longdistancescam

Was Long-Distance Calling a Scam?

Kind of — but not in the way you might think

Remember long-distance calling from landlines? If you wanted to call someone in a different area code, or at least someone fairly far away from you, you got a bill at the end of the month for it. Weird! And every time you turned on the TV, you’d see advertisements for cheap long-distance plans. It was a big deal to be able to save a few bucks calling your grandfather in another state, your childhood best friend who moved away or your mother while you were away at college. After all, there was no email, text messages or social media back then. 

But why did it cost so much money? How’d it actually work? Was it a scam? What the hell was “long distance,” anyway? Alongside Bill Horne, a retired phone technician and engineer who’s now moderator of the Telecom Digest, the oldest continuously published mailing list on the internet, we’re dialing in some answers.

When did long-distance calling become a thing?

“It was always there, but you couldn’t do much with it for a while,” Horne says. In the early days of phones, specifically the 1870s, Congress was besieged by complaints from business owners that all the competing phone companies were forcing them to buy two, three or five telephone lines, because the different companies wouldn’t connect to each other. It was a mess! Thus, Congress created a public service company-slash-monopoly whose name you might have heard before: AT&T (however, this old AT&T, also known as Ma Bell, is not to be confused with the AT&T we know today — more on that in a bit). 

Anyway, the long-distance phone lines were always there, but they weren’t very good because they were copies of telegraph lines, with just one wire. That works fine for binary signals like morse code, but not for the carriage of something as infinitely variable as a human voice. So between that and all the noise in the ground due to cities being electrified on a mass scale at the time, the quality sucked.

Then, two major things happened. First, a man named Theodore Vail, president of AT&T, did an experiment by combining two separate wires, which was a huge improvement in quality. That ushered in an era of actually usable long-distance lines. The second is that farm-state congressmen started demanding discounts for phone lines for all their constituents to help make the telephone ubiquitous in America. Since the cost of bringing phone service to farmer Joe’s plot of land all over the nation would come at an enormous cost, the question became, how to pay for this? They proposed that they raise the rates of long-distance calls — a service overwhelmingly used by businesses, making it, in effect, a business tax.

How expensive was it, then?

Extremely! Way more so than it was in the 1980s. In postwar America, a cross-country call could cost $8 per minute or more — and that’s $8 in, say, 1960s money! It cost so much that corporate behemoths of the day, like Sears, leased their own set of phone lines between facilities just so they could more accurately predict costs and budgeting, according to Horne.

So the cost of long-distance back then subsidized local phone service?

Yes, and then some. At the time, AT&T “was the only company in the world whose stock was distributed so widely they bragged about it in their ads,” Horne says. Everyone and their neighbors owned stock, so if basically everyone has shares in the company, who controls it? Nobody! (Sure, shareholders do, but there were so many shareholders that, as a practical matter, no one had any sway.) They were both a monopoly and answerable to no one. They could do what they wanted — and what they wanted was to make lots of money.

AT&T supplied phone service to the whole Goddamn country. They controlled the operating companies in every state that dealt with administration and lower-level politicians. They also owned Western Electric, the company that made pretty much all the hardware, as well as Bell Labs, which was the company that designed all the equipment that Western Electric made and sold. They even owned the Yellow Pages! 

“They stood in a river of gold that flowed between their customers and suppliers, and did whatever they wanted at any time they chose,” Horne says. The postwar economy was surging, and companies didn’t have other means of communication like the internet — they were fully reliant on phone service. What else were they gonna do? American industry basically paid for every American to have phone service, and AT&T got very, very rich because of it.

That doesn’t sound too equitable.

Maybe not, but Horne asserts that it made the American economy into the 20th century behemoth it became. Ubiquitous phone service was a huge cost to bear, but the system itself was the envy of the world. Everyone — businesses, citizenry — could save time and become more efficient by use of the telephone (whether it meant the bank calling you instead of writing you, or a housewife being able to order more milk to be delivered over the phone). And it was controlled by a company — not a government entity (or some subdivision of the government) like in other countries, with all the attendant graft and lousy performance. The U.S. was the only country in the world where the dial tone was always there when you picked up the receiver. The price of that was high, but reliable phone service became an indispensable part of the economy.

What were the actual, practical costs of calling long distance?

Well, there’s the infrastructure — it’s hard to explain all of it in a paragraph, but let’s just say that phone infrastructure itself was intricate and expensive (and costly to maintain), and required a ton of hardware and power — that’s just for local service. There are five levels of offices used to connect a call, based on how far away the person you’re trying to connect to will be: From offices that connect local and regional calls (level five) down to level one offices, of which there were only two in the country. Depending on the distance, the conversation might be connected at four or five levels.

Then there’s the entire billing apparatus. When you’d place a long-distance call, the operator would ask for your number, “and you’d be surprised how few people lied about that,” Horne says. They would write down your number on a ticket and stamp it with a machine, and that would be the record of the call. Later those gave way to long paper tape tickets, but in any case, those tickets eventually had to be entered into a computer: They’d be driven to a billing center to be fed through a machine, which would eventually generate the computer records to eventually generate a bill. All that media transfer and transportation was expensive.

Were there any workarounds to long distance?

Actually, yes: Another corporate giant was built on it, in fact. It was called blue box fraud, after the device used to simulate a call to an 800 number that was instead used to make a long-distance call. It wasn’t widespread, though if it sounds familiar to you, this was the subculture that spawned computer hacking. Steve Jobs and Steve Wozniak, the founders of Apple, were into it, and they got seed money for Apple from the sales of blue box devices. Remember that Balzac line, about how behind every great fortune is a great crime? Look no further than Apple.

Did long-distance calling get less expensive, then?

Yes, and we have mutual fund managers to thank for it. In the 1970s they built up enough stake in AT&T to effect change, in which they settled a long-running antitrust lawsuit against the company and forced it to break up into a somewhat more competitive market. Doing so enabled other players (Sprint, MCI and an unaffiliated long-distance company called AT&T etc.) to get into the long-distance game — all of which was no accident whatsoever, according to Horne: Lowering the cost of long distance lowered the operating costs of the many other companies that mutual funds held stock in. The nationwide system became regionalized, and these regional remnants of AT&T (NYNEX, US West, Bell South, etc.) plus the long-distance upstarts, created price wars for long-distance calling, as a result of which it got cheaper and more reasonably priced — say, $8 an hour vs. $8 per minute. 

So what happened to long distance? Why don’t cell phone companies charge for it?

Horne says some genius came in and told them it’d be more cost-effective for them to not charge for it. Crazy, right? But half the distance of every long-distance call went into billing and collecting that money. So the cell phone companies bought tons and tons of what, in layperson’s terms, are a bit like 800 numbers, onto which cellular long-distance calls are made. They pass that cost onto customers as part of their monthly service bill. Thus, for everybody with a cell phone, long-distance calls are now a flat rate, and the world no longer has to suffer from advertising fare like this.

Is there an equivalent to long-distance calling today?

Data! You’re aware that your phone is basically an electronic leash, right? Your phone company knows where you are at all hours of the day, whom you communicate with and what you search for. All of this behavioral data is far more valuable than a few bucks of calling between states. Different day, same hustle by the phone company: The true cost of the service it provides is always paid for in insidious ways.