Modern technology comes to Walnut Grove when its citizens begin installing telephones in their homes. Mrs. Olesen gets a job as switchboard operator.
Big mistake! She listens in on conversations and spreads what she's heard as ... dum-de-dum-dum, GOSSIP! The first call is between banker Bill Anderson and his bookie, who is giving him tips on race horses and the stock market. Anderson is very lucky and wins a lot of money.
Meanwhile, Jonathan, Charles and Caroline surprise Alice with a gift – a new telephone, with which she can call her mother and talk anytime she wants. She does just that, but while joyed at listening to her mother's voice sound like it's coming from the next room, what Mother has to say is not very good news.
It seems like Alice has an ex-husband named Harold, and he's just been released from prison for his crime. Alice tries hard to conceal her feelings from the others, and once they leave, she resumes the conversation.
Alice is unaware that someone – namely, Mrs. Olesen, is listening in on the phone conversations. Mrs. Olesen immediately blabs to Nellie, who shares her knowledge with Andrew (and Laura and Albert as well).
Jonathan finds out and immediately storms over to confront Mrs. Olesen and demand an apology, but she insists it was true. After Jonathan leaves, Nels rebukes his wife and warns her never to listen in on phone conversations again.
Jonathan arrives home and demands an explanation from Alice, who admits she was indeed married before. She says she wanted to conceal this ill-fated marriage (which just lasted a week, when she was barely old enough) from Jonathan so he wouldn't hurt him, but Jonathan is even more upset that she didn't tell him about her previous marriage.
After several days of barely talking to each other, Andrew gets very upset and wants the fighting to stop. Jonathan agrees he needs some time to sort through his emotions and decides to accompany Charles on a delivery run.
Meanwhile, Nellie has offered to work as a substitute at the switchboard, and has also been taught to listen in on phone conversations. Laura and Albert work with Mr. Anderson to effect a phony phone conversation to catch her eavesdropping. The scheme – which involves Mr. Anderson investing heavily in a prosperous company – works when Albert drops a live mouse on Nellie's lap, causing her to scream in terror.
At least Nellie has learned her lesson. Mrs. Olesen, meanwhile, decides to act on the phony tip. She plans to invest the family's savings (well, her share, anyway) in a high-risk company. Nels is furious, but course he is unable to reason with his wife that investing in stocks involves the possibility of losing money. So, he gives in and agrees to let her make her investment.
In Minneapolis, Charles and Jonathan stay with Alice's mother, who reveals the whole story about Harold. She explains that Alice's real father had died and Harold (who boarded with them) became close with the family. Soon after Harold and Alice wed, the real Harold came forward; he had cleverly concealed a life of heavy drinking and gambling, and was sent to prison for 18 years after a failed bank robbery.
After a delicious supper, Jonathan leaves to find the saloon where Harold is working. He meets the man that was once married to Alice, and finds he is a haggard old man who has nothing left in life except to tend bar. Harold corobberates the same story, and admits he let the best thing he ever had – Alice – slip through his hands. He knows that Alice has re-married and has a son, and then tells Jonathan (who never reveals his identity) that the man that married her should consider himself very lucky.
Jonathan knows the truth and returns home, where he asks for Alice's forgiveness. But not before ...
... we check in with Mrs. Olesen and see how she made out on her trip to Mankato. Not so good, not so sorry to say. She invests everything, only for the company to promptly go bankrupt. Nels has no sympathy for his wife when she begs for him to recoup her losses, saying she can earn it all back.
At the Garvey homestead, Jonathan says "I'm sorry," and Alice accepts. All is OK between loving couple once more ...
except for one minor detail – the phone line connected to their house. Jonathan uses his brute strength to push down the telephone pole and disconnect it's service!