I Introduction

Telephone, instrument that sends and receives voice messages and data. Telephones convert speech and data to electrical energy, which is sent great distances. All telephones are linked by complex switching systems called central offices or exchanges, which establish the pathway for information to travel. Telephones are used for casual conversations, to conduct business, and to summon help in an emergency (as in the 911 service in the United States). The telephone has other uses that do not involve one person talking to another, including paying bills (the caller uses the telephone to communicate with a bank’s distant computer) and retrieving messages from an answering machine. In 2001 there were 667 main telephone lines per 1,000 people in the United States and 676 main telephone lines per 1,000 people in Canada.

About half of the information passing through telephone lines occurs entirely between special-purpose telephones, such as computers with modems. A modem converts the digital bits of a computer’s output to an audio tone, which is then converted to an electrical signal and passed over telephone lines to be decoded by a modem attached to a computer at the receiving end. Another special-purpose telephone is a facsimile machine, or fax machine, which produces a duplicate of a document at a distant point.

II Parts of a Telephone

A basic telephone set contains a transmitter that transfers the caller’s voice; a receiver that amplifies sound from an incoming call; a rotary or push-button dial; a ringer or alerter; and a small assembly of electrical parts, called the antisidetone network, that keeps the caller’s voice from sounding too loud through the receiver. If it is a two-piece telephone set, the transmitter and receiver are mounted in the handset, the ringer is typically in the base, and the dial may be in either the base or handset. The handset cord connects the base to the handset, and the line cord connects the telephone to the telephone line.

More sophisticated telephones may vary from this pattern. A speakerphone has a microphone and speaker in the base in addition to the transmitter and receiver in the handset. Speakerphones allow callers’ hands to be free, and allow more than two people to listen and speak during a call. In a cordless phone, the handset cord is replaced by a radio link between the handset and base, but a line cord is still used. This allows a caller to move about in a limited area while on the telephone. A cellular phone has extremely miniaturized components that make it possible to combine the base and handset into one handheld unit. No line or handset cords are needed with a cellular phone. A cellular phone permits more mobility than a cordless phone.

A Transmitter

There are two common kinds of telephone transmitters: the carbon transmitter and the electret transmitter. The carbon transmitter is constructed by placing carbon granules between metal plates called electrodes. One of the metal plates is a thin diaphragm that takes variations in pressure caused by sound waves and transmits these variations to the carbon granules. The electrodes conduct electricity that flows through the carbon. Variations in pressure caused by sound waves hitting the diaphragm cause the electrical resistance of the carbon to vary—when the grains are squeezed together, they conduct electricity more easily; and when they are far apart, they conduct electricity less efficiently. The resultant current varies with the sound-wave pressure applied to the transmitter.

The electret transmitter is composed of a thin disk of metal-coated plastic and a thicker, hollow metal disk. In the handset, the plastic disk is held slightly above most of the metal disk. The plastic disk is electrically charged, and an electric field is created in the space where the disks do not touch. Sound waves from the caller’s voice cause the plastic disk to vibrate, which changes the distance between the disks, and so changes the intensity of the electric field between them. The variations in the electric field are translated into variations of electric current, which travels across telephone lines. An amplifier using transistors is needed with an electret transmitter to obtain sufficiently strong variations of electric current.

B Receiver

The receiver of a telephone set is made from a flat ring of magnetic material with a short cuff of the same material attached to the ring’s outer rim. Underneath the magnetic ring and inside the magnetic cuff is a coil of wire through which electric current, representing the sounds from the distant telephone, flows. A thin diaphragm of magnetic material is suspended from the inside edges of the magnetic ring so it is positioned between the magnet and the coil. The magnetic field created by the magnet changes with the current in the coil and makes the diaphragm vibrate. The vibrating diaphragm creates sound waves that replicate the sounds that were transformed into electricity by the other person’s transmitter.

C Alerter

The alerter in a telephone is usually called the ringer, because for most of the telephone’s history, a bell was used to indicate a call. The alerter responds only to a special frequency of electricity that is sent by the exchange in response to the request for that telephone number. Creating an electronic replacement for the bell that can provide a pleasing yet attention-getting sound at a reasonable cost was a surprisingly difficult task. For many people, the sound of a bell is still preferable to the sound of an electronic alerter. However, since a mechanical bell requires a certain amount of space in the telephone to be effective, smaller telephones mandate the use of electronic alerters.

