How Hard Could It Be To Get Millions Of Phone Bills Right?

It may be a foreign concept to anyone who has never paid a dime for a phone call over and above the monthly service charge, but phone calls were once very, VERY expensive — especially long-distance calls, which the phone company ungenerously defined as anything more than a few towns away. Woe betide the 70s teen trying to talk to out-of-town friends or carry on a romance with anyone but the guy or girl next door when that monthly phone bill came around; did anyone else try to intercept it from the mailbox before the parents could see it?

While it seems somewhat quaint now, being charged for phone calls was not only a big deal to the customers, but to the phone company itself. The Bell System, which would quickly become a multi-billion dollar enterprise, was built on the ability to accurately meter the use of their service and charge customers accordingly. Like any engineered system, it grew and changed over time, and it had to adapt to the technologies and economic forces at the time.

One of the most interesting phases of its development was the development of Automatic Message Accounting (AMA), which in a very real way paved the way for the wide-open, worldwide, too-cheap-to-meter phone service we enjoy today.

An Intensively Manual Process

From its very beginnings, telephone networks were money-making ventures, or at least were supposed to be. To that end, accounting systems needed to be developed alongside the network infrastructure, and needed to scale with them as the networks grew. That was a pretty simple proposition at first, when networks were generally limited to a single city and where connections between caller and recipient were generally managed manually by switchboard operators. Having humans in the switching loop was really the key to billing, since operators could easily write down information about the call on a ticket for submission to the accounting department, which would determine the charges and bill the customer.

As the phone network grew in scope, so to did its complexity increase. Trunk lines were installed between local exchanges, allowing subscribers to “reach out and touch someone” in the next town over. Automated switches, at first step-by-step (SxS) switches and later crossbar switches, automated away the need for operators to complete local calls — subscribers could now complete calls simply by dialing the correct number. This represented huge cost savings for the phone companies, who no longer had to employ vast numbers of operators, but it also presented a challenge: with no operators in the loop, who would take care of recording call details for billing information?

At first, the answer was simple — keeping some operators on the job. This was pretty much the answer to the problem of long-distance calling up until about the 1940s — subscribers could directly dial numbers within their local exchanges, and even within the small group of surrounding exchanges. Outside of those areas, specialist long-distance operators would make the connection and record call information for billing purposes. It worked, but it was expensive, error-prone, and would obviously not scale well as the network grew, so an alternative had to be found.

The first steps toward Automated Message Accounting (AMA), as the systems developed by Bell Labs would eventually be known, were taken in the 1940s with automatic ticketing. Instead of operators manually recording call information on a ticket, automatic equipment that could create billing tickets began being installed in the central offices of telephone exchanges. These devices sat before the exchange’s outgoing trunk lines and were essentiallly electromechanical printers driven by the impulses created by dialing a number. The ticket printed the caller’s numbers, the called number, the date and time of the call, the overall length of the call, along with technical and subscriber information. The call information was printed in plain text, and tickets were collected from the printers and forwarded to the billing department regularly.

Punch It Up

A section of perforated AMA tape. It’s not easy to appreciate the dimpled shape of the perforations here, but they were critical for proper reading of the tapes in centralized accounting centers. Source: Bell Laboratories Record, vol. 29, pg. 402 (1951).

Automatic ticketing was a huge leap forward for the phone company, but it still had obvious problems — it only partially automated the billing process. Someone still had to sort and process all those billing tickets manually, so while automatic ticketing reduced the need for some operators, it meant more employees were needed in the billing department. A proper Automatic Message Accounting system would require recording call information in a way that it could be machine readable, so that both ends of the billing process could be automated.

The Bell System began deploying a fully automated AMA system in the late 1940s and early 1950s. Rollout of AMA was gradual; if it was nothing else, the Bell company was extremely conservative, and technologies cooked up at Bell Labs were given thorough testing under real-world conditions before being widely deployed across the network. And so it was mainly exchanges in larger cities that got first dibs on the new AMA equipment.

The Bell Labs researchers made some interesting engineering choices when designing the AMA equipment. Given the era, the obvious choice of recording medium would have been the venerable punch card. But Bell engineers decided to roll their own system — literally.

AMA recorders used oil-impregnated paper tape in long rolls as their recording medium. The tape was about 3″ (76 mm) wide, with information recorded as perforations across the width of the tape. There was room for 28 perforations, which allowed for six different fields to be recorded. Each row started on the left with a three-hole entry index field; this was followed by five groups of five perforations, each encoding a single digit from 0 to 9. Each digit was encoded with a 2-of-5 code, where only two “bits” out of the group of five are set for each digit.

