Telephone Industry

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.

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.