bi-weekly column with timely,
relevant and possibly irreverent
insight into the BC technology
December 8th, 2006
Greenstone Venture Partners
Requiem For Innovation?
“And I hope when I get old
I don't sit around thinking about it
But I probably will…
Well time slips away
And leaves you with nothing mister but
Boring stories of Glory days.”
– Bruce Springsteen, Glory Days
Lucent merged with Alcatel in case you missed it.
Headquarters will be in France and it is by far the
biggest telecommunications equipment company in the
world. Yes, this news is old, but the impact is
starting to be felt. Just last week, it was announced
that Bell Labs would be broken up to focus on applied
customer-driven product development in different areas
and that all direction will come from Paris. That got
me thinking. Here’s why:
In Bell Labs’ 85 year history, its scientists have
collectively have won six Nobel Prizes in Physics, nine
U.S. Medals of Science, seven U.S. Medals of Technology,
two Draper Prizes and a Grammy award, for many
achievements in sound technology.
The lab has been granted 32,031 U.S. patents, 15,000 of
which are still active.
A look at some key advances:
•1925: First demonstration of a facsimile machine
sending pictures over telephone wires.
•1926: First synchronization system for sound movies.
•1927: First long-distance television transmission,
sending live images of President Hoover from Washington,
D.C., to New York.
•1939: First binary digital computer.
•1947: John Bardeen, Walter Brattain and William
Shockley invent the transistor, leading to the
electronic-age of portable radios, touchtone phones,
computer microchips and color and high-definition
television; they share 1956 Nobel Prize.
•1951: Direct dialing of domestic long-distance calls.
•1954: Solar battery cell to convert sunlight into
•1956: First transatlantic telephone cable, handling up
to 36 calls.
•1958: Arthur Schawlow and brother-in-law Charles Townes
invent the laser (short for light amplification by
stimulated emission of radiation), now used in
fiber-optic communications networks and as a cutting
tool in surgery and industry. Each later won a Nobel
related to the research.
•1962: Demonstrated cellular technology, tested the
first paging system, produced the first orbiting
communications satellite (Telstar I) and invented
light-emitting diodes, now widely used in imaging
•1965: Arno Penzias and Bob Wilson stumble upon cosmetic
background radiation while using a highly sensitive
"horn antenna" in radio astronomy experiments; they win
1978 Nobel Prize. The static noise they heard was the
strongest evidence supporting the Edwin Hubble/George
Lemaitre theory the universe was created in a "Big Bang"
•1969: UNIX operating system, software that made open
computer systems possible and became the Internet's
•1979: Digital signal processor, enabling cellular
phones and modems.
•1980: Digital cellphone technology.
•1988: First fiber-optic transatlantic cable, handling
up to 40,000 phone calls at once.
•1992: Invented compression technology needed for
•1995: First prototype system supporting wireless
•1998: First switch allowing Internet telephone traffic,
faster Internet access.
•2005: First Internet Protocol transmission at 100
gigabits per second, 10 times the current speed and
critical for future services such as IPTV.
In summary, many of the fundamental inventions in
electronics have come from Murray Hill, NJ as well as a
side benefit of proving the Big Bang theory. And now it
is part of a broader trend in the US and Canada to
eliminate funded research parks sponsored by
corporations. With the notable exception of Microsoft
and its $1B a year research arm, IBM shed Almaden, Xerox
closed PARC a long time ago, HP broke up and with the
split came the dumping of their fundamental research and
now the venerable giant of research in
telecommunications is done. In Canada, Bell Northern
Labs and MPR Teltech were huge innovation engines that
Nortel and BC Tel respectively broke up in the 1990’s.
At the end of the day it comes down to ROI. Return on
invested dollar for the company is usually diametrically
opposed to really cool research that a bunch of
terrifyingly smart people come up with on bean bag
chairs. Anyone who has worked at a research park says
that having a bunch of exceedingly bright folks can
still create dynamics in the workplace similar to The
Office or Dilbert. A lot of time and money gets wasted,
say the critics. And the Board Room demands innovation
that leads to profits. Makes sense for the company to
shed some fat and cut back the nerd playground.
But is this good for North America? Japan and Europe
(and soon China) are picking up the fundamental research
ball. Not just in public R&D, but in corporate funded
parks like the one that just “moved” to France. How can
we innovate on the product side if we are not funding
the places where monumental discoveries like the
Look at Vancouver’s technology history as an anecdote on
this issue… MPR Teltech was, like many other research
parks, a fairly dysfunctional place. It had many bright
engineers and a few good leaders, but not the same
urgency that a product company like Newbridge or Nortel
had. I don’t have the numbers that BC Tel actually spent
on the place from when it opened in the late 70’s to
when they sold that last bit in the late 90’s, but it
was probably a combined $100M or so. They probably got
10% back in their fire sale. But out of there came
Newbridge’s highest selling product ever, Sierra
Wireless’ early team and PMC, which Sierra Semi got for
a song. Did BC Tel waste their money on frivolous
research? Clearly not, as the combined market value of
what came out of there was in the billions of dollars.
Did BC Tel fail to recognize what they had and/or find
it was not useful in their business? Clearly yes. Did
some savvy entrepreneurs make hay and get a big return
on BC Tel’s investment? Absolutely. Did we as a
society benefit from BC Tel’s investment? Based on
improved telecommunications and faster networks that
these innovations helped, I’d argue yes.
MPR Teltech’s story is a mini-Bell Labs. There was lost
of wasted time and research there, but it attracted the
brightest people, like Ted Darcie, now of UVic, but a
twenty year veteran of Bell Labs and a highly recognized
contributor (AT&T and IEEE Fellow). Ted was working on
data transmission over cable systems at Bell Labs in the
late 1980’s. His name is on some of the most important
patents around Hybrid Fiber Coaxial Transmission or HFC,
the basic architecture of the cable data plant that
delivers your broadband via Shaw today. Now wait a
minute. Bell Labs was owned by AT&T from the early part
of the last century. That’s a phone company. In 1984,
it was broken up into the Baby Bells because it was too
dominant in telephony. And Ted was working on… cable?
AT&T did not have a single line of coaxial cable
anywhere but in his lab. His research and the growing
requirement for television and later Internet access
drove AT&T into becoming a cable company when it bought
TCI and then MediaOne in the mid-90s. By investing in
wireless and other research beyond the telephone and
proving out new technologies, Bell Labs helped spur
future cash streams for AT&T. But, what now for the old
AT&T which is merged with SBC, one of its “babies”?
Where is the innovation coming from? Its equipment arm
Lucent is now French. And Bell Labs is a product
With fewer and fewer of these creative places to do
world-class research in North America, we may be setting
ourselves up for a decline in innovation. And fewer
places for great ideas means fewer start-ups, which is
why I have a particular concern beyond the social good.
Am I Chicken Little here? Is the sky falling? Or is
there a new model for innovation in North America that
doesn’t require the corporate funded parks of old…
What Do You Think? Talk Back To Brent Holliday
Something Ventured is a bi-weekly column designed
to supplement the T-Net British Columbia web site with
some timely, relevant and possibly irreverent insight
into the industry. I hope to share some of the
perspective and trends that I see in my role as a VC.
The column is always followed by feedback (if its
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