Two-of-Five encoding truth table. Each “bit” is weighted as either 0, 1, 2, 3, or 6, and the two positions that add up to the digit’s value are set, or punched in this case. Zero is handled as an exception so that two positions out of the block of five are always set.
Digit Weighting
1 11000
2 10100
3 10010
4 01010
5 00110
6 10001
7 01001
8 00101
9 00011
0 01100
The AMA perforator mechanism. Getting the 28 punches to line up 0.1″ apart with such large electromagnets driving them was no mean feat. Source: Bell Laboratories Record, vol. 29, pg. 505 (1951).

The AMA perforator itself was an ingenious design, and one that took great advantage of Bell’s long experience with electromagnetic systems. Each perforator had to cram 28 electromagnetically operated pins spaced only 0.1″ (2.54 mm) into less than 3″ of space.

This was accomplished by arranging the perforating magnets into four groups of seven, each arranged semicircularly on two different levels. Each pin lined up with a cylindrical punching drum, a precision-machined part that sat under the paper tape and allowed the pin to punch a cone-shaped dimple in it. The shape of the perforation was critical because it formed part of the drive mechanism for reading the completed tape; the dimples would engage with a similar drum in the AMA reader in accounting, which would rotate and pull the tape through the machine. This meant that the completed tapes had to be treated gingerly so as to not collapse the dimples before the data could be read.

Since each row could only encode five digits, the complete record of a phone call would cover multiple rows — anywhere from four to six. This presented a problem, since the time from starting a toll call to resolving it — either because the called number never picked up, or when the conversation ended — was variable and often quite long. Even a moderately busy central office could expect a different toll call to be started before the previous call had been completed, which meant that records from one call would often be spread across a wide amount of tape. It was even possible for records of a call to be recorded on two separate rolls, which were changed at around 3:00 AM every day. The AMA equipment in the accounting center had to handle this eventuality, which it did through devices called assemblers that correlated records through a two-digit entry index and the timestamp for the entry. The assembler would then record the sorted records on a separate roll of tape through another perforator, for further processing on the other machines in the accounting center.

AMA Across America

For all its computational crudity, AMA was wildly successful. As the short promotional film below shows, AMA enabled direct-dialing of long-distance calls for the first time, albeit in a limited number of markets, and introduced subscribers to the concept of an “area code.” The introduction of AMA was critical to making the coast-to-coast microwave relay “Long Lines” project, coincidentally enough also completed in 1951, a money-making operation.

By the mid-1950s, refinements of AMA, including Centralized Automatic Message Accounting (CAMA), which used things like banks of reed relays, ferrite cores, and cold-cathode tube amplifiers, began deployment nationwide.  The invention of the transistor in 1947, also by Bell Labs scientists, and the subsequent revolution in digital computing would pave the way for the eventual demise of AMA systems, but not for a while — it wasn’t until 1966 that magnetic tape started replacing the AMA paper tapes, and the concepts behind AMA and CAMA continued to tote up toll charge in computerized form until the mid-1970s.

46 thoughts on “How Hard Could It Be To Get Millions Of Phone Bills Right?

  1. Surprising they did not use the same punch technology that Teletype (a division of Western Electric) used to punch their tapes. The requirement for delicate handling seems to be a major drawback.

  2. Sorry, my dear friends,
    but nothing has changed for the better for me.
    To call from Europe my professor from University of Columbia
    I am charged $2 for a one minute call for landline number.

    If you know a nicer solution, please let me know.
    Since every smartphone call is transferred as TCP/IP data stream over fiber world-wide,
    charging extra fee for international cell calls, called roaming fee, should be banned, since we don’t pay alike roaming fees for reading international website.

    thank you

    1. If you call the US frequently, just open an account with some SIP provider in the US. Install a free VoIP app like ZoiPer on your smartphone, configure it and you’re fine. Some VoIP providers also provide their own apps. Note that a VoIP provider might block IP addresses from foreign countries, but it’s at least worth a try.

      Try your google-fu with something like ‘free voip calls in the us’.

      The other option would be that the US joins the EU. Not bloody likely.

      I would have expected that the University of Columbia would have been modern enough to embrace services like MS Teams or Zoom. Oh well, if they haven’t done so, especially in the wake of COVID-19, they’ll probably never do.

