Why exactly did telegraphs have to use "STOP" instead of a period and "QUOTE" instead of a quotation mark? (Or special codes.)

Telegrams were charged per word, and the "stop" and other punctuation marks were counted as a word. Spelling them out was a way to communicate that this was important enough to be charged for. It prevented arguments and inaccuracies of how much a telegram cost, and also prevented people from cheating their system by developing a code whereby combinations of punctuation marks would convey a meaning.

Because telegraph was a manually routed transmission. Like the original Ethernet of the 1980's, one had long cable runs with stations tapping the cable along its length. Transmission to another station on the same cable run was single hop, but to a station on another cable run would be multi-hop.

Unlike Ethernet however, with it's automatic repeaters, telegraph had manual repeaters who would receive a message on one cable and retransmit it on another. For a Trans-Atlantic transmision this might involve several hops on each side of the trans-Atlantic cable:

• Evanston to Chicago

• Chicago to New York

• New York to Belfast

• Belfast to London

• London to Paris

• Paris to Rheims

• Rheims to Verdun

In all these retransmits, there was a very real danger that single punctuation marks might get missed, thus garbling the message. By introducing distinct words such as STOP, COMMA, SEMICOLON for the punctuation marks a degree of redundancy - essentially error-checking - was introduced that made such errors vastly less likely.

That it was the military that first made this practice standard is not surprising. When giving orders, competent commanders go to great lengths to ensure that the orders are direct and unambiguous. An example of the consequences of even a simple failure, two orders arriving out of sequence, is well known from the first days of the 1809 campaign in Bavaria.

Napoleon sent a first message to Berthier from Paris by semaphore, which was delayed for more than a day by cloudy conditions near Strasbourg. Then he sent a second, more detailed, message by courier which arrived to Berthier first. As a consequence of the orders arriving out of order (but not being recognized as such), Berthier took the more general instructions as an amendment of the detail rather than the other way around - resulting in Davout's corps remaining at Regensburg two days longer than intended by Napoleon.

The ensuing correspondence between Berther and Davout is well described in Volume 1 of John H Gill's Thunder on the Danube, as the two marshals attempt to sort out, long distance, the true intent of Napoleon's orders.

Why only puncutation you might ask? Because normal language already contains a great deal of redundancy, both in spelling and grammar, as evidenced here:

Finally - why were English words used instead of special code? Because the sender was charged for the message by the "word" - and every character of a "special code" was it's own word. And why was that you ask - because words can be processed faster and more accurately than special codes. Words, as noted above, contain error-checking redundancy that special codes cannot. The difficulty is not at the sending end so much as at the receiving end, where the receiver cannot utilize any obvious redundancy to ensure accuracy.

The consequential combination of both lower cost and improved accuracy (the whole point of replacing single character punctuation after all) meant it was never going to be useful, in the large, to use special codes rather than words.

Further examples of telegraphese and commercial (telegraph) code aimed at both decreasing cost and improving clarity and accuracy of telegraphed messages..

A 1928 booklet on HOW TO WRITE TELEGRAMS PROPERLY has this to say concerning the use of STOP (emphasis mine):

If it seems impossible to convey your meaning clearly without the use of punctuation, use may be made of the celebrated word "stop," which is known the world over as the official telegraphic or cable word for "period."

This word "stop" may have perplexed you the first time you encountered it in a message. Use of this word in telegraphic communications was greatly increased during the World War, when the Government employed it widely as a precaution against having messages garbled or misunderstood, as a result of the misplacement or emission of the tiny dot or period.

Officials felt that the vital orders of the Government must be definite and clear cut, and they therefore used not only the word "stop," to indicate a period, but also adopted the practice of spelling out "comma," "colon," and "semi-colon." The word "query" often was used to indicate a question mark. Of all these, however, "stop" has come into most widespread use, and vaudeville artists and columnists have employed it with humorous effect, certain that the public would understand the allusion in connection with telegrams. It is interesting to note, too, that although the word is obviously English it has come into general use In all languages that are used in telegraphing or cabling.

"Stop" is of course never necessary at the end of a message.

So the goal was clarity of the message.

Since there seems to still be some question about why the actual word STOP is being used, we can look at the Wikipedia article on Full Stop for more information:

The word period was used as a name for what printers often called the "full point" or the punctuation mark that was a dot on the baseline and used in several situations. The phrase full stop was only used to refer to the punctuation mark when it was used to terminate a sentence.

Again, clarity. A period had several uses, but the Full Stop is the proper term for the item terminating a sentence. No errors or misunderstandings, STOP meant the end of the sentence.