Innovation, Monopolies and Fear of Disruptive Technologies

Great excerpt from Tim Wu's The Master Switch: The Rise and Fall of Information Empires. Wu details the AT&T monopoly, the innovations of Bell Labs, and the inevitable pitfalls faced by a monopoly trying to continue to innovate.

How Ma Bell Shelved the Future for 60 Years:

What would the world be like if fiber optic and mobile phones had been available in the 1930's? Would the decade be known as the start of the Information Revolution rather than the Great Depression?

 The Great Bell Labs

In early 1934, Clarence Hickman, a Bell Labs engineer, had a secret machine, about six feet tall, standing in his office. It was a device without equal in the world, decades ahead of its time. If you called and there was no answer on the phone line to which Hickman's invention was connected, the machine would beep and a recording device would come on allowing the caller to leave a message.

The genius at the heart of Hickman's secret proto–answering machine was not so much the concept- perceptive of social change as that was-but rather the technical principle that made it work and that would, eventually, transform the world: magnetic recording tape.

So what happened to magnetic recording tape in the 1930s? Why did't we get magnetic storage in the 1930s?

What's interesting is that Hickman's invention in the 1930s would not be " discovered" until the 1990s. For soon after Hickman had demonstrated his invention, AT&T ordered the Labs to cease all research into magnetic storage, and Hickman's research was suppressed and concealed for more than sixty years, coming to light only when the historian Mark Clark came across Hickman's laboratory notebook in the Bell archives.

"The impressive technical successes of Bell Labs' scientists and engineers," writes Clark, "were hidden by the upper management of both Bell Labs and AT&T." AT&T "refused to develop magnetic recording for consumer use and actively discouraged its development and use by others."

One would ask WHY? The answer is not that surprising.

In the language of innovation theory, the output of the Bell Labs was practically restricted to sustaining inventions; disruptive technologies, those that might even cast a shadow of uncertainty over the business model, were simply out of the question.

The recording machine is only one example of a technology that AT&T, out of such fears, would for years suppress or fail to market: fiber optics, mobile telephones, digital subscriber lines (DSL), facsimile machines, speakerphones - the list goes on and on. These technologies, ranging from novel to revolutionary, were simply too daring for Bell's comfort. Without a reliable sense of how they might affect the Bell system, AT&T and its heirs would deploy each with painfully slow caution, if at all.

It's interesting to wonder whether Google, Apple, Facebook, and Microsoft have all either fallen or will fall into this same trap.

Photo by jrmyst - http://flic.kr/p/gc6UF