Ohio Bell Telephone Company History

Company History:

Ohio Bell Telephone Company, as a part of the Ameritech Corporation, provides local-exchange and limited long-distance telephone communications in Ohio. In the mid-1990s, Ohio Bell was serving about three-fifths of Ohio's residents and maintaining over 3.4 million phone lines in the Cleveland area, the company's home base. Ohio Bell was also engaged in providing other communications services as well, including private line voice and data services, data transmission, and radio and television broadcasts.

In 1876 Alexander Graham Bell shouted to his colleague through a revolutionary communications device; one year later, Cleveland, Ohio, installed its first telephone. The first phone service in that city was provided by Western Union Telegraph Co., but that company soon withdrew from the business after a patent dispute with the Bell Telephone Company, the organization formed to oversee and market Alexander Graham Bell's technology. The exchange was then purchased by a Bell licensed company called the Cleveland Telephone Company. Incorporated in 1880, the Cleveland Telephone Company operated as the only local telephone company in the city for ten years.

Phone service in Cleveland grew rapidly. The city's original customer base of 76 had increased to almost 300 by 1880. Ten years later that number had multiplied nearly ten times to 2,979 subscribers. Given the relative expense incurred by phone service ($72 a year for businesses and $60 for homes), the invention's popularity came primarily from the wealthy and from businesses.

After local phone line needs were met in Cleveland, long distance service moved into the area as well, reaching Cleveland for the first time in 1883 via a Chicago-based Bell organization. By 1893 the American Telephone and Telegraph Company (AT&T) was providing long-distance service to Cleveland, marking the beginning of a relationship between AT&T and Cleveland Telephone that would remain for almost a century.

AT&T was originally formed by Bell Telephone as its long-distance subsidiary. As Bell Telephone grew at a tremendous rate throughout the country, it found that it needed additional money to fund the expansion. However, the amount of capital it could raise and the means of raising it were restricted by the state of Massachusetts, in which Bell Telephone was incorporated. So, Bell Telephone had its AT&T subsidiary (incorporated in New York where rules for expansion were more lenient) take over its local phone exchanges as well as continuing its role as long distance provider. With over $70 million in assets, AT&T became the parent company of the Bell System in 1899, and the Cleveland Telephone Company became a wholly-owned subsidiary of AT&T.

After the expiration of the Bell patents in 1894, independent phone companies began forming and the Cleveland Telephone Company met its first competition. The Cuyahoga Telephone Company, for example, offered lower rates than Cleveland Telephone and gave subscribers access to locations not reached by the Bell system. The new competition prompted Cleveland Telephone to lower its rates. However, customers of each company soon became frustrated when they found they couldn't place calls to those subscribing to the competitors' service. In fact, businesses found that communicating effectively with all their customers necessitated subscribing to the services of both companies. In 1901, to help with this problem, the two companies agreed to exchange services.

The real growth of the Cleveland Telephone Company began in the early 1900s with a name change and a series of acquisitions. In 1921, Cleveland Telephone became incorporated as The Ohio Bell Telephone Company, an identity that remained for over 70 years. Also during this time, it acquired the Central Union Telephone Company's Ohio locations, as well as the southern Ohio services of the Chesapeake and Potomac Telephone Company of West Virginia. Finally, a merger with Ohio State Telephone, the country's largest independent phone company, made Ohio Bell the dominant communications company in the state. During this time, Ohio boasted around 875,000 phones, and Ohio Bell operated 505,000 of that total. The company was valued at $100 million.

Although the expansion of phone lines slowed during the great Depression, use increased again in the late 1930s, and Ohio Bell continued to upgrade its services and expand its operations. In fact, Ohio Bell became the eighth largest of the Bell companies. In the Cleveland area alone, over 188,000 people used Ohio Bell's services in 1940. Ten years later the company operated about 600,000 phones in the city and surrounding suburbs, and by 1965 that number had reached one million. In the late 1960s, Ohio Bell replaced the exchange numbers used since 1897 with new seven-digit numbers, and some customers also began enjoying such new services as call transfer, three-way calling, and call-waiting.

Ohio Bell's parent, AT&T, was also growing at an amazing rate. Acquiring independent phone companies beginning in the early 1900s, AT&T was reporting income of over $1 billion by 1929. During the late 1930s and 1940s, AT&T grew by one million new customers every year. With over one million employees by the mid-1960s, the corporation provided phone communications to about 85 percent of the homes in service region. Thus, by the 1970s AT&T was the largest company in the world.

The telephone industry in the United States was clearly dominated by the Bell System and AT&T, and such control was viewed by many as the most effective way to operate telecommunications in the country. This view had been expressed, in fact, by AT&T president Theodore Vail, in the company's 1910 annual report: "The telephone system should be universal, interdependent and intercommunicating, affording opportunity for any subscriber of any exchange to communicate with any other subscriber of any other exchange.... Such control and regulation as will afford the public much better service at less cost than any competition or governmental-owned monopoly." And telecommunications had become a regulated industry in 1934 under the authority of the Federal Communications Commission (FCC), which believed that the industry should be directed by public interest and not by free market competition.

