Bell Labs: Research,
Development, and
Innovation in a
Monopoly
Sheldon Hochheiser, ‘73
Archivist and Institutional Historian, IEEE
Former Corporate Historian AT&T
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)
Some major Bell Labs
innovations
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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
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.
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
AT&T: A company and
industry founded on innovation
Alexander Graham Bell, 1876
The Telephone Patent, 1876
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.
AT&T Long distance routes, 1892
There were parallel improvements in both
transmission and telephone instruments.
The First Competitive Era
Year
Per 1000
population
Telephones
(1000s)
Year
1894
4.1
1900
1905
Telephones
(1000s)
Per 1000
Population
285
1910
7,635
82.2
17.5
1,356
1915
10,524
103.9
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.
•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
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
AT&T advertisement, 1908
Monopoly Accepted
The Kingsbury Commitment, 1913
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
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.
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.
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.
The Audion and the high-vacuum tube repeater
Transcontinental Telephone Service, 1915
Last pole, transcontinental telephone, Wendover UT,
June 17, 1914
Bell opens transcontinental telephone service, New York,
January 25, 1915
Lesson Learned: Bringing
research in-house paid off.
Vail at the transcontinental opening, Jekyll Island, GA, 1915.
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
Bell Labs established as a
separate subsidiary, 1925
463 West St., New York City, Bell Labs Headquarters 1925-1962
Universal Mission,
Universal Service
Telephone installation, Atlanta, 1925
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, 19251948.
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
Innovation: The Transistor
John Bardeen, William Shockley,
Walter Brattain, 1948
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.
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
Research to development to
commercial production
Generations of miniaturization
Bell Labs freely licensed
transistor technology
The first transistor radio, 1954
Innovation Electronic
Switching
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 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
Satellites
John Pierce with traveling wave tube.
Echo Satellite, 1960
Telstar, 1962
Telstar Ground Station, Goonhilly,
Cornwall, UK
First live transatlantic television
Innovation: Information
Theory
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 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.
The Picturephone
Advertisement, Picturephone commercial field trial, 1970
Why did the Picturephone fail?
1.
2.
Cost
A networked technology discourages early
adoption
3.
AT&T never thought to ask if people wanted to be
routinely seen when on the telephone.
It proved to be a new service, rather than an
extension of telephony.
4.
What Makes for a successful
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
Decline and Fall of the
Monopoly
Microwave relay tower, Adams TX, 1967
Technological innovations weakened the
logic of natural monopoly.
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.
Eight Companies Out of One.
Regional Bell Operating Companies, 1984.
The new AT&T: Long Lines,
Western Electric and Bell Labs.
Coda: Bell Labs after the
Monopoly
Bell Labs/Lucent US Headquarters, Murray
Hill NJ, 1997.