In 1880 Ann Arbor was a small town with a University perched on its outskirts. There were virtually no public services available. The city council consisted of a mayor, the recorder (who was a forerunner of the modern city clerk), and twelve aldermen. Individual aldermen controlled affairs in their wards and personally extended the few existing city services to areas under their patronage.
The boom of the last two decades of the nineteenth century included not only the building of new houses, but also the construction of schools, churches, and public buildings, as well as the introduction of many modern services such as electric lights, water, sewers, paved streets, and a street car system. Ann Arbor responded to these changes first by letting private enterprise fill the needs, and when this proved unsatisfactory, by expanding the regulatory role of the city government. Trying to keep taxes as low as possible, the council granted franchises to private companies to build and operate new utilities.
In January 1881 the telephone company opened Ann Arbor's first telephone exchange and within the next few years put up lines connecting Ann Arbor with Ypsilanti, Saline, Manchester, Howell, Adrian, and Detroit. The number of telephones in town increased from 25 in 1881 to 96 in 1883 and 141 in 1892. Many subscribers used the instrument for entertainment. Some people played checkers by phone, while others sat at home and listened to a sermon delivered in the Congregational Church, or to a concert given in Adrian. As more and more businesses in town installed telephones, serious matters began to be transacted by phone.
The price for telephone service in the 1880's ($36 per year for a residence, $48 for a business) restricted use to the wealthier segment of the population. In 1897, however, a rival telephone company with considerably lower rates began operations in town. During the ensuing price war both companies added hundreds of new subscribers. But the competition also forced merchants and public offices to have two telephones--one with each company.
An electric light company was formed in 1884, and in the following year a group of outside investors started the local waterworks. In both cases there was some sentiment in favor of the city owning and operating the plants. But the council preferred to keep taxes down by contracting with private companies to provide the services. The city subsidized these enterprises by becoming their single largest customer. The first six electric street lights were installed in 1884. Within ten years, all of the gas street lamps had been replaced by electricity.
The agreement between the city and the water company stipulated that the company install 100 hydrants in the city and supply water for fire fighting at an annual fee of $40 per hydrant. Violating its trust, the company never provided satisfactory service. It allowed water pressure to drop below the level needed for fighting fires and mixed unhealthy river water with spring water. Little could be done to correct the situation because the company held a long-term franchise. It was not until 1913 that the city was able to buy it out.