Page:Popular Science Monthly Volume 71.djvu/150

144 the telephone booth not then devised, and upon the value of the central exchange as a public convenience, stating as one illustration:

It is a rainy morning, and Mrs. Smith does not want to get wet. She calls on the central office to connect her with Mr. Jones, the butcher. It is done. So with offices and houses, or workshops, and many other places.

Reports of other lectures could be cited, but a sufficient number have been shown to illustrate how clear was Graham Bell's conception of the usefulness and economical advantages of telephone exchange systems and long-distance telephone service before either one existed. And by reason of his cheery optimism and his logical, convincing arguments that the establishment of telephone exchanges in every city would necessarily follow, and that telephone service would become an indispensable feature in business and social life, his associates gained greater courage to push the exploitation of the telephone.

After considering the several plans presented for the future conduct and expansion of the new business, it was decided to adopt the plan of interesting local capital and cooperation in the establishing of local exchanges and to issue to these local organizations short-term licenses covering a period of only five or ten years. With this end in view agents w^ere appointed to solicit customers in given territory on a commission basis ranging from 25 to 50 per cent.

Where the intention was to construct and operate a local plant the exclusive right to operate under all Bell patents was granted with the proviso that the parent company, if it so desired, could purchase the property of the local company at cost, or at an appraised valuation at the expiration of the license. Then it was arranged that the telephones should never be sold during the life of the patent, but leased, the technical title of ownership being reserved to avoid legal complications, and also to secure territorial rights in the event of default of payment of the agreed royalties by the local companies. Thus the parent Bell company never granted to any operating company any right or interest in its patents nor the right to manufacture or sell telephones.

Within a year this method of locally introducing the telephone met with a cordial reception on the part of many with a speculative bent of mind, if not by permanent investors, and thereafter it became a comparatively easy task to interest local capital in local exchanges having a license covering a period of only five or possibly ten years. The royalty required of the local licensee, amounting to $7 a year for each instrument, was not in the beginning considered exorbitant by local owners familiar with the heavy yet legitimate payments necessary in protecting the licensees from infringing competition, for necessary subsidiary patents, as well as for experiments, the patent risk, and the endless litigation. And when the hard times of 188-i came, and again in 1885, the parent company made many concessions and introduced a sliding scale of rentals that materially lessened these royalty payments.