That is what the telephone repeater tubes 10 or 15 years ago did require and lasted about 1,000 or 1,500 hours and took about an ampere of current. Well, as a result of research, and we had been buying those things from a manufacturer as though we were individuals buying for our radio sets, since the tubes were absolutely satisfactory and had a reasonable length of life, measured by incandescent lamps, and what not, there would have been no particular incentive for that fellow to have improved his product, unless he could either get a bigger sale by that or get a higher price for it. But we had a very great incentive for reducing the annual costs by prolonging the life of the tubes and by reducing the amount of power that they took or consumed. To make a long story short, the end of the road, about 10 or 12 years ago, was a tube which was no better physically than the one preceding it, but instead of having 1,000 or 1,500 hours life it had 50,000 hours life and took half an ampere of current, and cost slightly less. The cost factor didn't make much difference.

Now what is the effect of that? That is a thing which we had a great incentive to do, but which no outsider, even with our facilities, would have had any particular incentive to do for us. I had the figures here a while back and what it amounts to is this. If I should wave a wand tonight over the plant or system of the Bell system and replace all of the vacuum tubes that are in all of these long-distance line circuits with tubes of the vintage which I have mentioned to you of 10 years ago, tomorrow morning the using public would not know the difference, so far as the service is concerned. The service would be just the same as it is now, but it would cost us $10,000,000 a year for increased power and increased replacements of these tubes.

I mention that simply because that was suggested, that I do that as an interesting thing, as an illustration of how this thing developed. The CHAIRMAN. I wonder if we might clarify that a little bit, Doctor. Do I understand that the Bell telephone system was purchasing from a manufacturer?

Dr. JEWETT. No. They always purchased from our own people, always purchased from the Western Electric.

The CHAIRMAN. The Western Electric was manufacturing the tube which was of the limited length of life?

Dr. JEWETT. That is right.

The CHAIRMAN. And who developed the tube of the longer length of life?

Dr. JEWETT. The Bell Telephone Laboratories, and what it actually resulted in, Senator, so far as the end result for the Bell system, is what I have just indicated to you. The effect on the Western Electric, that part of the Bell system, was of course to reduce its manufacturing output over what it would have been. In other words, instead of manufacturing, assuming you did not have any difference in the number of tubes, you reduced the number of tubes to one-fiftieth of what it was before.

The CHAIRMAN. In other words the system was being supplied by the subsidiary Western Electric with the short-lived tube?

Dr. JEWETT. That is right, short lived measured by our present standards.

The CHAIRMAN. The laboratory pursuing this research had discovered how to make a tube of much longer life to serve the same purpose and because of its longer life

Dr. JEWETT. And much less current capacity.

The CHAIRMAN. Longer life and less current used, and as a result of this discovery the Western Electric substituted the manufacture of the long-life less-powered tube for the other?

Dr. JEWETT. That is right, except insofar as the growth of the system brought about more business, the effect on the Western Electric as a manufacturing concern was to cut down its business. Suppose that there had been no growth in the use of tubes in the system at the time of the substitution. Then instead of having to replace tubes every thousand hours you replaced them only every 50,000 hours.

The CHAIRMAN. You cut down the number of tubes that it was necessary to manufacture for the same amount of business?

Dr. JEWETT. Right.

The CHAIRMAN. But if you allowed the longer life and the lesser amount of power to be reflected in price to your patrons, then in all probability you had a larger demand?

Dr. JEWETT. Unquestionably there was some larger demand because we all know these long-distance rates, which is the service in which most of these tubes are used, like the transcontinental rates, have been

The CHAIRMAN. Increasing demand.

Dr. JEWETT. I can't tell you what the effect was on the Western Electric Co., but the tendency was one direction, and all I have brought this out for was because one of the members of the committee suggested it was an interesting illustration of how a philospohy affects what you do with the same kind of tools, and it is a type of thing which if we had been a research laboratory, connected with the Western Electric Co., whose sole business was selling the general trade, we would have had no incentive to do that kind of thing.

Mr. PATTERSON. May I interrupt there? Did this tube become generally available?

Dr. JEWETT. It is universally available in the Bell system, and it is, if I am not mistaken, under all licenses we have granted to everybody, useful to anybody. But no ordinary manufacturer who is making his money out of the sale of his products is likely to have the same incentive to go as far as we have in making the things of extremely long life and extremely low current.

Mr. PATTERSON. I can understand why the manufacturer, the Western Electric, would not cut the business down. It seems to me, however, your incentive in increasing the life of this tube from 1,000 to 50,000 hours might very well have been to decrease the rate to your subscribers, which is what you constantly want to do, and are doing. That is the major effort?

Dr. JEWETT. That's right. You see our objective—maybe I ought to state this, although I think you all know it. It is nothing, even though I have been in the business 35 years, that I can take any credit for, because the wise men-let me go back to the early days of this Bell system, because I think it was a most astounding performance that was done, and its fruits are in the fact that it is recognized not only here but throughout the world that the telephone service in the United States is just miles above what it is anywhere else. Nowhere else in the world can you grab a telephone and call San Francisco or Seattle and wait at the telephone. You have to wait a very long time. That is one illustration.

