As the need to inter-connect telephone customers grew, they were connected via overhead wires to a central switching center, where the physical wires from each customer was connected to the physical wires of another customer via a manual operator.

As more and more customers were connected, the need for more and more operators to connect calls were required. This quickly became unworkable, so development began on automating the connection process between customers, hence, automatic telephone switching exchanges became a reality and replaced local operators, who were still used to connect toll (long distance) calls. The customers wires from their home to the telephone switching center were overhead, installed in the same way as a lot of existing electrical (power) wires are today, on top of long poles inserted into the ground, about 15 or so feet high. This quickly became very cumbersome and difficult to manage. Transmission quality was affected by the weather, as the rain created leakage paths for the signals to go to ground instead of along the wire. At the same time, demand grew to connect customers who lived further and further away, in rural areas. Electrical signals can only travel so far, and to provide service to rural customers meant using better cable that allowed the signals to travel longer distances. Unfortunately, this was costly, so something had to be done to provide them with service. In addition, customers also wanted to be able to talk to other people in different cities, so there developed a need to interconnect telephone exchanges together.

The cost of cable was very high, and before long special equipment was used to carry more than one speech conversation on one pair of wires. This was done by a technique known as multiplexing (specifically Frequency Division Multiplexing, which separates each conversion by frequency).

This bought down the cost of providing speech circuits (one circuit=one speech conversation) to customers. Whereas previously one cable equated to one speech circuit, now a cable could be equated to hundreds of speech circuits. This allowed an increase in revenue to be collected per cable by the telephone companies.