    2. Where I’m from, a roaming fee is charged for connecting your mobile to another carrier’s network. Such as when YOU are traveling abroad, not for being “at home” and calling someone who is abroad.

  3. I have always been mystified as to what exactly constituted “long distance.”

    I remember staying in a hotel (back in the 80’s) whose phone policy was “local calls are free.” Great. I tried ordering a pizza and was blocked because the call was “long distance.” So…I put on my shoes and walked to the pizza place–it was NEXT DOOR.

    1. Hollering across the corridor is a “local call” and free. Everything where you need to pick up your phone is not local.

      Note that if you abuse the free call service by hollering too much (especially in the night), they might throw you out.

      Fun fact: I once live in a house whose telephone line was not connected to the local exchange but to the (nearer) exchange of the next town (including the “wrong” area prefix). The phone company however registered calls as “local” not based on the exchange (or prefix) but on the actual location of the house. I guess they must have some pretty complex software to cater for all such special cases.

      Two decades later I worked for that phone company. Working on a software which would collect “exceptions” (meaning that some system got something wrong) and fix them automatically, or present them to a human worker to fix them manually. Yes, the phone company’s software landscape was (and still is) very…heterogenous. Lots of systems talking to each other, getting out of sync, dropping data, crashing, whatever. Now, I can neither confirm nor deny that the exception handling system would, at any time, show several millions of “exceptions”, but it amazes me to no small deal that they still get the majority of invoices right.

  4. I used to work in the cellular industry handling billing information like this. It’s interesting to see how little this whole process has changed over many decades. In cellular, at least, these entries are called “Call Data Records” and the switches can generate them for a huge number of events–not all of them call related.

    For example, a GSM switch can cut a CDR when a subscriber registers with the network and when they move around from location to location (Location Area Updates), and another when a device drops off the network. If they wanted to, cell companies could have builled us for just having our phone on. They could have even charged more/less (who are we kidding, it would be more) for being in certain areas. Fortunately, that didn’t occur to them or the engineers working on the network and billing record side didn’t mention this to them.

    With GSM, you can ‘trace’ a subscribers movements by watching the LAU records–at least to a coarse degree. It depends on how large your Location Areas are and that ties in with cell density and other factors. I’m not sure what it’s like with more modern cell standards, but I can’t imagine it got any less accurate. And that tracking is pretty much free as it requires no more messaging with the handset than is required to process calls and other necessary network traffic.

    1. For GSM, such location tracking is actually done.

      You don’t only have the information about active LAU, but also an approximate distance from the tower. GSM data is time division multiplexed and there is an intentional delay in both the phone and cell tower, to ensure the “response” is sent in the next timeslot and not too early. This allows for a maximum distance of ~35km from a cell tower. (In Australia, it is actually not the next timeslot, but the slot after, allowing for maximum distances of ~70km from a cell tower.)

      When a GSM is actively being searched for, the phone company prohibits connection to the currently active celltower and the phone automatically uses the next one. A phone generally always see about 5-6 cell towers.
      When done multiple times, trilateration of your phone is possible within about 100-150m.

      (However, today GPS data is often available. Did you know your SIM card has software too completely outside of the control of Android/IOS?)

      1. The distance from the cell site used for the timing advance (compensating for the time of flight from the handset and the tower so the data ends up arriving at the tower at the right time) is only calculated when there is a connection established. If you are not in a call or sending/receiving data, then the timing advance is not available. I was only refering to passive tracking. Once you’re in a call, there’s a lot more going on.

        The feature you’re talking about being used in Australia was refered to as Extended Range Cell–at least at Motorola. I was part of that feature team and I remember it well. The feature at the time halved the number of timeslots on a traffic channel (from 8 to 4) and allowed each connection to have two timeslots in which to transfer their data. That allowed for the maximum timing advance value plus the whole next timeslot. IIRC, it was meant mostly for Europe to use on their ocean borders, but sparsely populated areas of countries (which Australia sure has a lot of) would be another good use. Customers (and carriers) hated for people to be out on a boat with plenty of signal strength (lots of line of site over nice flat water), but not be able to place a call as they were beyong the maximing timing advance range.

        When a handset is told to search for neighboring cells (as part of the handoff preparation), it will report the timing offset and signal strength of those cells to the network and that indeed can be used to very effectively location a handset.

        Yes, a SIM card is a whole little computer inside your phone. They can run apps and other stuff. The network can talk to them without the handset user having any idea anything is going on. There’s a lot of room for abuse in there.

