AT&T Corporation - Company Formation and Expansion

Company Formation and Expansion

The formation of the Bell Telephone Company superseded an agreement between Alexander Graham Bell and his financiers, principal among them Gardiner Greene Hubbard and Thomas Sanders. Renamed the National Bell Telephone Company in March 1879, it became the American Bell Telephone Company in March 1880. By 1881, it had bought a controlling interest in the Western Electric Company from Western Union. Only three years earlier, Western Union had turned down Gardiner Hubbard's offer to sell it all rights to the telephone for $100,000 ($2.41 million in 2009 dollars).

In 1880, the management of American Bell created what would become AT&T Long Lines. The project was the first of its kind to create a nationwide long-distance network with a commercially viable cost-structure. This project was formally incorporated into a separate company named American Telephone and Telegraph Company on March 3, 1885. Starting from New York, the network reached Chicago in 1892.

Bell's patent on the telephone expired in 1894, but the company's much larger customer base made its service much more valuable than alternatives and substantial growth continued.

On December 30, 1899, the American Telephone and Telegraph Company bought the assets of American Bell; this was because Massachusetts corporate laws (which limited market capitalization to ten million dollars, preventing the direct growth of American Bell itself) were more restrictive than those of New York, where AT&T was headquartered. With this transfer of assets, AT&T became the parent of the Bell System.

National long distance service reached San Francisco in 1915. Transatlantic services started in 1927 using two-way radio, but the first trans-Atlantic telephone cable did not arrive until 1956, with TAT-1.