independent companies. The time of the original patents had expired, and the Bell Companies found themselves freed from the expense of litigation only to be snarled up in a tangle of duplication. In a few years there were six thousand of these little Robinson Crusoe companies. And by 1901 they had put in use more than a million telephones and were professing to have a capital of a hundred millions.

Most of these companies were necessary and did much to expand the telephone business into new territory. They were in fact small mutual associations of a dozen or a hundred farmers, whose aim was to get telephone service at cost. But there were other companies, probably a thousand or more, which were organized by promoters who built their hopes on the fact that the Bell Companies were unpopular, and on the myth that they were fabulously rich. Instead of legitimately extending telephone lines into communities that had none, these promoters proceeded to inflict the messy snarl of an overlapping system upon whatever cities would give them permission to do so.

In this way, masked as competition, the nuisance and waste of duplication began in most American cities. The telephone business was still so young, it was so little appreciated even by the telephone officials and engineers, that the public regarded a second or a third telephone system in one city as quite a possible and desirable innovation. "We have two ears," said one promoter; "why not therefore have two telephones?"

This duplication went merrily on for years before it was generally discovered that the telephone is not an ear, but a nerve system; and that such an experiment as a duplicate nerve system has never been attempted by Nature, even in her most frivolous moods. Most people fancied that a telephone system was practically the same as a gas or electric light system, which can often be duplicated with the result of cheaper rates and better service. They did not for years discover that two telephone companies in one city means either half service or double cost, just as two fire departments or two post offices would.

Some of these duplicate companies built up a complete plant, and gave good local service, while others proved to be mere stock bubbles. Most of them were over-capitalized, depending upon public sympathy to atone for deficiencies in equipment. One which had printed fifty million dollars of stock for sale was sold at auction in 1909 for four hundred thousand dollars. All told, there were twenty-three of these bubbles that burst in 1905, twenty-one in 1906, and twelve in 1907. So high has been the death-rate among these isolated companies that at a recent conven- tion of telephone agents, the chairman's gavel was made of thirty-five pieces of wood, taken from thirty-five switchboards of thirty-five extinct companies.

A study of twelve single-system cities and twenty-seven double-system cities shows that there are about eleven per cent more telephones under the double-system, and that where the second system is put in, every fifth user is obliged to pay for two telephones. The rates are alike, whether a city has one or two systems. Duplicating companies raised their rates in sixteen cities out of the twenty-seven, and reduced them in one city. Taking the United States as a whole, there are to-day fully two hundred and fifty thousand people who are paying for two telephones instead of one, an economic waste of at least ten million dollars a year.

A fair-minded survey of the entire independent telephone movement would probably show that it was at first a stimulant, followed, as stimulants usually are, by a reaction. It was unquestionably for several years a spur to the Bell Com- panies. But it did not fulfil its promises of cheap rates, better service, and high dividends; it did little or nothing to improve telephonic apparatus, producing nothing new except the automatic switchboard--a brilliant invention, which is now in its experimental period. In the main, perhaps, it has been a reactionary and troublesome movement in the cities, and a progressive movement among the farmers.

By 1907 it was a wave that had spent its force. It was no longer rolling along easily on the broad ocean of hope, but broken and turned aside by the rocks of actual conditions. One by one the telephone promoters learned the limitations of an isolated company, and asked to be included as members of the Bell family. In 1907 four hundred and fifty-eight thousand independent telephones were linked by wire to the nearest Bell Company; and in 1908 these were followed by three hundred and fifty thousand more. After this landslide to the policy of consolidation, there still remained a fairly large assortment of independent companies; but they had lost their dreams and their illusions.

As might have been expected, the independent movement produced a number of competent local leaders, but none of national importance. The Bell Companies, on the other hand, were officered by men who had for a quarter of a century been surveying telephone problems from a national point of view. At their head, from 1907 onwards, was Theodore N. Vail, who had returned dramatically, at the precise moment when he was needed, to finish the work that he had begun in 1878. He had been absent for twenty years, developing water-power and building street- railways in South America. In the first act of the telephone drama, it was he who put the enterprise upon a business basis, and laid down the first principles of its policy. In the second and third acts he had no place; but when the curtain rose upon the fourth act, Vail was once more the central figure, standing white-haired among his captains, and pushing forward the completion of the "grand telephonic system" that he had dreamed of when the telephone was three years old.

Thus it came about that the telephone business was created by Vail, conserved by Hudson, expanded by Fish, and is now in process of being consolidated by Vail. It is being knit together into a stupendous Bell System--a federation of self-governing companies, united by a central company that is the busiest of them all. It is no longer protected by any patent monopoly. Whoever is rich enough and rash enough may enter the field. But it has all the immeasurable advantages that come from long experience, immense bulk, the most highly skilled specialists, and an abundance of capital. "The Bell System is strong," says Vail, "because we are all tied up together; and the success of one is therefore the concern of all."

The Bell System! Here we have the motif of American telephone development. Here is the most comprehensive idea that has entered any telephone engineer's brain. Already this Bell System has grown to be so vast, so nearly akin to a national nerve system, that there is nothing else to which we can compare it. It is so wide- spread that few are aware of its greatness. It is strung out over fifty thousand cities and communities.

If it were all gathered together into one place, this Bell System, it would make a city of Telephonia as large as Baltimore. It would contain half of the telephone property of the world. Its actual wealth would be fully $760,000,000, and its revenue would be greater than the revenue of the city of New York.

Part of the property of the city of Telephonia consists of ten million poles, as many as would make a fence from New York to California, or put a stockade around Texas. If the Telephonians wished to use these poles at home, they might drive them in as piles along their water-front, and have a twenty-five thousand-acre dock; or if their city were a hundred square miles in extent, they might set up a seven-ply wall around it with these poles.

Wire, too! Eleven million miles of it! This city of Telephonia would be the capital of an empire of wire. Not all the men in New York State could shoulder this burden of wire and carry it. Throw all the people of Illinois in one end of the scale, and put on the other side the wire-wealth of Telephonia, and long before the last coil was in place, the Illinoisans would be in the air.

What would this city do for a living? It would make two-thirds of the telephones, cables, and switchboards of all countries. Nearly one- quarter of its citizens would work in factories, while the others would be busy in six thousand exchanges, making it possible for the people of the United States to talk to one another at the rate of SEVEN THOUSAND MILLION CONVERSATIONS A YEAR.

The pay-envelope army that moves to work every morning in Telephonia would be a host of one hundred and ten thousand men and girls, mostly girls,--as many girls as would fill Vassar College a hundred times and more, or double the population of Nevada. Put these men and girls in line, march them ten abreast, and six hours would pass before the last company would arrive at the reviewing stand. In single file this throng of Telephonians would make a living wall from New York to New Haven.

Such is the extraordinary city of which Alexander Graham Bell was the only resident in 1875. It has been built up without the backing of any great bank or multi-millionaire. There have been no Vanderbilts in it, no Astors, Rockefellers, Rothschilds, Harrimans. There are even now only four men who own as many as ten thousand shares of the stock of the central company. This Bell System stands as the life-work of unprivileged men, who are for the most part still alive and busy. With very few and trivial exceptions, every part of it was made in the United States. No other industrial organism of equal size owes foreign countries so little. Alike in its origin, its development, and its highest point of efficiency and expansion, the telephone is as essentially American as the Declaration of Independence or the monument on Bunker Hill.

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