Bell Labs: Research, Development, and Innovation in a Monopoly

1. Bell Labs: Research, Development, and Innovation in a Monopoly Sheldon Hochheiser, ‘73 Archivist and Institutional Historian, IEEE Former Corporate Historian AT&T

2. Bell Telephone Laboratories: the top industrial research lab of the 20th Century. Three of Bell Lab’s eleven Nobel Laureates: Clinton Davisson (1937) (l) William Boyle and George Smith (r) (2009)

3. Some major Bell Labs innovations • 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

4. Science and Technology in Corporate 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.

5. The Context: The Innovative Monopoly • 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. AT&T logo, 1939

6. AT&T: A company and industry founded on innovation Alexander Graham Bell, 1876

7. The Telephone Patent, 1876

8. Switching Innovations Early multiple switchboard Charles Scribner of Western Electric–inventor of the multiple switchboard; holder of 500 patents. Serving more subscribers required ever more sophisticated switchboards.

9. AT&T Long distance routes, 1892 There were parallel improvements in both transmission and telephone instruments.

10. The First Competitive Era 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 %.

11. AT&T advertising brochure, 1895

12. Loading Coils. • 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, 1899

13. Theodore 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

14. AT&T advertisement, 1908

15. Monopoly Accepted The Kingsbury Commitment, 1913

16. Implications • 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

17. John 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.

18. 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. Dr. Harold Arnold.

19. The Audion 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.

20. The Audion and the high-vacuum tube repeater

21. Transcontinental Telephone Service, 1915 Last pole, transcontinental telephone, Wendover UT, June 17, 1914 Bell opens transcontinental telephone service, New York, January 25, 1915

22. Lesson Learned: Bringing research in-house paid off. Vail at the transcontinental opening, Jekyll Island, GA, 1915.

23. The Vacuum Tube Had Many Applications • Condenser Microphones • Loudspeaker Systems • Radio • Electrical Sound Recording • Sound Motion Pictures • Hearing Aids • Quartz Clock • Television • Radar Air-to-Ground 2 way radio, 1918

24. Bell Labs established as a separate subsidiary, 1925 463 West St., New York City, Bell Labs Headquarters 1925-1962

25. Universal Mission, Universal Service Telephone installation, Atlanta, 1925

26. 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

27. 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.

28. Research 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

29. Innovation: The Transistor John Bardeen, William Shockley, Walter Brattain, 1948

30. Problems 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.

31. Mervin Kelly, Bell Labs Vice President for Research, started the solid state research program, 1936.

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

33. The first transistor, 1947

34. Research to development to commercial production Generations of miniaturization

35. Bell Labs freely licensed transistor technology The first transistor radio, 1954

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

37. Morris IL field trial of electronic switching, 1960-1962

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

39. Electronic Switching for NORAD, Cheyenne Mountain, CO, 1965

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

41. Innovation : The Solar Cell Solar battery inventors, Gerald Pearson, Daryl Chapin and Calvin Fuller

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

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

44. Innovation: Communications Satellites John Pierce with traveling wave tube.

45. Echo Satellite, 1960

46. Telstar, 1962

47. Telstar Ground Station, Goonhilly, Cornwall, UK

48. First live transatlantic television

49. Innovation: Information Theory Claude Shannon

50. Shannon’s classic paper, 1948