In 1922, in a major power grab, AT&T, which already had a government-sanctioned monopoly in the telephone business, decided to break its RCA agreements in an attempt to monopolize radio as well. Identifying the new medium as the “wireless telephone,” AT&T argued that broadcasting was merely an extension of its control over the telephone. Ultimately, the corporate giant complained that RCA had gained too much monopoly power. In violation of its early agreements with RCA, AT&T began making and selling its own radio receivers.

In the same year, AT&T started WEAF (now WNBC) in New York, the first radio station to regularly sell commercial time to advertisers. AT&T claimed that under the RCA agreements it had the exclusive right to sell ads, which AT&T called toll broadcasting. Most people in radio at the time recoiled at the idea of using the medium for crass advertising, viewing it instead as a public information service. In fact, stations that had earlier tried to sell ads received “cease and desist” letters from the Department of Commerce. But by August 1922, AT&T had nonetheless sold its first ad to a New York real estate developer for $50. The idea of promoting the new medium as a public service, along the lines of today’s noncommercial National Public Radio (NPR), ended when executives realized that radio ads offered another opportunity for profits long after radio-set sales had saturated the consumer market.

The initial strategy behind AT&T’s toll broadcasting idea was an effort to conquer radio. By its agreements with RCA, AT&T retained the rights to interconnect the signals between two or more radio stations via telephone wires. In 1923, when AT&T aired a program simultaneously on its flagship WEAF station and on WNAC in Boston, the phone company created the first network: a cost-saving operation that links (at that time, through special phone lines; today, through satellite relays) a group of broadcast stations that share programming produced at a central location. By the end of 1924, AT&T had interconnected twenty-two stations to air a talk by President Calvin Coolidge. Some of these stations were owned by AT&T, but most simply consented to become AT&T “affiliates,” agreeing to air the phone company’s programs. These network stations informally became known as the telephone group and later as the Broadcasting Corporation of America (BCA).

In response, GE, Westinghouse, and RCA interconnected a smaller set of competing stations, known as the radio group. Initially, their network linked WGY in Schenectady, New York (then GE’s national headquarters), and WJZ in Manhattan. The radio group had to use inferior Western Union telegraph lines when AT&T denied them access to telephone wires. By this time, AT&T had sold its stock in RCA and refused to lease its lines to competing radio networks. The telephone monopoly was now enmeshed in a battle to defeat RCA for control of radio.

This clash, among other problems, eventually led to a government investigation and an arbitration settlement in 1925. In the agreement, the Justice Department, irritated by AT&T’s power grab, redefined patent agreements. AT&T received a monopoly on providing the wires, known as long lines, to interconnect stations nationwide. In exchange, AT&T sold its BCA network to RCA for $1 million and agreed not to reenter broadcasting for eight years (a banishment that actually extended into the 1990s).