Bell Labs: Research, Bell Labs: Research, Development, and Development, and

Innovation in a Innovation in a MonopolyMonopoly

Sheldon Hochheiser, ‘73Sheldon Hochheiser, ‘73

Archivist and Institutional Historian, IEEEArchivist and Institutional Historian, IEEE

Former Corporate Historian AT&TFormer Corporate Historian AT&T

Bell Telephone Laboratories: Bell Telephone Laboratories: the top industrial research the top industrial research

lab of the 20lab of the 20thth Century. Century.

Three of Bell Lab’s eleven Nobel Laureates: Clinton Davisson (1937) (l) William Boyle and George Smith (r) (2009)

Some major Bell Labs Some major Bell Labs innovationsinnovations

• The Vacuum Tube Amplifier (1915)• Electrical Sound Recording (1924)• Broadband Coaxial Cable (1929)• The Transistor (1947)• The Solar Cell (1954)• Transoceanic telephone cables (1956)• Communications Satellites (1962)• Touch-Tone Telephones (1963)• Electronic Switching (1965)• Information Theory (1948)• Digital Transmission Systems (1962)• Charged-Coupled Device (1969)• Unix (1971)

Bell Lab, Murray Hill NJ, 1959

Science and Technology in Science and Technology in Corporate AmericaCorporate America

• Why “Research and Development”?• The institutionalization of R&D.• In-house R&D as a business strategy.• Offense and defense.• Owning a collection of patents.• Taking the long view. • Incremental improvements.

The Context: The Innovative The Context: The Innovative Monopoly Monopoly

AT&T logo, 1939

•AT&T was for most of the 20th century a U.S. sanctioned monopoly.•AT&T General Departments.•AT&T Long Lines.•Western Electric.•Local Bell Operating Companies.•Bell Labs.•It is a cliché that monopolies don’t innovate; AT&T did.

Alexander Graham Bell, 1876

AT&T: A company and AT&T: A company and industry founded on innovationindustry founded on innovation

The Telephone Patent, 1876

Early multiple switchboardCharles Scribner of Western Electric–inventor of the multiple switchboard; holder of 500 patents.

Serving more subscribers required ever more sophisticated switchboards.

Switching InnovationsSwitching Innovations

There were parallel improvements in both transmission and telephone instruments.

AT&T Long distance routes, 1892

The First Competitive EraThe First Competitive EraYear Per 1000

populationTelephones(1000s)

Year Telephones(1000s)

Per 1000Population

1894 4.1 285 1910 7,635 82.2

1900 17.5 1,356 1915 10,524 103.9

1905 48.8 4,127 1920 13,273 123.4

Telephones in use, U.S., 1894-1920

The telephone spread rapidly after Bell’s patents expired in 1894. Over 6,000 independent telephone companies started within the decade. Bell’s market share dropped from 100 % to 50%, but the size of its subscriber base increased 700 %.

AT&T advertising brochure, 1895

•Loading Coils, placed on the line according to mathematics worked out by AT&T’s George Campbell in 1899, reduced attenuation, making longer lines possible.

•Theory independently developed by Prof. Michael Pupin at Columbia.

•AT&T bought Pupin’s patent rights, rather than litigate.

•Can be used to either allow longer lines or use of thinner wire on existing lines.

•New York-Denver line, 1911—the technical limit of a loaded line.

Loading Coils.Loading Coils.

Loading Coils, 1899

Theodore VailTheodore Vail

• Theodore Vail returned as President of AT&T in 1907.•Vail campaigned to convince the American government and public that the telephone was a natural monopoly, which should be run by AT&T.• He suggested that since competition was not appropriate for the telephone, regulation was the correct substitute.

Theodore Vail, President AT&T, 1907-1919

AT&T advertisement, 1908

The Kingsbury Commitment, 1913

Monopoly AcceptedMonopoly Accepted

ImplicationsImplications

• The Bell System embraced a service ethos, as did its regulators.•The Bell system was regulated by multiple agencies; interstate services ( Long Lines) by the federal government; intrastate services (local telephone operations) by the states. •One principle on both levels was “rate of return.”•Hence, R&D expenditures could be rolled into the rate base. •AT&T provided the United States with the best and most extensive telephone service in the world.•And thus the monopoly was maintained

John J. CartyJohn J. Carty•Vail decided in 1908 that a transcontinental telephone line was AT&T’s highest technical priority.• Vail focused R&D expenditures on this area.•AT&T’s chief engineer was John J. Carty, who back in the 1880s had made some of the key innovations that made early long distance lines possible. •Carty knew that a 3000 mile telephone required a scientific breakthrough—a way to amplify the electrical signal•Carty announced the goal. publicly in 1909.

John J. Carty, Chief Engineer AT&T, 1907-1921.

Dr. Harold Arnold.

Carty asked Dr. Robert Millikan of U. Chicago to recommend a bright young physicist. Millikan sent him one of his students, Dr. Harold Arnold, who began work in in 1911 in the Western Electric Engineering Dept.

Lee de Forest, 1907, inventor of the Audion, the three element vacuum tube, which he used as a radio wave detector. It could do a small amount of amplification. He brought it to AT&T’s attention in 1912.

The Audion

The Audion and the high-vacuum tube repeater

Last pole, transcontinental telephone, Wendover UT, June 17, 1914

Bell opens transcontinental telephone service, New York, January 25, 1915

Transcontinental Telephone Service, 1915

Lesson Learned: Bringing Lesson Learned: Bringing research in-house paid off.research in-house paid off.

Vail at the transcontinental opening, Jekyll Island, GA, 1915.

