For most of early telephone history, calls were completed by young men and women working at the phone company central office, where they used plug-in cords to connect callers to the people and businesses they wanted to communicate with.
Almond Strowger was an undertaker/inventor in Kansas City, MO, who was described as "eccentric, irascible and even mad." He was motivated to invent an automatic telephone system after having trouble with local Bell Telephone operators.
He thought the operators were sending calls to a competitor rather than to his business. The origin of this suspicion reportedly arose from an incident when a friend died and the family contacted a rival undertaker. Other stories claim that the wife or cousin of a competing undertaker was a telephone operator and Strowger suspected that the operators were telling callers that his line was busy or connecting his callers to the competition. Yet another story has him boasting of inventing "the girl-less, cuss-less telephone."
Convinced that callers -- not operators -- should choose who was called, Strowger first conceived his invention in 1888, and patented the automatic telephone exchange in 1891.
The Strowger Automatic Telephone Exchange Company was formed, and it opened its first exchange in La Porte, Indiana in 1892, with about 75 subscribers. One subscriber, Dr. Jerome Rudolph, attempted to call his own office from La Porte Town Hall at the same time his secretary was calling a prescription to a pharmacy, and Dr. Rudolph heard what was apparently history's first busy signal. (Info from Wikipedia & other sources)