D Dial

The telephone dial has undergone major changes in its history. Two forms of dialing still exist within the telephone system: dial pulse from a rotary dial, and multifrequency tone, which is commonly called by its original trade name of Touch-Tone, from a push-button dial.

In a rotary dial, the numerals one to nine, followed by zero, are placed in a circle behind round holes in a movable plate. The user places a finger in the hole corresponding to the desired digit and rotates the movable plate clockwise until the user’s finger hits the finger stop; then the user removes the finger. A spring mechanism causes the plate to return to its starting position, and, while the plate is turning, the mechanism opens an electrical switch the number of times equal to the dial digit. Zero receives ten switch openings since it is the last digit on the dial. The result is a number of "dial pulses" in the electrical current flowing between the telephone set and the exchange. Equipment at the exchange counts these pulses to determine the number being called.

The rotary dial has been used since the 1920s. But mechanical dials are expensive to repair and the rotary-dialing process itself is slow, especially if a long string of digits is dialed. The development of inexpensive and reliable amplification provided by the introduction of the transistor in the 1960s made practical the design of a dialing system based on the transmission of relatively low power tones instead of the higher-power dial pulses.

Today most telephones have push buttons instead of a rotary dial. Touch-Tone is an optional service, and telephone companies still maintain the ability to receive pulse dialing. Push-button telephones usually have a switch on the base that the customer can set to determine whether the telephone will send pulses or tones.

E Business Telephones

A large business will usually have its own switching machine called a Private Branch Exchange (PBX), with hundreds or possibly thousands of lines, all of which can be reached by dialing one number. The extension telephones connected to the large business’s PBX are often identical to the simple single-line instruments used in residences. The telephones used by small businesses, which do not have their own PBX, must incorporate the capability of accessing several telephone lines and are called multiline sets. The small-business environment usually requires the capability of transferring calls from one set to another as well as intercom calls, which allow one employee to call another without using an outside telephone line.

F Cellular Telephones

A cellular telephone is designed to give the user maximum freedom of movement while using a telephone. A cellular telephone uses radio signals to communicate between the set and an antenna. The served area is divided into cells something like a honeycomb, and an antenna is placed within each cell and connected by telephone lines to one exchange devoted to cellular-telephone calls. This exchange connects cellular telephones to one another or transfers the call to a regular exchange if the call is between a cellular telephone and a noncellular telephone. The special cellular exchange, through computer control, selects the antenna closest to the telephone when service is requested. As the telephone roams, the exchange automatically determines when to change the serving cell based on the power of the radio signal received simultaneously at adjacent sites. This change occurs without interrupting conversation. Practical power considerations limit the distance between the telephone and the nearest cellular antenna, and since cellular phones use radio signals, it is very easy for unauthorized people to access communications carried out over cellular phones. Currently, digital cellular phones are gaining in popularity because the radio signals are harder to intercept and decode.

III Making a Telephone Call

A telephone call starts when the caller lifts a handset off the base. This closes an electrical switch that initiates the flow of a steady electric current over the line between the user’s location and the exchange. The exchange detects the current and returns a dial tone, a precise combination of two notes that lets a caller know the line is ready.

Once the dial tone is heard, the caller uses a rotary or push-button dial mounted either on the handset or base to enter a sequence of digits, the telephone number of the called party. The switching equipment in the exchange removes the dial tone from the line after the first digit is received and, after receiving the last digit, determines whether the called party is in the same exchange or a different exchange. If the called party is in the same exchange, bursts of ringing current are applied to the called party’s line. Each telephone contains a ringer that responds to a specific electric frequency. When the called party answers the telephone by picking up the handset, steady current starts to flow in the called party’s line and is detected by the exchange. The exchange then stops applying ringing and sets up a connection between the caller and the called party.

If the called party is in a different exchange from the caller, the caller’s exchange sets up a connection over the telephone network to the called party’s exchange. The called exchange then handles the process of ringing, detecting an answer, and notifying the calling exchange and billing machinery when the call is completed (in telephone terminology, a call is completed when the called party answers, not when the conversation is over).

