Bell Telephone Company - Acquisition By AT&T

Acquisition By AT&T

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 $2.41 million in current dollars). In only a few years Western Union's president would acknowledge that it was a serious business error, one that nearly 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.

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, 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.

John Elbridge Hudson joined Bell Telephone as counsel in 1880 and served as president from 1889 to 1900. AT&T would later be acquired by SBC Communications which became the New AT&T.