ing equipment and high- capacity, long-distance links roll-out. Historically, most operators grew gradually, initially connecting the central part of a city, and then connecting the outer suburbs. Similarly, telephony services were offered in large cities before small cities. The capital expenditure outlay was therefore made from the cash flow from serving present subscribers. The large capital expenditure played into the hands of an incumbent operator as a major entry barrier. Figure 3.20 Overhead telephone and telegraph wires in Broadway, 1890. Source: Ref. [9] Voice Communications Operational Expenditure The telephony network roll-out costs were very large. Thereafter however, operational expen- diture was minimal. These included the cost of human resources (switchboard operators) and later on the cost of electricity for switching the calls. Furthermore, there existed on-going costs of network maintenance and customer service. The costs of customer acquisition remained small as telephony services became a necessity. Furthermore, most new customers paid for having their premise connected to the nearest exchange. Many telephony operators maintained an R&D department to enhance telecommunications equipment and services. The most prominent of these was the Bell Laboratories which conducted a wide range of research and earned seven Nobel Prizes for a number of inventions such as transis- tors and discoveries such as cosmic microwave background radiation. While many of these inno- vations helped the operator business, some did not contribute to the main business of the operator. Revenues Telephone operator revenues were generally from subscription fees paid for services. These varied from operator to operator. Some operators charged a fixed monthly fee and allowed unlimited local calls while charging extra per minute for long-distance calls. Some other opera- tors charged only for the calls a subscriber made, with a fixed rate for local calls and per-minute charges for long-distance calls. Some operators even charge