        1. On the subject of timing advance in GSM… EVERY connection to the cell tower needs the timing advance set correctly. The timing advance is measured by the cell tower by the timing position of a special short burst nicknamed after the communications channel it represents, Random Access CHannel (RACH). The RACH is used as the first step in establishing any communications with the 2G GSM base station. In fact, all the channels include setting the timing advance as part of the initial channel set up. To locate the distance to a given GSM phone only requires the cell tower to send what is known as a Paging Block to the selected phone. Paging blocks are used by the network to signal a phone that the network wants it’s attention. The response to a paging block is a RACH, and the cell tower measures the timing advance from that. To support the scenario where you desire triangulation, you send a paging block to wake up the mobile device, which generates a RACH, causing the tower to reply back with an ‘IMMEDIATE ASSIGNMENT’, which opens a management channel, and sets the mobile’s timing advance. Over the channel the cell site send a message telling it to monitor and report on the neighbor cells in the area. Once the network gets the report, the software can select one or more towers, direct the phone to establish a connection on the other tower, and collect RACH timing advance information. Repeat for as many sites as you want. Do the math, and you have the location. The user does not know this has happened, and it takes a lot of network resources. Since it takes resources, you don’t want to do this to everyone in the network all the time, only to a mobile device of interest. You can collect some of this information passively, as phones regularly communicate with the network to update their location within a local update area. From this information for example, you can estimate how many people are in a given area, by the number of active cell phones in the location area, or by looking at how many phones are currently listening to a particular tower. The network operator has control over the rate at which the cell phones do location updates. It is possible to tell a phone to do updates more often if there is desire for that. There is a balance though, as the updates use network resources, and if you have too many phones trying too often, then you end up with too many collisions, and people’s batteries will get drained. In certain situations, this may be practical.

          Note that WCDMA and LTE also have similar channel establishment procedures, and while they differ in naming and execution, the basic principle is the same. Channel request, followed by channel assignment with timing advance, then communications. WCDMA and LTE use a much finer clock for measuring timing advance, so they have better resolution when it comes to triangulation.

          The details of the procedures and formats for GSM are all available to read on the 3GPP web site, the site itself needs some patience to find things, and I assure you all the approved documents live there. 3GPP TS 44.018 V17.0.0 (2022-03) contains the procedures for Channel establishment, in section ‘3.3 RR connection establishment’. The Data link layer is described in 3GPP TS 44.006 V17.0.0 (2022-03), and the physical layer in 3GPP TS 44.004 V17.0.0 (2022-03). This stuff is hard to read, and you are on a big learning curve to understand it, enjoy!

      2. Feature phones and early smartphones used A-GPS (Assisted GPS) that relied a lot on triangulating to cell towers. One could turn that location feature off for everything except emergency calls.

        Where they got the idea to use tower triangulation for locating was a murder. A couple was carjacked, forced to drive to a remote location, then the carjacker shot them both through the back of the front seat and took off.

        The man was able to call 911 on the carphone but he had no idea where he was. Someone at the police department had the idea to grid the area with patrol cars sounding their sirens in turn, while the 911 operator listened for which sirens were louder. Eventually they were found but the woman was DOA.

        So of course the police didn’t believe the carjacker story, nevermind they couldn’t come up with any plausible way for him to have shot himself in the back through the back of his car seat. They refused to look for anyone matching the description he gave of the killer and kept insisting he’d killed his wife and shot himself – until he jumped off a bridge.

        1. A-GPS didn’t work with tower info. It had a feature reduced GPS engine on the phone that could receive satallite signals and calculate a set of pseudorange signals, but needed Almanac and ephemeris data from a network source to do the final position calculation. That last calculation may have taken place off device.

          Are you thinking of the E911 enhancements which required handsets to be able to report more accurate tower signal levels/ranging if their standard supported such things? GSM and CDMA were still fighting it out in NA at the time and they differed greatly in their ability to do that.

  5. It always amazes me at how well made and detailed the Bell labs videos were during the 50s-70s. Companies were proud of their accomplishments and wanted to share them with the public. From time to time you’d see such videos on tv or at public events like worlds fairs which happened regularly. Bell even had an outreach program where they would come to your facility and do presentations. As VP of our high school ham club, I requested a free program on lasers around 1970 and a guy showed up 6 months later with a laser and a rotating hologram that he demonstrated to our ham club. It was very impressive. None of us had ever seen anything like it. It seems like a lot of that was lost in the mid 70s as telephones were hacked to make free calls. The Bell lab journal described how their system worked. Those journals were sent to university libraries and that information was used to circumvent it. That started an era of guarding information which was eventually again circumvented by internet sharing.
    I like these old videos and appreciate including them in these discussions.

