Prior to 1931, most phonograph records were produced by laterally cutting vibrations into wax disks. An AT&T research team led by Arthur C. Keller devised a technique that used vertical (or hill-and-dale) cutting, which resulted in better stylus tracking, lower harmonic distortion, a wider frequency response, and a longer playing time. The 1930s were an inopportune time to introduce a new consumer technology, so the vertical cut records achieved commercialization chiefly as the first technology for pre-recorded radio programs.

In 1933, A.C. Keller and I.S. Rafuse were conducting experiments into reducing phonograph recording intermodulation distortion. They decided to try two-channel recording. This led to the first U.S. single-groove stereo recording system in 1940.

AT&T also pioneered Electrical Recording.