When the conversation is over, one or both parties hang up by replacing their handset on the base, stopping the flow of current. The exchange then initiates the process of taking down the connection, including notifying billing equipment of the duration of the call if appropriate. Billing equipment may or may not be involved because calls within the local calling area, which includes several nearby exchanges, may be either flat rate or message rate. In flat-rate service, the subscriber is allowed an unlimited number of calls for a fixed fee each month. For message-rate subscribers, each call involves a charge that depends on the distance between the calling and called parties and the duration of the call. A long-distance call is a call out of the local calling area and is always billed as a message-rate call.

A Switching

Telephone switching equipment interprets the number dialed and then completes a path through the network to the called subscriber. For long-distance calls with complicated paths through the network, several levels of switching equipment may be needed. The automatic exchange to which the subscriber’s telephone is connected is the lowest level of switching equipment and is called by various names, including local exchange, local office, central-office switch, or, simply, switch. Higher levels of switching equipment include tandem and toll switches, and are not needed when both caller and called subscribers are within the same local exchange.

Before automatic exchanges were invented, all calls were placed through manual exchanges in which a small light on a switchboard alerted an operator that a subscriber wanted service. The operator inserted an insulated electrical cable into a jack corresponding to the subscriber requesting service. This allowed the operator and the subscriber to converse. The caller told the operator the called party’s name, and the operator used another cord adjacent to the first to plug into the called party’s jack and then operated a key (another type of electrical switch) that connected ringing current to the called party’s telephone. The operator listened for the called party to answer, and then disconnected to ensure the privacy of the call.

Today there are no telephones served by manual exchanges in the United States. All telephone subscribers are served by automatic exchanges, which perform the functions of the human operator. The number being dialed is stored and then passed to the exchange’s central computer, which in turn operates the switch to complete the call or routes it to a higher-level switch for further processing.

Today’s automatic exchanges use a pair of computers, one running the program that provides service, and the second monitoring the operation of the first, ready to take over in a few seconds in the event of an equipment failure.

Early telephone exchanges, a grouping of 10,000 individual subscriber numbers, were originally given names corresponding to their town or location within a city, such as Murray Hill or Market. When the dialing area grew to cover more than one exchange, there was a need for the dial to transmit letters as well as numbers. This problem was solved by equating three letters to each digit on the dial except for the one and the zero. Each number from two to nine represented three letters, so there was room for only 24 letters. Q and Z were left off the dial because these letters rarely appear in place-names. In dialing, the first two letters of each exchange name were used ahead of the rest of the subscriber’s number, and all exchange names were standardized as two letters and a digit. Eventually the place-names were replaced with their equivalent digits, giving us our current U.S. and Canadian seven-digit telephone numbers. In other parts of the world, a number may consist of more or less than seven digits.

The greatly expanded information-processing capability of modern computers permits Direct Distance Dialing, with which a subscriber can automatically place a call to a distant city without needing the services of a human operator to determine the appropriate routing path through the network. Computers in the switching machines used for long-distance calls store the routing information in their electronic memory. A toll-switching machine may store several different possible routes for a call. As telephone traffic becomes heavier during the day, some routes may become unavailable. The toll switch will then select a less direct alternate route to permit the completion of the call.

B Transmission

Calling from New York City to Hong Kong involves using a path that transmits electrical energy halfway around the world. During the conversation, it is the task of the transmission system to deliver that energy so that the speech or data is transmitted clearly and free from noise. Since the telephone in New York City does not know whether it is connected to a telephone next door or to one in Hong Kong, the amount of energy put on the line is not different in either case. However, it requires much more energy to converse with Hong Kong than with next door because energy is lost in the transmission. The transmission path must provide amplification of the signal as well as transport.

Analog transmission, in which speech or data is converted directly into a varying electrical current, is suitable for local calls. But once the call involves any significant distance, the necessary amplification of the analog signal can add so much noise that the received signal becomes unintelligible. For long-distance calls, the signal is digitized, or converted to a series of pulses that encodes the information.

