TLDR: "Management feared that the availability of a recording device would make customers less willing to use the telephone system and so undermine the concept

TLDR: "Management feared that the availability of a recording device would make customers less willing to use the telephone system and so undermine the concept of universal service. (...) The fear took two forms. First, if conversations became matters of record in the same way as letters or other contracts, managers felt that customers would abandon the telephone for critical negotiations and return to the mails, where a slip of the tongue would not prove fatal. (...) Second, if conversations could be recorded, matters of an illegal or immoral nature, which some executives estimated made up as much as one third of all calls, would no longer be discussed by phone. (...) Although one might expect that managers would stress the economic half of this equation, in fact they paid far more attention to the question of trust and image. During this period AT&T had constant public relations problems, largely the result of antitrust investigations. Thus, the fact that magnetic recording might create a major upset with only a minor gain for a few customers who could afford to have their calls answered automatically was simply not acceptable for managers concerned with preserving AT&T's good name."