In theory, two cell phones could connect to each other directly. They’d have to be bigger, but they could. The big problem comes when a thousand phones are trying to have one-on-one conversations simultaneously.
Cell phone systems are deliberately designed with very low transmitting power, for two reasons. First, it makes the phone smaller and lower-power, cheaper and with longer battery life. But more importantly, it minimizes the cross-talk between phones. If my phone is powerful enough to talk to another phone, it can also interfere with the transmissions of other nearby phones — even phones too far away to talk to directly can get their data disrupted and garbled. As the number of phones trying to communicate directly with each other gets bigger, the problem gets worse, like [people at a noisy cocktail party](https://en.wikipedia.org/wiki/Cocktail_party_effect) who have to shout to be heard, making the noise of conversation worse for everyone else.
The solution is to have the phones transmit and receive at very low power, and have big, expensive, powerful transmitters and sensitive receivers built into the cell towers. Each phone can only be heard by the nearest cell tower, minimizing the problem of cross-talk. This also lets the system grow to handle more users if it does get overcrowded: just add a new tower, and have everyone transmit even more quietly. Instead of shouting at a loud cocktail party, each person quietly passes a note to a very capable waiter who delivers their message to the recipient.
Some people here have mentioned Nextel’s Direct Connect feature. This was *not* actually a direct connection. Your phone contacted the nearest tower, which sent the message to your friend’s phone via their nearest tower, exactly the same as ordinary cell phone calls. The only difference was you didn’t have to dial.
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