When an analog electrical signal is digitized, samples of the signal’s strength are taken at regular intervals, usually about 8,000 samples per second. Each sample is converted into a binary form, a number made up of a series of 1s and 0s. This number is easily and swiftly passed through the switching system. Digital transmission systems are much less subject to interfering noise than are analog systems. The digitized signal can then be passed through a digital-to-analog converter (DAC) at a point close to the receiving party, and converted to a form that the ear cannot distinguish from the original signal.

There are several ways a digital or analog signal may be transmitted, including coaxial and fiber-optic cables and microwave and longwave radio signals sent along the ground or bounced off satellites in orbit around the earth. A coaxial wire, like the wire between a videocassette recorder, or VCR (see Video Recording), and a television set, is an efficient transmission system. A coaxial wire has a conducting tube surrounding another conductor. A coaxial cable contains several coaxial wires in a common outer covering. The important benefit of a coaxial cable over a cable composed of simple wires is that the coaxial cable is more efficient at carrying very high frequency currents. This is important because in providing transmission over long distances, many telephone conversations are combined using frequency-modulation (FM) techniques similar to the combining of many channels in the television system. The combined signal containing hundreds of individual telephone conversations is sent over one pair of wires in a coaxial cable, so the signal has to be very clear.

Coaxial cable is expensive to install and maintain, especially when it is lying on the ocean floor. Two methods exist for controlling this expense. The first consists of increasing the capacity of the cable and so spreading the expense over more users. The installation of the first transatlantic submarine coaxial telephone cable in 1956 provided only about 30 channels, but the number of submarine cable channels across the ocean has grown to thousands with the addition of only a few more cables because of the greatly expanded capacity of each new coaxial cable.

Another telephone-transmission method uses fiber-optic cable, which is made of bundles of optical fibers (see Fiber Optics), long strands of specially made glass encased in a protective coating. Optical fibers transmit energy in the form of light pulses. The technology is similar to that of the coaxial cable, except that the optical fibers can handle tens of thousands of conversations simultaneously.

Another approach to long-distance transmission is the use of radio. Before coaxial cables were invented, very powerful longwave (low frequency) radio stations were used for intercontinental calls. Only a few calls could be in progress at one time, however, and such calls were very expensive. Microwave radio uses very high frequency radio waves and has the ability to handle a large number of simultaneous conversations over the same microwave link. Because cable does not have to be installed between microwave towers, this system is usually cheaper than coaxial cable. On land, the coaxial-cable systems are often supplemented with microwave-radio systems.

The technology of microwave radio is carried one step further by the use of communications satellites. Most communications satellites are in geosynchronous orbit—that is, they orbit the earth once a day over the equator, so the satellite is always above the same place on the earth’s surface. That way, only a single satellite is needed for continuous service between two points on the surface, provided both points can be seen from the satellite. Even considering the expense of a satellite, this method is cheaper to install and maintain per channel than using coaxial cables on the ocean floor. Consequently, satellite links are used regularly in long-distance calling. Since radio waves, while very fast, take time to travel from one point to another, satellite communication does have one serious shortcoming: Because of the satellite’s distance from the earth, there is a noticeable lag in conversational responses. As a result, many calls use a satellite for only one direction of transmission, such as from the caller to the receiver, and use a ground microwave or coaxial link for receiver-to-caller transmission.

A combination of microwave, coaxial-cable, optical-fiber, and satellite paths now link the major cities of the world. The capacity of each type of system depends on its age and the territory covered, but capacities generally fall into the following ranges: Frequency modulation over a simple pair of wires like the earliest telephone lines yields tens of circuits (a circuit can transmit one telephone conversation) per pair; coaxial cable yields hundreds of circuits per pair of conductors, and thousands per cable; microwave and satellite transmissions yield thousands of circuits per link; and optical fiber has the potential for tens of thousands of circuits per fiber.

IV Telephone Services

In the United States and Canada, universal service was a stated goal of the telephone industry during the first half of the 20th century—every household was to have its own telephone. This goal has now been essentially reached, but before it became a reality, the only access many people had to the telephone was through pay (or public) telephones, usually placed in a neighborhood store. A pay telephone is a telephone that may have special hardware to count and safeguard coins or, more recently, to read the information off credit cards or calling cards. Additional equipment at the exchange responds to signals from the pay phone to indicate to the operator or automatic exchange how much money has been deposited or to which account the call will be charged. Today the pay phone still exists, but it usually serves as a convenience rather than as primary access to the telephone network.

