The Bell Telephone Company, a common law joint stock company, was organized in Boston, Massachusetts on July 9, 1877 by Alexander Graham Bell's father-in-law Gardiner Greene Hubbard, who also helped organize a sister company — the New England Telephone and Telegraph Company. The Bell Telephone Company was started on the basis of holding "potentially valuable patents", principally Bell's master telephone patent #174465.[1]
The two companies merged on February 17, 1879 to form two new entities, the National Bell Telephone Company of Boston, and the International Bell Telephone Company, soon-after established by Hubbard and which was headquartered in Brussels, Belgium.[2][3][4] Theodore Vail then took over its operations at that point, becoming a central figure in its rapid growth and commercial success.
The National Bell Telephone Company subsequently merged with others on March 20, 1880 to form the American Bell Telephone Company, also of Boston, Massachusetts.[5]
Upon its inception, the Bell Telephone Company was organized with Hubbard as "trustee", although he was additionally its de facto president since he also controlled his daughter's shares by power of attorney, and with Thomas Sanders, its principal financial backer, as treasurer.[6] The American Bell Telephone Company would later evolve into the American Telephone & Telegraph Company (AT&T), at times the world's largest telephone company.
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The Bell Patent Association (a name later assigned by historians), was technically not a corporate entity but a trusteeship and a partnership, and was first established verbally in 1874 to be the holders of the patents produced by Bell and his assistant Thomas Watson.
Approximate one third interests were at first held by Gardiner Greene Hubbard, a lawyer and Bell's future father-in-law; Thomas Sanders, the well-to-do leather merchant father of one of Bell's deaf students (and who was the very first to enter into an agreement with Bell); and finally by Alexander Graham Bell himself. Hubbard would subsequently register some of his shares with two other family members. An approximate 10% interest of the patent association was later assigned by its principles to Bell's technical assistant Thomas Watson, in lieu of salary and for his earlier financial support to Bell while they worked together creating their first functional telephones.
The verbal Patent Association agreement was first formalized in a memorandum of agreement on February 27, 1875.[7] The Patent Association's assets would later became the foundational assets of the Bell Telephone Company.[8][9]
At the time of the organization of the Bell Telephone Company (also known as the Bell Company) as a joint stock company in 1877 by Hubbard, who became its trustee and de facto president, 5,000 shares in total were issued to:[10]
Two days after the company's formation, on July 11, 1877, Bell married Hubbard's daughter Mabel Gardiner Hubbard, and made a wedding gift of 1,487 shares of his allotment to his new wife, keeping only 10 shares for himself. Bell and his wife left not long after for a tour of Europe that lasted over a year, during which time Mabel left her shares with her father under a power of attorney.
Alexander Graham Bell's ten shares of Bell Telephone Company stock were later converted into a single share of the American Bell Telephone Company, and still later into two shares of the American Telephone and Telegraph Company. AT&T President Frederick Fish would subsequently return Bell's single American Bell Telephone Company share to him as a memento after it had been converted and canceled.[11][12]
Alexander Graham Bell's fiancée Mabel Hubbard was the indirect source of the Bell Telephone Company's early commercial success after his creation of the telephone. The U.S. Centennial Exposition in Philadelphia in 1876 made Bell's newly invented telephone a featured headline worldwide. Exhibition judges Brazilian Emperor Dom Pedro II and the eminent British physicist William Thomson (Lord Kelvin) recommended his device to the Committee of Electrical Awards, which voted Bell the Gold Medal for Electrical Equipment, helping to propel him to international fame. Bell also won a second Gold Medal for his additional display at the exposition, Visible Speech —developed earlier by his equally famous father Alexander Melville Bell.
Pivotally, late in the evening moments after the main group of tired judges and newspaper reporters had quickly looked over and derided Bell's telephone display, Emperor Dom Pedro, who was straggling, entered the fair's Education Building where Bell's two displays were located. As the main group started moving on to the next exhibit to be reviewed, Dom Pedro came upon the displays and called out to Bell in his booming voice: "What are you doing here?" The emperor had previously met Bell in Boston much earlier while visiting schools for the deaf in the United States.[13][14][15][16][17]
Startled by the emperor's enthusiastic response to Bell's telephone demonstration—during which the emperor exclaimed "My God! It talks!", the crowd of judges and press members became energized and vied to take turns communicating with Bell over his invention.[13][14][15][16][17]
Ironically, Bell, who was then a full-time teacher, hadn't even planned on exhibiting at the fair due to his heavy teaching schedule and preparation for his student's examinations. He went to Philadelphia only at the stern insistence of Mabel Hubbard, his then-fiancée and future wife and who was an expert multilingual lip reader, deaf since age five.[18]
Mabel had understood Bell's reluctance to go to the exhibition and display his works, so she secretly bought his train ticket to Philadelphia, packed his bag, and then took the unknowing Bell to Boston's train station where she told her shocked fiancé that he was going on a trip. When Bell started arguing, Mabel turned her sight away from him and became literally deaf to his protests.[18][19][20]
By 1881 American Bell had acquired 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 US$100,000 (approximately $2.27 million in current dollars[21]). In only a few years Western Union's president would acknowledge that it was a serious business error, one that almost led to his company later almost being swallowed up by the newly emerging telecommunications giant that Bell Telephone would shortly evolve into. Western Union was saved from demise only by the U.S. Government's anti-monopoly interventions.[22]
A year earlier in 1880 the management of American Bell had 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. The project was formally incorporated in New York State as a separate company named American Telephone and Telegraph Company on March 3, 1885. Starting from New York, its long-distance telephone network reached Chicago, Illinois, in 1892,[22] with its multitudes of local exchanges continuing to stretch further and further yearly, eventually creating a continent-wide telephone system.
On December 30, 1899, the assets of American Bell were transferred into its subsidiary American Telephone and Telegraph Company (formerly AT&T Long Lines); this was because Massachusetts corporate laws were very restrictive, and limited capitalization to ten million dollars, forestalling American Bell's further growth. With this assets transfer on the second to last day of the 19th Century, AT&T became the parent of both American Bell and the Bell System.[23]
John Elbridge Hudson joined Bell Telephone as counsel in 1880 and served as president from 1889 to 1900. AT&T would later undergo mergers with SBC Communications and BellSouth to become the New AT&T.