The Idea Factory: Bell Labs and the Great Age of American Innovation (43 page)

The work put DiPiazza on the vanguard of radio engineering. And two years later, when he finished his tour of duty on Kwaj and returned to Bell Labs’ Whippany office, he was asked to continue with military radar. Not long after, though, Bell Labs decided to get out of missile work when it became apparent that the United States would sign an anti–ballistic missile treaty with the Soviet Union. “Bell Labs wasn’t going to fire us,” recalls DiPiazza. “They were going to tell us to find a job within Bell Labs.” Around that time, he ran into a good friend of his at the Labs. “My friend said, ‘You know, you guys should be doing radio telephone.’ ” And so DiPiazza and his boss asked around and soon found themselves in a meeting with Dick Frenkiel and Phil Porter in Holmdel, listening to them talk about cellular telephony. They pitched their own talents in the hope of being brought in.

There may have been only a few people in the world who knew as much about building high-frequency military communications systems as DiPiazza. And none of them were drafted, serendipitously, into a cellular telephone project. As DiPiazza saw it, the systems engineers like
Engel and Frenkiel were standing around blackboards or sitting at their desks with sharpened pencils. His team of development engineers could actually build what they needed—a complex mobile radio that could automatically change frequency, for instance, as a driver moved from cell to cell. For the next few years, DiPiazza, like Bill Jakes, spent most of his time in the field, driving around New Jersey and Philadelphia with his colleagues in an effort to construct a real-world cellular experiment. The men had purchased a small trailer home, then they ripped out the bathrooms and kitchens and hauled in small computers and electronic detection equipment. They called the trailer their mobile technology unit. Often the team would stay up all night, driving through various Philadelphia neighborhoods, testing signal strengths in their trailer home and tinkering with their hardware.

Mainly, they needed to know what radio signals did in urban and suburban settings. As DiPiazza says, “You had to find out, What is the noise level in a suburban environment? How far would a signal go if the antenna was at ten feet, twenty feet, fifty feet? Would it go one mile, two miles, four miles? How many antennas do you need? How do you build an antenna? What are you going to put the antenna
on
?” Nobody had ever built those things before. And if a cellular system was going to someday expand across the country, the core challenge was coming up with standards. They had little time to contemplate their legacy, but some of the decisions made by DiPiazza’s team proved indelible—for instance, the height of a cellular tower and the close arrangement of its antennas. Meanwhile, Phil Porter, who had worked with Frenkiel on the original system, came up with a permanent answer to an interesting question. Should a cellular phone have a dial tone? Porter made a radical suggestion that it shouldn’t. A caller should dial a number and then push “send.” That way, the mobile caller would be less rushed; also, the call would be connected for a shorter time, thus putting less strain on the network. That this idea—dial, then send—would later prove crucial to texting technology was not even considered.

In December 1971, AT&T submitted a long and detailed cellular proposal to the FCC, and the regulators began their deliberations. Motorola,
whose radio business could conceivably be jeopardized by the Bell Labs plan, made a variety of seemingly contradictory arguments against it. The company objected to the proposed cellular system on technical grounds, indicating that they believed it simply wouldn’t work; at the same time, Motorola claimed that AT&T would enter the cellular market and use its monopoly power to crush any competition.
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Not long after AT&T submitted its proposal, the company announced that it would only seek permission to build and operate cellular networks. “The company felt it had to make some concession, so they said they would not make handsets,” Dick Frenkiel recalls. Thus the handset business would be opened up to companies like Motorola or Japanese vendors. Such moves were meant to appease regulators concerned about competition. As the phone company executives now realized, the pervasive feeling in Washington was that the current monopoly was big enough. Perhaps it was too much. The cellular business, if it caught on, was going to be different.

