Speedy communication speeds the economy

The telephone dates from March 7th, 1876, the date on which Alexander Graham Bell took out a patent for a new device he called by that name. Three days later, on March 10th, Bell made his device to work. He spoke on it to his assistant, Thomas Watson, "Mr. Watson—Come here—I want to see you" into the transmitter.  Watson, listening at the receiving end in an adjoining room, heard the words clearly. The device turned vocal sounds into electrical currents, which could do the reverse at the other end of the line.

It changed the economy rapidly, Businesses that had depended upon hand-couriered messages or mailed communications, or at best the anonymous telegraph, could now communicate by voice more rapidly. Not only did it grow a whole new telecommunications industry, it facilitated most other businesses by speeding up their transactions.

Bell and his partners offered the patent to Western Union for $100,000, but were rebuffed. Two years later the WU President said that if he could acquire it for $25m, he would think it a bargain. The Bell Telephone Company developed into American Telephone and Telegraph (AT&T). For most of the 20th Century it held a monopoly in the US and Canada, and was nicknamed “Ma Bell.”

In the UK the telephone monopoly was held by the Post Office, a monopoly so tight that it was held that the ringing of hand-bells to communicate could be in breach of it. When its telecommunications arm was formed into an independent entity and privatized in 1984, it was initially thought that a telephone service was a natural monopoly, since it would be cumbersome to have several lines connected to each home. At privatization, however, the new company, BT, was required to send the signals of its long-distance competitor down “the last mile” into each home. More competitors were allowed later, making the UK one of the world’s most competitive telephone markets.

More recently the development of mobile telephony has leapfrogged over fixed landlines to enable developing countries to move from no telephone service at all into widespread mobile telecommunication. This had made a big economic impact, enabling isolated farmers to discover where the best prices are to be had before moving their produce to market. Mobile phones are increasingly used in developing countries to transfer money across distances rapidly and safely.

Such were the consequences of that March day in 1876, but Bell himself thought that telephones were a distraction from his scientific work, and refused to have one in his study. He continued to work helping to develop other inventions, including the phonograph and the hydrofoil.