Right, that's crucial to understand. In 1985 you could make a direct dial from England to the US but it was eye wateringly expensive. £2 per minute. An hour's call to your mum? That's over £100.

But the cost to Bell and British Telecom was not £2 per minute, or £1 per minute, or even 1p per minute, it was nothing at all. Their costs were not for the call, but for the infrastructure over which the call was delivered, a transatlantic cable. If there was one call for ten minutes, once a week essentially at random, that cable must still exist, but if there are 10 thousand call minutes per week, a thousand times more, it's the same cable.

So the big telcos all just picked a number and understood it as basically free income. If everybody agrees this call costs £2 then it costs £2 right, and those 10 thousand call minutes generate a Million pound annual income.

It's maybe easier for Americans to understand if you tell them that outside the US the local telephone calls cost money back then. Why were your calls free? Because why not, the decision to charge for the calls is arbitrary, the calls don't actually cost anything, but you will need to charge somehow to recoup the maintenance costs. In the US the long distance calls were more expensive to make up for this for a time, today it's all absorbed in a monthly access fee on most plans.

This analysis doesn't concern the limited bandwidth available for call delivery on plain old telephone networks (POTS). They did squeeze extra money out of the system with their networks as a monopoly, but the cost was zero only if you don't consider the cost of operating and maintaining the network, or the opportunity cost of having much less bandwidth than currently available. For the former, they still had to fix problems. For the latter if they had made calls pennies everyone would have had "all circuits are busy" all the time. A single line wasn't capable of carrying 10,000 calls back then. Pricing to limit usage to available bandwidth was as important as recouping infrastructure costs and ongoing maintenance. There's also a lemonade stand pricing effect. If you charge too little you don't get enough to cover costs. But if you charge too much, not enough people will do business and you won't cover costs. Also, ma bell was broken up in 1982, but regional monopolies lasted a lot longer (telecommunications act of 1996).

There was some capital expenditure that had to be paid for.

In the US, ATT was just barely deregulated by then so the prices were not just 'out of thin air'.