I
N 1975
, the Bell Labs optical team decided to test their new product. Executives at AT&T and Bell Labs had concluded that fiber, at least at first, would be most useful for high-traffic areas within cities. Even without the Picturephone, copper lines were becoming congested with the steady increase in phone calls and computer data.
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The first fiber was fabricated at a new manufacturing facility in Atlanta. But Bell Labs engineers decided the Atlanta factory would also serve as an experiment—the first building where fiber would be installed.
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The Labs engineering team planned to string a glass cable—actually, 144 fibers arranged on a flat ribbon, and then bound within a protective cover—through the factory’s underground ducts. Afterward, they would spend several months testing the fiber, lasers, repeaters, splicing, transmission quality, and a host of other technical matters. Though it was only the thickness of a person’s thumb, the cable could carry forty-six thousand two-way conversations.

It went even more smoothly than anticipated.
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Encouraged by the
success, the team began a more practical test a year later in Chicago, where fiber would be installed in the field to transmit voice, video, and data to customers and between switching offices. Chicago, like Atlanta, proceeded without a serious hitch. This was cause for elation within a company that was now engaged in a legal struggle for survival. “I have taken very seriously the principles of innovation that you and I followed so long, and that you emphasized about lightguide systems years ago,” Bill Baker wrote at the time to John Pierce in California. Pierce should take pride in the Chicago effort, Baker suggested. “Your spirit is embodied in it.”
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Chicago was also chosen as the test site for the new cell phone technology. The FCC seemed to be moving cautiously toward approval. But it would first review how the Bell Labs system worked in the real world. In the summer of 1978, Bell set up a working cellular service in Chicago, limited to two thousand paid subscribers, over a two-thousand-square-mile area of the region. For the most part, the test was meant to satisfy the FCC’s desire to better understand the market—not only how cellular subscribers judged the service, but how equipment from other manufacturers, like handsets built by Motorola, meshed with Bell’s new network.
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The Chicago tests of fiber and cellular were largely completed by the late 1970s. Bell Labs executives then began planning for a major installation of fiber along the northeast corridor. As for mobile phones, AT&T planned a rollout in several cities—pending a green light from the FCC. By 1980, the success of both technologies seemed assured.

T
HE FUTURE OF THE
B
ELL
S
YSTEM
was far less clear. Between 1978 and 1980, the legal landscape for Ma Bell had grown increasingly grim. The government’s lawsuit asking for a breakup of AT&T had proceeded steadily forward. A new lawyer at the Justice Department’s antitrust division was now overseeing the suit—a Stanford academic, William Baxter, who promised to litigate it “to the eyeballs.”
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Also, there was a new judge hearing the case, a brilliant and mercilessly efficient former government
lawyer named Harold Greene. Finally, the powerful and pugnacious John deButts had retired as chairman of AT&T. The new AT&T chairman was a mild-mannered electrical engineer who had begun his career at AT&T as a ditch digger and had worked his way up through the company via twenty-three different jobs over several decades.
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His name was Charles Brown. Everybody called him Charlie.

One could see AT&T’s fundamental problem as arrogance. The phone company’s broad powers and influence, Judge Greene would later say, gave it “both the ability and the incentive to prevent competitors from gaining a substantial foothold.”
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This in turn had had a negative impact on consumers. During the trial, the judge would eventually hear a mountain of persuasive evidence put forward by government litigators; one after another, competitors would testify how Ma Bell had thwarted their efforts to enter the telecommunications business. At the same time, one could view the trial as a great war over ideas. To William Baxter, the driving force at Justice, AT&T’s fundamental problem was that it was both vertically and horizontally integrated. Vertical integration meant that the company controlled its research, development, manufacturing, and deployment. One way to visualize the verticality was to see Ma Bell as a series of boxes, stacked one atop another, each representing essential units of the company. The bottom box, where ideas and innovations began, was Bell Laboratories. Above that was Western Electric, where those innovations were in turn mass-produced. Above that was the top box, AT&T, which deployed the new technologies in the long-distance and local markets.
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Baxter did not object to the idea of vertical integration. It made sense that companies should fund research and bring the fruits of those investments to the market. It was the horizontal integration he considered unacceptable. Horizontal integration could be seen as a series of boxes, too, but these boxes stretched from side to side, or really from coast to coast, instead of from top to bottom. These boxes comprised AT&T’s long-distance group as well as the local Bell operating companies—New York Telephone, New England Telephone, Southern Bell, Northwestern Bell, and so forth. The government believed that AT&T’s control of almost
all the local networks created a bottleneck preventing long-distance competition, such as MCI, from thriving. It also created a barrier to companies that wanted to build their own telecommunications equipment. As it was, Western Electric, a close corporate partner to phone companies around the country, had a near hammerlock on the telecom manufacturing business.

