Actually, in 1861, a German school teacher, Phillip Reis, developed a device that could transmit musical tones from one device to another. This was really the first telephone created. He is the one who named it the telephone. However, he never put any more work into it other than that. Later on, two men worked on getting voice to transmit across devices. It was Elisha Gray and Alexander Graham Bell.
Since the telegraph was the main communication system of the time, they were both working on getting the telegraph to share the same wire. Thomas Edison stopped their work by solving this problem, so both men switched over to the telephone. Although both were working independently of each other, and many miles apart (one in Chicago, one in Boston), they progressed at an equal rate.

On Valentine’s Day in 1876, they both raced down to the U.S. Patent office to patient their inventions. However, since Bell got there a few hours before Gray, Bell got the patent. Ever since then we associate Alexander Graham Bell as the inventor of the telephone. If only Reis had spent more time, we would know PacBell as "PacReis" or "Reis Telephone".
You have to remember that in that day, the telegraph was the main source of communication, and Western Union was the owner of the biggest part of that. Their were a giant. Even though Alexander Graham Bell offered his patents to Western Union for $100,000, Western Union declined and hired Gray to perfect their telephone and compete with Bell.
After several years of court battles, Western Union acknowledged, at their lawyers’ request, that Bell owned the patents. So they gave in and settled for 20 percent of the rental of their devices to Bell Industries.
This gave Alexander Graham Bell a monopoly. His company later became AT&T and over a hundred years later purchased Western Union. They were so big that in 1984, the government split them and their one million employees— the same thing that the government is trying to do to Microsoft right now.
As the years went by, the telephone continued to work well in its environment and all wires went to a central office. It was there where everyone would ask the operator to connect them to the person they wished to talk to.
Phones worked this way for several years until one day a mortician, Almon Brown Stowger, became extremely upset because his competitor was getting all the calls. It turned out that the wife of this competitor was a telephone operator and she would route all the calls to her husband instead of Strowger’s business.
So he set out to design a switch that would do away with the operator. His design is the main backbone of the telecommunication switches used for many, many years. However, his design required a new type of telephone, one that was equipped with a dialer with a set of ten numbers.
It took some time before it caught on but soon it was so successful that everyone had phones with dialers. Most of the development from that point on aimed at improving the quality of the voice as well as the switching, and as more phones were installed in the network, more numbers had to be dialed in order to reach the right person.

Then in 1963, the invention of a tone being used to dial the specified digit was introduced. It was called Touch Tone and it took almost thirty years for everyone to switch over to that type of service. Nowadays, you cannot even purchase a pulse-type phone unless it is an antique of some sort.
People use telephones so much that it is forgotten how you used to have to go down to the telegraph office in order to wire a note to a person in another town. Then they might not get it for several days. With the convenience of the cellular phone and how many people have several phone numbers nowadays, it is unheard of to not be able to contact someone with the hour, wherever that person is.
You might say what is the interest in telephones to me and why would I start writing about old technology? Well, as a part of my company’s services, I also support telephone equipment, and since HullSoft Enterprises is in the business of office automation and supporting networks, I have to support the phone business as well.
I have been installing small Norstar phone systems made by Nortel Networks that support many types of businesses, from small 2- or 4-line companies to large 8-or 40-line companies, each supporting from 8 stations to over 128 stations. I am also installing voice mail systems behind those systems for all sizes of companies.

They are fantastic systems and fairly easy to program.
The next time you use your phone, think of all the technology that went into that little device and where it is going to be a hundred and forty years from now.