Air-to-Ground 2 way radio, 1918

•Condenser Microphones•Loudspeaker Systems•Radio•Electrical Sound Recording•Sound Motion Pictures•Hearing Aids•Quartz Clock•Television•Radar

The Vacuum Tube Had Many The Vacuum Tube Had Many ApplicationsApplications

Bell Labs established as a Bell Labs established as a separate subsidiary, 1925separate subsidiary, 1925

463 West St., New York City, Bell Labs Headquarters 1925-1962

Telephone installation, Atlanta, 1925

Universal Mission, Universal Mission, Universal ServiceUniversal Service

We found ourselves [after recovering from the interruptions of the World War] once more on the track so we could go on about our business which is furnishing telephone service to the people of this country. I did a lot of thinking as to where we were to go from here. It seemed to me that on the technical side of the business that we hadn’t anywhere near reached the limit of what we could do. If we were to look forward and try to picture the technical millennium, it might be something like this: You would be able to pick up a telephone and talk to anybody anywhere just as quickly as you can talk to anyone across the street by telephone today, and do it for a very reasonable cost

-- AT&T President Walter Gifford, 1928

We pioneered again in having research and development carried on in a central organization. This insured progress in spite of the fact that competition in the usual sense of the word—such competition which is assumed to be essential to progress—has been largely absent.

--Walter Gifford, 1939

Walter Gifford, President AT&T, 1925-1948.

Research and DevelopmentResearch and Development•Research and Development is not always a linear process.•Bell Labs undertook fundamental research in areas where a breakthrough might lead to applications.•Bell Labs also undertook more focused development projects to directly improve the telephone system. •Bell Labs set technical standards for the Bell System.•Absent competition, Bell Labs and AT&T took the time to get a innovation right (as an engineer would define right), and put innovations in place is a measured way to insure robustness, and to protect depreciation.•Bell Labs did government R&D.

Telephones, 1907 and 1939

John Bardeen, William Shockley, Walter Brattain, 1948

Innovation: The TransistorInnovation: The Transistor

Problems to be solvedProblems to be solved

•Electromechanical automatic switches were building-sized machines with tens of thousands of moving parts that needed maintenance and wore out. •Vacuum tubes amplifiers gave off heat, were somewhat fragile, and wore out.•Were there in the long term better solutions?

A small portion of a Panel Switch, Chicago, 1938.

Mervin Kelly, Bell Labs Vice President for Research, started the solid state research

program, 1936.

Russell Ohl, inventor of the p-n junction diode (1940)

The first transistor, 1947

Generations of miniaturization

Research to development to Research to development to commercial productioncommercial production

The first transistor radio, 1954

Bell Labs freely licensed Bell Labs freely licensed transistor technologytransistor technology

Innovation Electronic Innovation Electronic SwitchingSwitching

Section of a large electromechanical switch: No. 1 Crossbar, New York City, 1938

Morris IL field trial of electronic switching, 1960-1962

Installation of the first electronic central office, 1 ESS #1, 1965

Electronic Switching for NORAD, Cheyenne Mountain, CO, 1965

Control console of the first 4ESS digital switch, Chicago 1976

Innovation : The Solar CellInnovation : The Solar Cell

Solar battery inventors, Gerald Pearson, Daryl Chapin and Calvin Fuller

D. E. Thomas tests a solar-cell-powered radio transmitter, Murray Hill, 1954

Solar cells powering a rural telephone line, Americus, GA 1955

Innovation: Communications Innovation: Communications SatellitesSatellites

John Pierce with traveling wave tube.

Echo Satellite, 1960

Telstar, 1962

Telstar Ground Station, Goonhilly, Cornwall, UK

First live transatlantic television

Innovation: Information Innovation: Information TheoryTheory

Claude Shannon

Shannon’s classic paper, 1948

First digital transmission system, T-1, Chicago, 1962

A strand of optical fiber, as used in the first generation of fiber-optic transmission systems, 1980s.

Universal Service AchievedUniversal Service Achieved

Year % Year %

1920 35.0 1957 75.7

1929 41.6 1962 80.3

1933 31.3 1969 90.0

1942 42.2 1980 96.2

1946 51.4

Percent of households with telephone service, 1920-1969

By the end of the 1960s, both AT&T and the Federal Communications Commission had come to believe that the long agreed goal of Universal

Service had been achieved.

Advertisement, Picturephone commercial field trial, 1970

The PicturephoneThe Picturephone

Why did the Picturephone fail?Why did the Picturephone fail?

3. AT&T never thought to ask if people wanted to be routinely seen when on the telephone.

4. It proved to be a new service, rather than an extension of telephony.

1. Cost2. A networked technology discourages early

adoption

What Makes for a successful What Makes for a successful Industrial R&D Lab?Industrial R&D Lab?

•A corporate culture that values innovation•Steady adequate funding•Willingness to undertake a long view•Good management that can

•Select projects with high potential payoff•Balance the needs and interests of the corporation to those of its researchers.•Knowing the right amount of “rope.”

•Balance of research and development

Microwave relay tower, Adams TX, 1967

Technological innovations weakened the logic of natural monopoly.

Decline and Fall of the Decline and Fall of the MonopolyMonopoly

MCI Building, Washington, 1978

Would-be competitors arose to exploit the newer technologies, the changing regulatory and political climate, and the American body politic’s dislike of

monopolies.

Prediction of doom

With a 1982 agreement to settle the 3rd Anti-trust suit brought against AT&T, the monopoly ended, and a new era

in telecommunications began.

Regional Bell Operating Companies, 1984.

Eight Companies Out of One.Eight Companies Out of One.

The new AT&T: Long Lines, Western Electric and Bell Labs.

Coda: Bell Labs after the Coda: Bell Labs after the MonopolyMonopoly

Bell Labs/Lucent US Headquarters, Murray Hill NJ, 1997.