Computer-controlled exchange switches make it possible to offer a variety of extra services to both the residential and the business customer. Some services to which users may subscribe at extra cost are call waiting, in which a second incoming call, instead of receiving a busy signal, hears normal ringing while the subscriber hears a beep superimposed on the conversation in progress; and three-way calling, in which a second outgoing call may be placed while one is already in progress so that three subscribers can then talk to each other. Some services available to users within exchanges with the most-modern transmission systems are: caller ID, in which the calling party’s number is displayed to the receiver (with the calling party’s permission—subscribers can elect to make their telephone number hidden from caller-ID services) on special equipment before the call is answered; and repeat dialing, in which a called number, if busy, will be automatically redialed for a certain amount of time.

For residential service, voice mail can either be purchased from the telephone company or can be obtained by purchasing an answering machine. An answering machine usually contains a regular telephone set along with the ability to detect incoming calls and to record and play back messages, with either an audiotape or a digital system. After a preset number of rings, the answering machine plays a prerecorded message inviting the caller to leave a message to be recorded.

Toll-free 800 numbers are a very popular service. Calls made to a telephone number that has an 800 area code are billed to the called party rather than to the caller. This is very useful to any business that uses mail-order sales, because it encourages potential customers to call to place orders. A less expensive form of 800-number service is now available for residential subscribers.

In calling telephone numbers with area codes of 900, the caller is billed an extra charge, often on a per-minute basis. The use of these numbers has ranged from collecting contributions for charitable organizations, to businesses that provide information for which the caller must pay.

While the United States and Canada are the most advanced countries in the world in telephone-service technologies, most other industrialized nations are not far behind. An organization based in Geneva, Switzerland, called the International Telecommunication Union (ITU), works to standardize telephone service throughout the world. Without its coordinating activities, International Direct Distance Dialing (a service that provides the ability to place international calls without the assistance of an operator) would have been extremely difficult to implement. Among its other services, the ITU creates an environment in which a special service introduced in one country can be quickly duplicated elsewhere.

V The History of the Telephone

The history of the invention of the telephone is a stormy one. A number of inventors believed voice signal might be carried over wires, and all worked toward this end. The first to achieve success was a Scottish-born American inventor, Alexander Graham Bell, a speech teacher in Boston, Massachusetts.

Bell had built an experimental telegraph, which began to function strangely one day because a part had come loose. The accident gave Bell insight into how voices could be reproduced at a distance, and he constructed a transmitter and a receiver, for which he received a patent on March 7, 1876. On March 10, 1876, as he and his assistant, Thomas A. Watson, were preparing to test the mechanism, Bell spilled some acid on himself. In another room, Watson, next to the receiver, heard clearly the first telephone message: “Mr. Watson, come here; I want you.”

A few hours after Bell had patented his invention, another American inventor, Elisha Gray, filed a document called a caveat with the U.S. Patent Office, announcing that he was well on his way to inventing a telephone. Other inventors, such as Amos E. Dolbear, also made claim to having invented the telephone at the same time. Lawsuits were filed by various individuals, and Bell’s claim to being the inventor of the first telephone had to be defended in court 600 times before the Supreme Court of the United States decided in his favor.

A Advances in Technology

After the invention of the telephone instrument itself, the second greatest technological advance in the industry may have been the invention of automatic switching. The first automatic exchanges were called Strowger switches, after Almon Brown Strowger, an undertaker in Kansas City, Missouri, who invented the system because he thought his town’s human operators were steering prospective business to his competitors. Strowger received a patent for the switches in 1891.

Long-distance telephony was established in small steps. The first step was the introduction of the long-distance telephone, originally a special highly efficient instrument permanently installed in a telephone company building and used for calling between cities. The invention at the end of the 19th century of the loading coil (a coil of copper wire wound on an iron core and connected to the cable every mile or so) increased the speaking range to approximately 1,000 miles. Until the 1910s the long-distance service used repeaters, electromechanical devices spaced along the route of the call which amplified and repeated conversations into another long-distance instrument. The obvious shortcomings of this arrangement were overcome with the invention of the triode vacuum tube, which amplified electrical signals. In 1915 vacuum-tube repeaters were used to initiate service from New York City to San Francisco, California.

