how IT came to rule the world, 1.8: Bell Labs and the Transistor
Posted on | April 10, 2010 | No Comments
This is the 13th post in the mini-series How IT Came to Rule the World
The transistor provided an extraordinary capability to control an electrical current which was initially used for amplifying electromagnetic frequencies and then for the switching of 1s and 0s needed for digital computing. An unlikely scenario unfolded in the 1950s when AT&T’s fear of government anti-trust action and regulation sparked the sharing of this seminal technology. This led to the solid state electronics revolution and then to the silicon semiconductor innovations that led to the rapid development of computerized information technology.
The transistor emerged from the research efforts of AT&T, the corporate behemoth that was formed by 
JP Morgan and guided by US policy to become the nation’s primary telecommunications provider. In 1913, AT&T settled its first federal anti-trust suit with the US government. The agreement established the company, started with Alexander Graham Bell’s technology, as an officially sanctioned monopoly. A document known as the Kingsbury Commitment spelled out the new structure and rules of interconnection in return for AT&T divesting its controlling interest in telegraphy powerhouse Western Union.
Both companies had a history of consolidating their market domination through patent creation or purchase. For example, AT&T purchased the patents for the De Forest vacuum tube amplifier in 1915, giving it control over newly emerging “wireless” technologies such as radio and transatlantic radiotelephony, as well as any other technology that used the innovation to amplify electrical signals. Patents, as government sanctioned barriers to entry, created huge obstacles for other competitors and effectively barred them from producing and using anything close to the restricted technology. As AT&T grew more powerful, it established Bell Telephone Laboratories Inc. (Bell Labs) in 1925 as a research and development subsidiary. Fed by AT&T’s monopoly profits, Bell Labs became a virtual “patent factory”, producing thousands of technical innovations and patents a year by the 1930s. One of its major challenges was to find a more efficient successor to the vacuum tube.
After World War II, the US Justice Department filed another anti-trust lawsuit against AT&T. In 1949 it sought the divestiture of Western Electric, AT&T’s equipment-manufacturing arm. The action came after, although not necessarily because of, the telephone company’s invention of the transistor, an electronic device that regulated the flow of electricity through a small cylinder device. It operated much like the vacuum tube but the transistor however was “solid-state”: easier to use, more reliable, and much smaller as well. It worked by reducing the voltage while maintaining a strong current, ideal for a wide variety of electronic devices.
The transistor’s inception dates to December 23, 1947 at Bell Labs’ facilities in Murray Hill, New Jersey. At the time, AT&T’s famed research facility employed nearly 6,000 people, with 2,000 being engineering and research professionals. The development of the transistor was not a result of just basic research; it was the result of an all-out attempt to find something to replace the vacuum tube. In any case, the government’s lawsuit meant that AT&T would tread lightly with this new invention lest it raise additional concerns about Ma Bell’s monopoly power.
Unlike its previous history of zealously controlling or acquiring any patents (including the vacuum tube) dealing with its telephone network, AT&T decided to liberally license out the new technology. It did not want to antagonize the Justice Department over a technology it did not fully understand nor knew how to implement commercially. But some of the Bell Labs employees were already jumping ship with the technology and the anti-trust action was an indication that any patent infringement cases would be hard to defend in court.
So in 1951 and 1952, Bell Labs put on two symposiums revealing all their information on the transistor. The first was for government and military officials only, while twenty-five American companies and ten foreign companies attended the second. All were required to put out $25,000 as “a down-payment on a license.” Sensing the potential of the new device, the Department of Defense awarded a number of multi-million dollar contracts for transistor research contracts. General Electric, Raytheon, RCA, and Sylvania, all major vacuum tube makers, began working with their transistor licenses on military applications. AT&T’s Western Electric for example found in the Department of Defense an immediate market for nearly all its transistors. AT&T’s fear of the government’s anti-trust threat resulted in an extraordinary diffusion of the century’s most important technology.
In the mid-1950s the US government made a fateful decision regarding the future of the semiconductor industry when it ruled on Western Electric’s fate. In 1956, the Justice Department decided to let AT&T hold on to its manufacturing subsidiary under two conditions. First, it restricted the telephone company from computer-related activities except for sales to the military and for its own internal purposes, such as in telephone switching equipment. Second, AT&T was also required to give up its remaining transistor patents. As a consequence of the government’s pressure, the nascent semiconductor industry was released from the control of the monolithic telephone company.
Three licensees in particular, Motorola, Texas Instruments and Fairchild took advantage of AT&T’s transistor technology. Each procured valuable government contracts to refine the electronic switching technology and increase its reliability. The government contracts also helped them to develop sophisticated manufacturing techniques so they could mass-produce the transistors. In particular, two political developments, the nuclear arms race with the USSR and the goal to land on the Moon, became important for advancing the transistor technology that would propel an electronics revolution and lead to major advances in computer technologies.
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Anthony J. Pennings, PhD is the Professor of Global Media at Hannam University in South Korea. Previously, he taught at St. Edwards University in Austin, Texas and was on the faculty of New York University from 2002-2012. He also taught at Victoria University in Wellington, New Zealand and was a Fellow at the East-West Center in Hawaii in the 1990s.
Tags: Alexander Graham Bell > AT&T > Bell Labs > Fairchild > Kingsbury Commitment > Motorola
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Professor at State University of New York (SUNY) Korea since 2016. Moved to Austin, Texas in August 2012 to join the Digital Media Management program at St. Edwards University. Spent the previous decade on the faculty at New York University teaching and researching information systems, digital economics, and strategic communications.
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