    1. It should be remembered that Bell Labs, and indeed the whole Bell system was a costly monopoly (and thus a juicy target for phreakers and the like). “Sharing” was done to the public who had paid for the work and is less generous than it seems.

      The positive side of this was that the “old” Bell Labs didn’t have to sing for its supper very often, and the developments this freedome allowed, from semiconducters to information theory are still at work. I don’t think we’ll see that kind of productivity again anytime soon.

  6. Back in the 1970’s and 80’s when I was still in New Jersey, we had the following:
    Union City was both local to Jersey City and Fairview, but Jersey CIty and Fairview were not local.
    It seems it was whatever city you were in, the calls within and the surrounding border towns were
    local. This made sense, but then you throw county lines into the mix. Jersey City and Union City were both in Hudson County while Fairview and Cliffside Park were in Bergen County. So the adjoining cities and towns (Union City, North Bergen, West New York, Guttenberg) were local to both Jersey City and Fairview and Cliffside Park, The Bergen county towns were not local south past Union City.

    I still remember the punch card that came with my NJ Bell telephone bills for 7 phone lines.
    “Please do not fold, spindle, staple or mutilate” or something like that.

    I ran a Diversi-Dial chat system back in the 80’s before Al Gore invented the internet.
    The 7 D-Dial lines were local calls only, metered service and mostly received calls.
    There is a system that still emulates that software today where you can
    log in and chat. My system took up 7 phone lines. I recently took a look on Google Street View
    at the old house we were renting at the time and the 7 lines are still there.

  7. If I would have had to solve the problem with 1940s technology, I would have had the system punch out a new card with the caller’s phone number every 10 minutes for each active line.

    Then sort all the cards with one of those IBM machines and bill each customer by the number of cards that have them as the caller. If traceability is important, it could include destination phone number and date & time on the card too – but no need to try to match begin & end records.

    1. Back in the 80’s after deregulation where everybody got into the long distance business I wrote a billing system that ran on a z80 based system with 64 k of RAM that processed Station Detail Message Records to create bills for a company that built a long distance switches so their customers could resell long distance . Each call resulted in a SDMR. I don’t recall all the details but each record contained the calling number the called number the time and other stuff I have forgotten. Billing was based on distance, time, time of day, and type of trunk used, customer rate etc. We had a database with a record for each NPA/NXX area code and prefix with a us VHX location for each local CO. Computed the distance * time by rate. Efficiently sorting tens of thousands of records by client and call date time in 64K was a challenge. I had to create my own fast efficient file based sort. The program printed bills non-stop for hours and hours. It needed a pause capability that allowed changing ribbons or loading new paper. Dot matrix printers didn’t last long with that duty cycle . Good times

      1. That’s impressive. By the mid/late 90s, processing the CDRs for a even a small cellular carrier took multiple Alpha servers running 24/7. The software wasn’t anywhere near as efficient, but it was very flexable.

        1. I wasn’t involved with the switch design or development but these were small custom designed switches with onboard logic that selected outbound trunks based on destination number to select the least expensive outbound line. The switch operator had to manage the “routing tables” and line cost weights. I don’t recall the maximum number of connections they could support. The resellers services were only used when one of their customers was calling long distance. Their customers were usually in the same local calling area. In those days the customer had to dial a special prefix prior to the number they were calling to get routed to the resellers switch. The switch had a number of inbound POTs lines and a number of outbound POTS trunks that were selected by the switch to be the least cost available outbound trunk. I also wrote some line utilization software that the operators used to analyze outbound trunk use so they could change the types of outbound lines they needed to optimize their cost. You could get FX lines that only went to certain areas that were less expensive than general purpose long distance lines. These resellers sold mostly to businesses that made a lot of calls to certain out of local area locations so use was somewhat predictable.

          The whole system ran on an S-100 system with Multi user TurboDOS OS where each user had a dedicated Z80 based single board computer on the the buss via a dumb terminal and they shared access to disk drives and printers via controllers on the buss. Removeable storage was 8 inch Bernoulli 20MB disks. TurboDOS was an elegant fast CP/M compatible system for multiple users

  8. I worked for a LEC in the 1999-2000 time while they were selling dial up internet.

    Every f’ing thing had to go through the billing system. They were planning on a per bit charge, just waiting for the first competitor to do it.

