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===The Bell System: The Largest Telecommunications Monopoly===

===The Bell System: The Largest Telecommunications Monopoly===

He initiated management and organizational strategies which resulted to the company's remarkable growth such as the issuance of formal contracts and systematic accounting control over licensees and delegated travelling agents to monitor the licensing business.<ref>[http://faculty.insead.edu/adner/research/Wester%20Union%20case%20sample.pdf The Bell Western Union Patent Agreement of 1879]</ref>

Theodore Vail, as General Manager, initiated management and organizational strategies that resulted in remarkable growth for the company.<ref>[http://faculty.insead.edu/adner/research/Wester%20Union%20case%20sample.pdf The Bell Western Union Patent Agreement of 1879]</ref> Vail also succeeded in negotiating an out of court settlement in connection with a patent infringement case against Western Union in 1879. In the settlement, Western Union recognized Alexander Graham Bell as the inventor of the telephone and as such agreed that it will stay out of the telephone business. In addition, Western Union also transferred all of its patent rights on Elisha Gray and Thomas Edison's telephone inventions to Bell, making it so that all entities with interests in the telephone business would be licensed under the Bell patents. Furthermore, Western Union also agreed to pay 20% of the total cost of every newly-developed telephone patent. In return, Bell Telephone Company agreed that it would not enter into the telegraph business, and Western Union would be given a license to use Bell's telephone system to transmit telegraphic messages, and that it would be given 20% of all Bell telephone rentals and royalties.<ref>[http://faculty.insead.edu/adner/research/Wester%20Union%20case%20sample.pdf The Bell Western Union Patent Agreement of 1879]</ref><ref>[http://memory.loc.gov/mss/magbell/285/28500129/0001i.jpg Boston Daily Advertiser: The Telephone Settlement, Oct. 25, 1879]</ref>

Vail also succeeded in negotiating an out of court settlement in connection with the company's patent infringement case against Western Union in 1879. Western Union recognized Alexander Graham Bell as the inventor of the telephone and agreed that it will stay out of the telephone business. In addition, Western Union also transferred all of its patent rights on Elisha Gray and Thomas Edison's telephone inventions. All entities who have interests in the telephone business will be licensed under the Bell patents. Furthermore, Western Union also agreed to pay 20% of the total costs of every new developed telephone patents. In return Bell Telephone Company agreed that it will not engage in the telegraph business and Western Union will be given a license to use the telephone to transmit telegraphic message and it will be given a 20% of the Bell telephone rentals and royalties. <ref>[http://faculty.insead.edu/adner/research/Wester%20Union%20case%20sample.pdf The Bell Western Union Patent Agreement of 1879]</ref>

The settlement agreement gave Bell Telephone Company full control over telephone technology and monopoly over the telecommunications industry. It also gave the company leverage to develop a well-founded national system: the Bell System.  

<ref>[http://memory.loc.gov/mss/magbell/285/28500129/0001i.jpg Boston Daily Advertiser: The Telephone Settlement, Oct. 25, 1879]</ref>

 

The settlement agreement gave Bell Telephone Company the full control over the telephone technology and monopoly over the telecommunications industry. It also gave the company the leverage to develop a well-founded national system--the Bell System.  

The Bell System was composed of the American Telephone & Telegraph (AT&T) Long Lines, also known as "Ma Bell;" 22 regional operating companies known as "Baby Bells," which provide telephone exchange services and equipment within the United States; Bell Laboratories, the research and development subsidiary of AT&T; and the Western Electric Company, its manufacturing arm. The companies within the Bell System embraced the spirit of united service to the public, and were the biggest employer in America, where employees felt secured in their job.<ref>[http://www.porticus.org/bell/bellsystem_history.html The Bell System]</ref>

The Bell System was composed of the American Telephone & Telegraph (AT&T) Long Lines, also known as "Ma Bell;" 22 regional operating companies known as "Baby Bells," which provide telephone exchange services and equipment within the United States; Bell Laboratories, the research and development subsidiary of AT&T; and the Western Electric Company, its manufacturing arm. The companies within the Bell System embraced the spirit of united service to the public, and were the biggest employer in America, where employees felt secured in their job.<ref>[http://www.porticus.org/bell/bellsystem_history.html The Bell System]</ref>

In 1887, Vail resigned as General Manager of the AT&T because of conflict in management style with his superiors. He didn't want to compromise his management principle.  He believed that the company needs to expand its service to attain growth but his superiors believe otherwise, for them dividend is more important.<ref>[http://www.porticus.org/bell/capsule_bell_system.html#The Corporation Is Born AT&T (Long Lines) Appears and Mr. Vail Exits]</ref>

In 1887, Vail resigned as General Manager of the AT&T because of a conflict in management styles with his superiors. He was against compromising his management principles, and believed that the company needed to expand its service to attain growth, while his superiors believed that dividend was more important.<ref>[http://www.porticus.org/bell/capsule_bell_system.html#The Corporation Is Born AT&T (Long Lines) Appears and Mr. Vail Exits]</ref>

 

AT&T continued to grow but the company incurred a large financial debt. In 1907, JP Morgan gain control of the AT&T debt financing and decided to convinced Theodore Vail to serve as President of the company. Vail accepted the position on May 1, 1907. Under his leadership, Vail implemented the '''One Policy, One System, One Universal Service'''. He also implemented good public relations and acknowledge that the Bell System is natural monopoly cooperating with state regulation. He instituted standard operating procedures within the company and regained the national control in telephone service. Vail retired in 1919 and during that period AT&T's structure and operation was already well established and modernized.<ref>[http://www.porticus.org/bell/capsule_bell_system.html#The Corporation Is Born Mr. Vail Goes to Work]</ref>

===Early International Expansion===

===Early International Expansion===