Although the earlier Telegraph Acts contained no reference to telephones, a court judgement was issued on 20 December in favour of the Post Office in a landmark legal action (Attorney General vs. Edison Telephone Company of London Ltd. - Law Report 6 Q B D244). The judgement laid down that a telephone was a telegraph, and that a telephone conversation was a telegram, within the meaning of Section 4 of the Telegraph Act, 1869.
Independent telephone companies were thereupon obliged to obtain 31-year licences to operate from the Postmaster-General, the Post Office taking 10 per cent of gross income and having the option to purchase a telephone undertaking at the end of ten, 17 or 24 years. It was Post Office policy to issue licences for the few existing telephone systems, restricting these systems to areas in which they were operating, and to undertake the general development of the telephone itself.
As a result of this court judgement the Postmaster-General was to continue providing the telephone service under the provisions of the various telegraph acts until the Telephone Act 1951. This Act was the first statutory recognition of the telephone separate from the telegraph, 75 years after the telephone was invented.
The Telephone Company Ltd (Bell's Patents) issued the first known telephone directory on 15 January. It contained details of over 250 subscribers connected to three London exchanges. Details of 16 provincial exchanges were also given. By the time of the publication of their next directory in April, the company had seven London exchanges, 16 provincial exchanges and more than 350 subscribers.
The Edison Telephone Company of London published its first directory (list of subscribers) on 23 March.
After some litigation over patents, the Telephone Company Ltd and the Edison Telephone Company of London Ltd were amalgamated on 13 May to form the United Telephone Company with a capital of £500,000. The new company, now controlling Bell's and Edison's patents, reflected the situation in the United States.
The first trunk telephone line was opened between Leeds and Bradford on 29 January.