(FORTUNE Magazine) – On Oct. 13, 1983, Bob Barnett, an executive at Ameritech, the erstwhile Baby Bell, sat in a car parked outside Soldier Field in Chicago and made the country's first commercial cellular phone call. He called Alexander Graham Bell's grandson in Berlin. The sound quality wasn't pristine, and the conversation wasn't especially scintillating.

But to the telecom and business leaders assembled for the occasion it was a historic moment. A glorious new era was imminent: Moguls would turn their chauffeur-driven cars into offices, workers would sit at any cubicle and receive their calls, and people would walk down the street and talk on the phone--simultaneously! This wasn't a ridiculous faux wonder like Maxwell Smart's shoe phone. No, cellular would be irresistibly cool--up there with personal helicars, meals-in-a-pill, and teleportation.

And then the revolution didn't happen. Actually, it did happen--is happening, and gathering momentum. Wireless is now a $325 billion industry that has altered the way many people around the world communicate and even behave. But the world we wirelessly live in today (who would have thought back in 1983 that "camera phones" would be banned from locker rooms?) was a long time coming. For nearly a decade after the Chicago launch, wireless service sputtered along, garnering a tepid 7.5 million users by 1992, and it wasn't until the end of the 1990s that cellphones became truly mainstream. The clunkiness of the early cellular era was a major reason for the delay--the handsets were bulky, the service was spotty, and the monthly bills were outrageous.

But there was another reason. A complex, world-shifting technology like mobile telephony doesn't just up and shift the world. These things take time--not to mention imagination, luck, governmental forbearance, great gobs of money, and tremendous effort on the part of countless engineers and entrepreneurs. The story of cellphones is an object lesson in how technological change unfolds unpredictably, even when fostered by the finest minds of the FORTUNE 500.

Scientists at AT&T's Bell Labs first came up with the cellular concept in 1947--back when black-and-white TV was considered a hot technology. The researchers realized that a radio signal could be reused and handed off between service areas, or "cells." But scientists were way ahead of their time--or at least ahead of the Federal Communications Commission. Cell calls ride on a band of electromagnetic spectrum--a public resource --that the FCC distributes and regulates. Back in 1947 the agency hadn't come up with a way to dole out that spectrum, making it hard for AT&T to capitalize on its scientists' genius.

Not that Ma Bell was in any hurry to upset its cozy monopoly. People in the cellphone business suspect the company long had a bias in favor of its heritage of hard-wired assets. (Industry legend has it that in the 1980s AT&T figured that cellphones would attract no more than 900,000 users by 1995.) They've also long believed that wireless telephony was the natural order of things. "If Marconi had come before Alexander Graham Bell, all our phones would be wireless today because people are mobile," snorts Marty Cooper, a former Motorola executive widely credited with inventing the first cellular handset back in 1972. "It is just not natural to be forced to stay in one place."

Cooper was determined to prove to the FCC that cellular worked, so his team at Motorola built an entire cellphone system. The group made antennas and base stations--minicomputers really--that measured a call's signal strength and handed weak ones off to the next cell. And, of course, Cooper made handsets--a big, burly model known as the "shoe phone." On April 3, 1973, Cooper tested one of his phones on a trial network in Manhattan by calling a rival scientist at Bell Labs. The phone was portable--barely. A 22-pound, battery-operated beast, Cooper's phone boasted all of ten minutes' talk time. "There were no wireless phones at that time. There weren't even cordless phones," he says. "We were walking down the street, and New Yorkers were gawking."

Motorola and eventually AT&T staged similar trials, and the FCC was duly impressed. But it took the bureaucrats almost a decade to decide how to distribute licenses. Each local market would get two: one for the incumbent local phone company, the other for entrepreneurs who applied for licenses. The wireless giveaway brought all kinds of newcomers to the telephone business--cable operators and media companies. "I felt extremely lucky," recalls one now-famous entrepreneur, Craig O. McCaw. "It probably was the single greatest transfer of wealth from the public sector to the private sector." He says the FCC even awarded a license to a restaurant in Washington, D.C., called Blackie's House of Beef.