The vacuum tube also made possible the development of longwave radio circuits that could span oceans. Sound quality on early radio circuits was poor, and transmission subject to unpredictable interruption. In the 1950s the technology of the coaxial-cable system was combined with high-reliability vacuum-tube circuits in an undersea cable linking North America and Europe, greatly improving transmission quality. Unlike the first transatlantic telegraph cable placed in service in 1857, which failed after two months, the first telephone cable (laid in 1956) served many years before becoming obsolete. The application of digital techniques to transmission, along with undersea cable and satellites, finally made it possible to link points halfway around the earth with a circuit that had speech quality almost as good as that between next-door neighbors.

Improved automatic-switching systems followed the gradual improvement in transmission technology. Until Direct Distance Dialing became available, all long-distance calls still required the assistance of an operator to complete. By adding a three-digit area code in front of the subscriber’s old number and developing more sophisticated common-control-switching machines, it became possible for subscribers to complete their own long-distance calls. Today customer-controlled international dialing is available between many countries.

B Evolution of the Telephone Industry

In the late 1800s, the Bell Telephone Company (established in 1877 by Alexander Graham Bell and financial backers Gardiner Greene Hubbard, a lawyer, and Thomas Sanders, a leather merchant) strongly defended its patents in order to exclude others from the telephone business. After these patents expired in 1893 and 1894, independent telephone companies were started in many cities and most small towns. A period of consolidation followed in the early 1900s, and eventually about 80 percent of the customers in the United States and many of those in Canada were served by the American Telephone and Telegraph Company (AT&T), which had bought the Bell Telephone Company in 1900. AT&T sold off its Canadian interests in 1908.

From 1885 to 1887 and from 1907 to 1919 AT&T was headed by Theodore Vail, whose vision shaped the industry for most of the 20th century. At that time, AT&T included 22 regional operating companies, each providing telephone service to an area comprising a large city, state, or group of states. In addition to owning virtually all of the long-distance circuits in use in the United States, AT&T owned the Western Electric Company, which manufactured most of the equipment. Such a corporate combination is called a vertically integrated monopoly because it dominates all facets of a business.

Both the long-distance part of AT&T and the operating companies were considered to be “natural monopolies,” and by law were decreed to be the sole provider of telephone service within a designated area. More than 5,000 independent companies remained, but each independent was also a monopoly with an exclusive service region. This arrangement reduced the costs associated with more than one company stringing wires in an area, and eliminated the early problems that had arisen when customers of one company serving a region wished to call customers of another company serving the same area. In exchange for the absence of competition, the companies were regulated by various levels of government, which told them what services they must provide and what prices they could charge.

During this time, telephone sets were never sold to the customer—they were leased as part of an overall service package that included the telephone, the connecting lines to the exchange, and the capability of calling other customers. In this way, the telephone company was responsible for any problems, whether they arose from equipment failures, damage to exposed wires, or even the conduct of operators on their job. If a telephone set broke, it was fixed or replaced at no charge.

Since stringing wires between exchanges and users was a major part of the cost of providing telephone service, especially in rural environments, early residential subscribers often shared the same line. These were called party lines—as opposed to private, or single-party, lines. When one subscriber on a party line was making a telephone call, the other parties on the line could not use the line. Unfortunately, they could listen to the conversation, thereby compromising its privacy. Such arrangements also meant that, unless special equipment was used, all the telephones on the line would ring whenever there was a call for any of the parties. Each party had a distinct combination of short and long rings to indicate whether the call was for that house or another party.

Business telephones were usually private lines. A business could not afford to have its service blocked by another user. This meant that business service was more expensive than residential service. Businesses continued to be charged more for their private lines than were subscribers with private lines in homes. This subsidization of telephones in homes permeated the government-regulated rate structure of the telephone industry until about 1980. Long-distance service was priced artificially high, and the consequent extra revenues to the telephone company were used to keep the price of residential service artificially low.