The lawsuit was not, therefore, about Bell Labs. Executives at AT&T had nonetheless realized from the start that whatever fate befell the larger phone system would befall their laboratory, too. By 1980, Morry Tanenbaum, who invented the silicon transistor at Bell Labs years before, had become involved in the decisions over the company’s destiny. Tanenbaum had risen to become AT&T’s executive vice president, effectively making him one of Charlie Brown’s top deputies. “I was the only one of the senior officers who had spent time at Bell Labs, and Charlie was extremely concerned about Bell Labs,” he recalls. Brown worried that if he spun off Western Electric—the middle box on the vertical stack—then AT&T wouldn’t be able to take new discoveries from Bell Labs and move them up into the telecommunications network. Spinning off the local operating companies presented a similarly unappealing prospect: It would drastically reduce the funding available to Bell Labs, since those local companies represented a large portion of AT&T’s annual revenue.

Brown asked Tanenbaum to advise him on what each choice could mean to Bell Labs’ future. By mid-1981, as the trial was in full swing, it was clear to both men that spinning off Western Electric would not satisfy the government. So there were really only two options: AT&T could agree to spin off the local operating companies, or it could continue with the trial and see what happened. Charlie Brown leaned toward a settlement. The problem, as both Tanenbaum and Brown saw it, was Judge Greene. His preliminary comments from the bench suggested he was not sympathetic to the phone company’s arguments in favor of the status quo. In mid-trial, Greene had gone so far as to say that from what he had heard, the government’s evidence “demonstrate[s] the Bell System has violated the antitrust laws in a number of ways over a lengthy period of time.”
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Some of the most farsighted thinkers at Bell Labs had long believed
that the phone monopoly might not endure. Mervin Kelly, for one, constantly had that possibility on his mind, from the mid-1940s onward. Their reasoning was neither legal nor philosophical. Popular technologies spread quickly through society; inevitably, they are duplicated and improved by outsiders. As that happens, the original innovator becomes less and less crucial to the technology itself. “I think they knew that,” says John Mayo, a legendary engineer who began working at Bell Labs in the 1950s and rose to become its president some years after the litigation had ended. An intriguing question, at least to Mayo, is why the leadership that preceded him at Bell Labs—Jewett, Kelly, Fisk, Pierce, Baker, and the rest—nonetheless decided to invest so heavily and so consistently in research and in exploring what he calls “the unknown.” They were not forced to; other government-run phone companies around the world did not. Arguably, Bell Labs could have existed as a highly competent development organization without doing much in the way of basic or applied research. In Mayo’s view, “it’s not clear what possessed them to do such a unique thing, because in the long term it clearly was not something that assured their future.”

Morry Tanenbaum puts it somewhat differently. “Technology would have destroyed the monopoly anyway,” he says. Tanenbaum notes that Bell Labs’ most significant research and development efforts—transistors, microwave towers, digital transmission, optical fiber, cellular telephone systems—all fit a pattern. They took years to be developed and deployed, and soon became essential parts of the network. Yet many of the essential patents were given away or licensed for a pittance. And those technologies that weren’t shared were duplicated or improved upon by outsiders anyway. And eventually, the results were always the same. All the innovations returned, ferociously, in the form of competition.

B
ACK IN 1974
, just after the Department of Justice filed its suit, Bill Baker was asked what it would mean to Bell Labs if the government won. “Well, I think that Bell Laboratories as we know it now would just disappear,” he replied. As he saw it, parts of Bell Labs would have to be chopped
away. “As Western Electric and Long Lines or the operating companies go off,” he noted, “parts of the Labs would doubtless spin off with them, and Bell Laboratories would cease to exist.” Baker also remarked that his beloved research division would ultimately face extinction, too. “There’d be no reason for it,” he said. It could not be properly funded without the operating companies, which comprised two-thirds of the phone company’s assets.
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