    Luckily dial up is a thing of the past, and the LEC got bought by another company.

  9. Oh geez, in 1985 I had a 512k “fat” Macintosh with a 300 baud acoustic coupler modem. Living in New Hampshire, there was nothing local that I could find to connect to. I did find a BBS list somewhere and called the closest one – in New Jersey. Great fun watching the text appear on my screen on character at a time. Then the phone bill arrived…

  10. In the UK BT had banks of mechanical counters tied to each phone line that ticked up the minutes (I don’t know if/how they handled long-distance), then every so often someone would come round with a special camera on a jig, take photos of the banks and use that for billing.

    I was told they cut them up and attached a photo of your counter to your bill but I can’t confirm that – I’ve seen the banks of counters though, really wish I saved a few from the scrap bin.

    1. The way the Post Office (later BT) charging system worked was that the pulse rate to the counters varied according to where you were calling. You could (for a small fee) have the metering pulses sent out on your line – that was used by places such as hotels which charged guests by the number of units. All bills were simply for a number of units used and until the advent of digital switching in the 1980s there was no record of the numbers you called or the duration of calls. It was technically illegal to dispute the amount billed.

      Long ago calls used to be local or in one of 3 charge rate bands ‘a’, ‘b’ and ‘c’. Later this was changed to local, regional and national. Generally local was broadly your own exchange and neighbouring ones – these calls were made by dialling a short code starting with 8 or 9 before the number whereas long distance calls always started with 0. I can’t remember the division between the ‘a’, ‘b’ and ‘c’ bands (I think band ‘a’ may have been a long distance call treated as local; the division between bands ‘b’ and ‘c’ was by distance) but the later regional and national was divided at a distance of 56 km (it was originally 35 miles) although this varied in some cases. The distance was measured between “group switching centres” which handled the long distance calls for several local exchanges. These days all charged calls are generally at the same rate regardless of distance.

  11. Bell Labs invented the transistor, but apparently they put it in the solutions looking for problems bin. Texas Instruments would be the first company to make commercial use of transistors in 1954, in the first transistor radio. In 1958 Texas Instruments produced the first integrated circuit.

  12. I’m old…when I saw the punched tape, Lily Tomlin’s skit on how to get back at the phone company came to mind. (Didn’t find it on YouTube). We used to get a punch card with each electric bill and phone bill. Her instructions: Soak the punch card in soapy water. Iron it flat and dry, return it with your check. “The holes will shrink, just the tiniest bit…” :-D

    Tomlin’s skits as Ernestine the telephone operator are timeless humor. Well, some of them are…

  13. Phone calls are STILL billed per minute. Customers don’t typically see these charges, but carriers bill each other for them. I run the billing team for one of these carriers. We use modern systems (Java, Kafka, data warehouses) to generate hundreds of millions of dollars from billions of phone calls, each one being charged a fraction of a penny per minute. If you consider each phone call and SMS message a transaction, we do more per day than MasterCard.

    And no, we don’t put the roundoff errors into a special account like in Office Space :-)

  14. It took the telco less than a century to move its billing from from “intensively manual” to “audacious chicanery” — Comcast alone pulls in a billion/year just from fraudulent charges.

  15. This discussion of telephone billing practices around the world is surprisingly relevant to the history of credit cards. Have you ever wondered why smart cards appeared in Europe long before they did in the U.S.? Credit card companies originally relied on shopkeepers’ willingness to make a phone call for approval on every card transaction. At the time, local phone service in the U.S. was free for homes and cheap for businesses. In the U.K. and Europe it was not, so many merchants waited until the close-of-business to call in the day’s credit card purchases. This resulted in enough fraud that credit card companies implemented two-factor authentication: a PIN stored securely in a card’s chip could be verified by a keypad terminal that did not have to “phone home” (yet). The U.S. only caught up with the rest of the world after the rise of the dark net, wholesale trade in credit card numbers, and organized counterfeiting of mag-stripe cards. The roll-out of U.S. chip cards came with a practical twist: the credit card companies wanted to avoid the hassle and expense required to force every customer to accept a random PIN (mailed in a separate letter) or choose one themselves like a debit card, so the whole U.S. credit card system dispensed with PINs entirely, while bank-issued debit cards would still require a PIN, thus the still-common query at every U.S. gas pump: “Debit or Credit?”

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