While most consumers were happy with the control of all equipment by the telephone companies, some were not. Also, because of strong vertical integration within AT&T, the purchase of equipment from independent manufacturers was tightly controlled. AT&T initially refused to allow the independently manufactured Carterphone, a device that linked two-way-radio equipment to a telephone, to be connected to its network. After protracted lawsuits, AT&T agreed in 1968 to allow the connection of independently manufactured telephones to its network, provided they met legal standards set by the Federal Communications Commission (FCC). While the AT&T agreement did not directly involve the other telephone companies in the country, over time the entire industry followed AT&T’s lead.

In 1974 MCI Communications Corporation challenged AT&T about its right to maintain a monopoly over long-distance service. Antitrust proceedings were brought, and eventually settled in 1982 in a consent decree that brought about the breakup of AT&T. In a consent decree, the federal government agrees to stop proceedings against a company in return for restrictions on or changes in the company.

The antitrust proceedings were dropped when AT&T agreed to sell off its local operating companies, retaining the long-distance network and manufacturing companies. The former AT&T operating companies were regrouped into seven Regional Holding Companies (RHCs), which were initially restricted from engaging in any business other than telephone service within their assigned service area. The RHCs promptly began sidestepping these restrictions by setting up subsidiaries to operate in the unregulated environment and seeking legislation to further remove restrictions. At the same time, alternate long-distance carriers, such as MCI and Sprint, sought legislation to keep AT&T under as much regulation as possible while freeing themselves from any regulation.

C The Telephone Industry Today

In 1996 the U.S. government enacted the Telecommunications Reform Act, which removed government rules preventing local and long-distance phone companies, cable television operators, broadcasters, and wireless services from directly competing with one another. The act spurred consolidation in the industry, as regional companies joined forces to create telecommunications giants that provided telephone, wireless, cable, and Internet services.

In other countries, until the 1990s, most of the telephone companies were owned by each nation’s central government and operated as part of the post office, an arrangement that inevitably led to tight control. Many countries are now privatizing telephone service. In order to escape government regulation at home, U.S. companies are investing heavily in the phone systems of other countries. For example, in 1995 AT&T announced it would attempt to gain a share of the market for telephone services in India. In a reverse trend, European companies are investing in U.S. long-distance carriers.

Other major markets for telephone companies are opening up around the globe as the developing world becomes more technologically advanced. Nonindustrial countries are now trying to leapfrog their development by encouraging private companies to install only the latest technology. In remote places in India and Africa, the use of solar cells is now making it possible to introduce telephones in areas still without electricity.

VI Recent Developments

The introduction of radio into the telephone set has been the most important recent development in telephone technology, permitting first the cordless phone and now the cellular phone. In addition to regular telephone service, modern cellular phones also provide wireless Internet connections, enabling users to send and receive electronic mail and search the World Wide Web.

Answering machines and phones with dials that remember several stored numbers (repertory dials) have been available for decades, but because of their expense and unreliability were never as popular as they are today. Multifunctional telephones that use microprocessors and integrated circuits have overcome both these barriers to make repertory dials a standard feature in most phones sold today. Many multifunctional telephones also include automatic answering and message-recording capability.

Videophones are devices that use a miniature video camera to send images as well as voice communication. Videophones can be connected to regular telephone lines or their messages can be sent via wireless technology. Since the transmission of a picture requires much more bandwidth (a measure of the amount of data a system can transmit per period of time) than the transmission of voice, the high cost of transmission facilities has limited the use of videophone service. This problem is being overcome by technologies that compress the video information, and by the steadily declining cost of transmission and video-terminal equipment. Video service is now used to hold business “teleconferences” between groups in distant cities using high-capacity transmission paths with wide bandwidth. Videophones suitable for conversations between individuals over the normal network are commercially available, but because they provide a picture inferior to that of a television set, have not proven very popular. Television news organizations adopted the use of videophones to cover breaking news stories in remote areas. Their use escalated in 2001 during the U.S. war against terrorists and the Taliban regime in Afghanistan.

Telecommunications companies are rapidly expanding their use of digital technology, such as Digital Subscriber Line (DSL) or Integrated Services Digital Network (ISDN), to allow users to get more information faster over the telephone. Telecommunications companies are also investing heavily in fiber optic cable to meet the ever-increasing demand for increased bandwidth.

As bandwidth continues to improve, an instrument that functions as a telephone, computer, and television becomes more commercially viable. Such a device is now available, but its cost will likely limit its widespread use in the early part of the 21st century.

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