But by the 1970s, however, some began to question such control. Customers began to wonder whether the company was still working in their best interests, and companies with new telecommunications ideas wanted to compete. For example, an ambitious company called Microwave Communications, Inc. (MCI) sought to provide new and less expensive microwave technology for long distance services. When MCI received permission to offer limited service in the early 1970s, it promptly filed an antitrust suit against AT&T in 1974. A similar suit was also filed by the Justice Department during this time.

Following years in court in the biggest antitrust case in U.S. history, AT&T agreed to divest its operations in 1982. AT&T shed its local operating subsidiaries as part of the antitrust settlement, and Ameritech Corporation, a Chicago-based communications company, was established as one of the seven new regional holding companies. On January 1, 1984, The Ohio Bell Telephone Company became a wholly-owned subsidiary of Ameritech Corporation.

The period from the mid-1980s through the 1990s was a time of major restructuring and consolidation for Ohio Bell. In 1990, the company announced the reduction of about eight percent of their workforce, or approximately 1,000 jobs, through early retirement, hiring freezes, and resignations. Two years later, Ameritech consolidated management positions at all five of its Bell telephone companies: Ohio Bell, Illinois Bell, Indiana Bell, Michigan Bell, and Wisconsin Telephone. Thousands of positions in marketing, advertising, training, operations and accounting were eliminated or transferred into Ameritech Services Inc., the administrative division of the group. Additional cuts were made in later years.

During this crucial restructuring time, Jacqueline F. Woods became the new president of Ohio Bell and was faced with the challenge of assuring employees and customers that the recent changes were best for everybody. Nevertheless, many Ohio Bell workers worried about the future of their jobs and some customers were confused about who actually served their phone needs. Also during this time, management announced that the Ohio Bell name would be phased out and the state company would adopt the Ameritech name. The company thereafter became known among its customers as Ameritech Ohio, retaining the Ohio Bell name for financial reporting purposes only.

Increased competition in the 1990s prompted Ameritech Ohio to seek regulatory changes on the state level. Specifically, the company supported a plan to reform the way local-exchange companies were controlled. The Ohio Telephone Association (OTA), representing 42 local-exchange companies including Ameritech Ohio, proposed the changes, asking that local-exchange companies be subjected to lower taxes and allowed more freedom to set prices, especially with business phone rates. If approved by state officials, the changes would help Ameritech Ohio compete with competitive access providers (CAPs), who supplied businesses with fiber-optic lines that connected them to long-distance carriers at lower prices. CAPs were one of the most rapidly growing segments in the industry during this time. According to an Ameritech Ohio spokesperson in a 1992 Business First-Columbus article, "We are still operating under a regulatory system that was established at the start of the century. We need to change that system to reflect the fact that local telephone companies are no longer a monopoly business and face competition on all fronts." Moreover, Ameritech also petitioned the federal government for open communications markets for both local and long distance companies. Ameritech wanted competition, regarding it as an opportunity to grow and expand into new markets.

Technology brought exciting new services to the modern phone customer in the 1990s. Through a joint venture telecommunications experiment with new homeowners in a New Albany, Ohio, community, Ohio Bell, AT&T, and Georgia-based ICS, Inc. worked together to make daily communications life even easier. A fiber optics system called Integrated Services Digital Network (ISDN), installed in new homes, allowed residents to enjoy intercom services with other homes and locations in the community, caller identification, customized ringing patterns, a do-not-disturb feature, night service, as well as back-up power in case of power failure. The system also allowed home offices to access company computers and networks without interrupting other phone calls to the home. Other new equipment such as pagers, modems, and cellular phones made communications even easier and more convenient. Such advancements also gobbled up phone numbers, and in 1995, the state of Ohio added an additional area code to increase the availability of new numbers. While a changing regulatory environment and consolidation of services at Ameritech Ohio made their course difficult to predict, the company was pursuing a program of greater efficiency and growth, spurred by technological advancements in an increasingly interactive industry.

Further Reading:

• Brooks, John, Telephone: The First Hundred Years, New York: Harper & Row Publishers, Inc., 1975.
• Connole, Jon, "Ohio Bell Begins to Restructure, Cut 1,000 Jobs," Crain's Cleveland Business, August 6, 1990, p. 1.
• Hall, Matthew, "Ma Bell Changes," Business First-Columbus, December 13, 1993, p. 15.
• ------, "Rival Pitching Tent in Bell's Back Yard: MetroComm Eyes Local-Exchange Market," Business First-Columbus, July 13, 1992, p. 17.
• "Home Information Services Now on Trial," Custom Builder, September-October 1993, p. S19.
• Lashinsky, Adam, "Ameritech Expected to Merge Bell Units," Crain's Cleveland Business, September 7, 1992, p. 1.
• "Ohio Bell Realigns Network, Marketing," Business First-Columbus, July 9, 1990, p. 2.
• Rose, William Ganson, Cleveland: The Making of a City, Cleveland: World Publishing Co., 1950.
  The Telephone Situation in the State of Ohio, Cleveland: The Ohio Bell Telephone Co., 1924.
• Thompson, Chris, "Bell Chief Awaits Test: New President to Lead Corporate Transition," Crain's Cleveland Business, March 1, 1993, p. 1.
• Tunstall, W. Brooke, Disconnecting Parties--Managing the Bell System Break Up: An Inside View, McGraw-Hill Book Company, 1985.

Source: International Directory of Company Histories, Vol. 14. St. James Press, 1996.