McCaw understood what the FCC didn't when it distributed licenses on a market-by-market basis: that wireless was a national business, not local. His company developed technology that enabled customers to wander among the networks McCaw had amassed through acquisitions, and he used his muscle to forge roaming agreements with other operators so that consumers could leave their home territory and simply pick up their phone and dial. (In the earliest days customers traveling outside their home network had to get permission--and pay big bucks--to roam on another carrier's network.)

With the basic technology in place and smart people like McCaw in the game, a bunch of new problems popped up. First came the great cellphones-give-you-brain-cancer scare of the early 1990s--a debate that has pretty much disappeared. Then there was the fraud. Crooks would steal a user's account information and use it to run up hundreds of dollars in phone calls. Another problem: Cellphones were for jerks. That was the public perception, anyway. As late as 1995, 53% of Americans surveyed by Gallup thought people who had cellphones didn't really need them--they just wanted to show off.

The biggest problem, however, was still price. Cell service was cheaper than during the early years, when a call could cost as much as 40 cents a minute--not including long-distance or roaming charges--but it was still expensive. That changed in 1996. By then the FCC had released more wireless spectrum, which allowed more competitors. Carriers began to deploy digital networks and improved sound quality. Handsets began to get smaller too; 1996 was also the year Motorola introduced its three-ounce StarTAC.

But the tipping point for the wireless revolution came in 1998. AT&T, the company that had once eschewed wireless, introduced a series of simple flat-rate calling plans. Customers paid a monthly fee for a bucket of minutes that included all roaming and long-distance calls. Competitors scrambled to match AT&T, and soon customers could talk on their wireless phones for as little as 10 cents a minute, cheaper than some long-distance rates at the time. Suddenly you weren't a jerk if you had a cellphone--you were a jerk if you didn't have one. People were using their mobile phones everywhere: in their cars, on the beach, at the mall. Flat-rate calling plans even got people using cellphones in their homes to make cheap long-distance calls. And the service became so convenient that some people started ditching their home phones altogether.

Today cellphones seem as ubiquitous as the air that carries our calls. In the past six years wireless users in the U.S. have tripled, to more than 158 million. Americans have adopted wireless phones at a faster rate than we embraced such must-haves as color TVs, cable, and PCs. We truly have become an unwired society, talking and messaging at a rate of nearly a trillion untethered minutes a year.

Cellphones didn't just change the way we communicate with one another--they changed our behavior. When was the last time you used a pay telephone? How often have you turned the car around because you've left your cellphone behind? Do you remember taking a business trip without obsessively checking your voicemail and calling in to the office? Oh, and locker-room attendants beware: In coming years, predicts Hewlett-Packard CEO Carly Fiorina, the camera phone will be the world's most ubiquitous digital device--outselling even stand-alone digital cameras.

Wireless has also remade the $500 billion U.S. communications industry. Mobile services now account for 33% of Verizon's annual sales, up from 6% a decade ago, mutating the regional phone company into a national company that ranks 12th on the FORTUNE 500. Qualcomm, formed just 16 years ago, has reached No. 434 on the list on the strength of its chips and software for digital cellphones. Overseas the transformation has been even starker. In fast-growing, emerging countries such as China and India, consumers have bypassed land-line technology altogether, favoring ultracheap (almost disposable) "pop" phones.

It gets cooler: The same networks you use to talk and send text messages will eventually handle movies and videoconferences. TVs and CD players can be hooked up to wireless networks, transforming the way people get their entertainment. Soon you'll be able to use your cellphone to call your wireless-enabled fridge to see if you need to buy more milk. Okay, the cell-to-fridge thing may be a few years away--the first wave of wireless taught us that technological change doesn't happen overnight. But entrepreneurs, engineers, and investors all are looking for ways to ride the next wireless revolution. Could helipads and meals-in-a-pill be far behind?

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