Bernay himself found out about loop-around-pairs from a friendly telephone company engineer, who explained that within the millions of connections and interlinked local exchanges of what in those days made up the Bell network there were test numbers used by engineers to check connections between the exchanges. These numbers often occurred in consecutive pairs, say (213)-9001 and (213)- 9002, and were wired together so that a caller to one number was automatically looped around to the other. Hence the name, loop-around-pairs. Bernay publicized the fact that if two people anywhere in the country dialed any set of consecutive test numbers, they could talk together for free. He introduced a whole generation of people to the idea that the phone company wasn't an impregnable fortress: Ma Bell had a very exploitable gap in its derenses that anyone could use, just by knowing the secret. Bernay, steeped in the ethos of the sixties, was a visionary motivated by altruism--as well as by the commonly held belief that the phone system had been magically created to be used by anyone who needed it. The seeds he planted grew, over the next years, into a full-blown social phenomenon.
Legend has it that one of the early users of Bernay's system was a young man in Seattle, who told a blind friend about it, who in turn brought the idea to a winter camp for blind kids in Los Angeles. They dispersed back to their own hometowns and told their friends, who spread the secret so rapidly that within a year blind children throughout the country were linked together by the electronic strands of the Bell system. They had created a sort of community, an electronic clubhouse, and the web they spun across the country had a single purpose: communication. The early phreakers simply wanted to talk to each other without running up huge long-distance bills.
It wasn't long, though, before the means displaced the end, and some of the early phreakers found that the technology of the phone system could provide a lot more fun than could be had by merely calling someone. In a few years phreakers would learn other skills and begin to look deeper. They found a labyrinth of electronic passages and hidden sections within the Bell network and began charting it. Then they realized they were really looking at the inside of a computer, that the Bell system was simply a giant network of terminals--known as telephones--with a vast series of switches, wires, and loops stretching all across the country. It was actual place, though it only existed at the end of a phone receiver, a nearly limitless electronic universe accessible by dialing numbers on a phone. And what made this space open to phreakers was the spread of electronic gadgets that would completely overwhelm the Bell system.
According to Bell Telephone, the first known instance of theft of long-distance telephone service by an electronic device was discovered in 1961, after a local office manager in the company's Pacific Northwest division noticed some inordinately lengthy calls to an out-of-area directory-information number. The calls were from a studio at Washington State College, and when Bell's engineers went to investigate, they found what they described as "a strange-looking device on a blue metal chassis" attached to the phone, which they immediately nicknamed a "blue box."
The color of the device was incidental, but the name stuck. Its purpose was to enable users to make free long-distance calls, and it was a huge advancement on simple loop-around-pairs: not only could the blue box set up calls to any number anywhere, it would also allow the user to roam through areas of the Bell system that were off-limits to ordinary subscribers.
The blue box was a direct result of Bell's decision in the mid 1950'S to build its new direct-dial system around multifrequency tones--musical notes generated by dialing that instruct the local exchange to route the call to a specific number. The tones weren't the same as the notes heard when pressing the numbers on a push-button phone: they were based on twelve electronically generated combinations of six master tones. These tones controlled the whole system: hence they were secret.
Or almost. In 1954 an article entitled "In-band Signal Frequency Signaling," appeared in the Bell System Technical System Journal, which described the electronic signals used for routing long-distance calls around the country, for "call completion" (hanging up), and for billing. The phone company then released the rest of its secrets when the November 1960 issue of the same journal described the frequencies of the tones used to dial the numbers.