The honor for owning the first telephone in Michigan goes to a Grand Rapids plaster company whose president was a close personal friend of Alexander Graham Bell. Bell sent his friend a pair of prototype telephones and a public demonstration of the scientific marvel was held on August 4, 1877. The following month, the first commercial telephone line was installed between a Detroit drugstore and its laboratory almost two miles away. By October, a set of telephones were connecting the units of the Detroit police department.
Given that Bell had produced the first working model of the telephone only one year earlier, public acceptance of the new technology occurred with amazing rapidity. The Bell Telephone Company was officially incorporated in Boston on July 9, 1877 and by October of that year they had granted a license to the Michigan Telephone and Telegraph Construction Company to operate phone lines in the Detroit area. These early telephones had to be directly connected to each other by wires strung across rooftops as the system of telephone exchanges had not yet been perfected. In addition to poor sound quality, the early Bell phones had only one transmitter/receiver and people had a difficult time adjusting to the new style of conversation. “After speaking, transfer the telephone from the mouth to the ear very promptly,” instructed one Bell telephone ad,”When replying to communication from another, do not speak too promptly … much trouble is caused from both parties speaking at the same time. When you are not speaking, you should be listening.” These difficulties were to be overcome fairly quickly but much to Bell Telephone’s distress, it was the giant Western Union Telegraph Company that would be responsible for the introduction of both the first telephone exchanges as well as a technically superior telephone apparatus.
Although the Bell company, by then renamed The American Bell Telephone Company, staunchly maintained that Western Union was violating their patent, in 1878 the giant telegraph company entered the telephone business by constructing a series of local telephone exchanges in their telegraph offices across the nation. The first Michigan exchange was opened in August of that year in the Detroit office of the American District Telegraph Company and a second exchange was opened the following year in Grand Rapids. An enraged American Bell sued Western Union over the patent infringement and in the fall of 1879 an agreement was reached between the two companies whereby Western Union gave up all its telephone patents and facilities in exchange for 20 percent of telephone rental receipts over the seventeen year life of the Bell patents. With the issue of competition out of the way at least until the patents expired, Bell set to work expanding its telephone system.
A large number of local telephone companies were founded in Michigan over the next two years, each operating under an American Bell license that allowed the company to control all lines within a 15 mile radius of its central office. By 1880, Bell-licensed telephone exchanges were in operation in almost all major lower Michigan towns from Cadillac in the north to Port Huron and Grand Rapids in the east and west. During the next few years the challenge would be to connect these local exchanges. Not only were there serious technical difficulties in extending telephone lines beyond the 15–20 mile limit, but the distribution of fees between the local licensees was also problematic. The Michigan Bell Telephone Company was founded in 1881 as a holding company that would control a number of smaller licensees and facilitate interconnection. This company would soon merge with the largest of the local concerns, the Detroit based Telephone and Telegraph Construction Company, which become the Michigan Telephone Company. By 1885 Detroit had long distance connections to all major towns within a 100 mile radius including Saginaw, Flint, Lansing, Ann Arbor and Toledo, Ohio.
In 1894 Alexander Graham Bell’s telephone patent expired and a whole new era of telephone competition was inaugurated. While in certain areas of the East Coast the American Bell Telephone Company managed to maintain control of most telephone services, in the Midwest a large number of hastily formed independent telephone companies made major inroads into Bell’s market. Michigan was one of the centers of this growth in non-affiliated companies and at the turn of the century many Michigan cities including Detroit and Grand Rapids had two or three competing telephone systems. Bell steadfastly refused to let these independents connect to their lines so that customers had to choose between companies and could not communicate by phone outside of their system. Businesses were forced to subscribe to both companies if they wanted to be available to the full range of the citizenry. By 1898 the Michigan Independent Telephone Association could boast that their members operated 16,000 telephones in the state against 14,000 for American Bell.
The Bell System, now under the aegis of the American Telephone and Telegraph Corporation, responded to this new competition by consolidating its Michigan holdings into a single entity. The Michigan State Telephone Company was incorporated in 1904 as the successor to the Michigan Bell Telephone Company (in 1924 it would resume this earlier name), but now with control over all Bell telephone exchanges in the state of Michigan. The Bell System found itself in an awkward position during the first two decades of the century. Not only was Bell faced with an onslaught of competing companies but its refusal to allow the independents to connect to AT&T long distance lines had given rise to an anti-trust investigation by the federal Department of Justice. Forced to move cautiously for fear of generating public and government animosity, Michigan Bell bought only one small telephone company during this period. Public attitude towards the company would reverse itself, however, following a brief government takeover during World War I.
Source : Michigan Bell Telephone History