How did that come about? It wasn't just through a chance aggregation of stupidities. It was due to some awfully wise planning, and what is most astounding to me is that some men back in Boston apparently in the 1880's had a concept which has found, outside the Bell system, very little application since. Practically every public utility, including the Post Office of the United States, which requires material things for its operation, is limited to some extent by the physical things which are produced by somebody else. In other words, it is not master of its own house completely. It is true that the customer influences the supplier of these things, but these Johnnies back in Boston in 1880, who may have had the railroads or the Western Union or somebody as their example, came to the conclusion that if they were going to attain their objective, and I will tell you what that objective was in a minute, there was only one way they could do it. The supplier of physical things must be subordinate to the user of those things, and they set up this arrangement which has persisted since 1882, in which the manufacturer, the using utility company, directs and controls the research and development work and directs and controls the physical things which go into his plant. He is master of his own house, and it has led to some very peculiar things.

The Western Electric Co. is one of the three largest electric manufacturing companies in the United States and it is the only great manufacturing company that I know of anywhere in the world that doesn't have an engineering department. It has no engineering department. It doesn't design a single thing that it manufactures.

The CHAIRMAN. Dr. Jewett, I was tremendously interested in that general principle which you say those Johnnies back in Boston developed, the principle which they felt must be followed at any and all events, namely, that the supplier of the usable thing must be subordinate to the user. Did I understand that correctly?

Dr. JEWETT. This is for a public utility that they were talking about. I don't know that they would have carried it to the ordinary affairs of life. I don't know that they would do that.

What was the objective they were trying to reach? Of course they were kind of a Jules Vernes outfit in those days-they must have been-but they were wise Jules Vernes, and you will find what their objective was stated in the charter of the American Telegraph & Telephone Co. It has been oft quoted. They had the vision of anybody anywhere in the United States, on demand being able to be connected to anybody anywhere else, not only in the United States; they mentioned these places-Canada, Mexico, and what not-by wires or other appropriate means whenever they wanted to do it. They made that statement long before they could talk 500 miles.

The CHAIRMAN. I take it that you meant by that statement that those who were planning this development which we now know as the Bell telephone system, world-wide in its aspects, decided at an early date that if their plan, a very widespread plan, were to be carried out effectively, it must be under a system whereby those who were making the plan and carrying out the plan should be in a position to demand the manufacture of the things that they needed.

Dr. JEWETT. Yes, that is quite right.

The CHAIRMAN. And it was for that reason, I suppose, that these planners established the Western Electric Co. as a manufacturing subsidiary of the Bell.

Dr. JEWETT. That's right.

Dr. JEWETT. You are quite right. Let me finish this and then I will tell you an illustration exactly along the lines I think your mind is running. It shows how the thing worked in another situation contrariwise. Their objective was this thing I have indicated to you and that they should provide this service on demand at the lowest possible rate, and by lowest possible rate they meant in every case rates which were low enough so that they imposed no substantial artificial barrier to a free usage of this service, and with safety to the business. Now that has been the objective ever since before I was in the telephone business. It was stated by Gifford down at Dallas many years ago, and it wasn't anything new with Gifford; he was just restating a thing which was old before he and I were born, almost.

Now to give you the illustration of how the thing works contrariwise. One of the things which was done here a good many years ago in the growth of the business was to develop certain kinds of machine switching to take the place of manual switching which had become in the big cities a very difficult thing to do, and because of this centralized, unified thing in the Bell system, and because of this long-range proposition where you finally judge whether a thing is good, bad, or indifferent by the total cost of the time until you put it on the junk heap, certain types of apparatus were developed for the big city areas like New York. The British Post Office came along and they had a similar problem in London. London, a great big city, didn't have as big a telephone development as New York, but it was a big problem and they envisioned what has actually taken place, a big growth in the telephone service in London. They knew of all this work we had done over here, there was no secret about it, and they wanted very much to use that, the engineers in the British post office wanted to use it, but that type of apparatus required extremely expensive tools to stamp out the stuff, so expensive that it only proved out over the less efficient types of things if you could manufacture in large quantities, single manufacture such as we had in the Bell system. They didn't have that in England; they weren't masters of their own house; their business was built to a considerable extent on what they could get from the manufacturers. That isn't saying that the manufacturers didn't try to do what they wanted but there was a division of responsibility there. They were set up on a competitive basis so far as their manufactures were concerned, and it was quite obvious that two or three or four manufacturers could not tool up with these expensive tools to make this limited quantity of stuff and have the post office bear the burden as they would have to bear it, of these duplicate sets of tools. The post office even went so far at that time (the Postmaster General did) as to work out and present to Parliament a scheme which was, in effect, that these several manufacturing companies should realine their business so that one of these companies could be the sole producer of this thing which they wanted to use, and in return for that give up other kinds of things which it had been manufacturing, and Parliament in its wisdom, probably it was all right, refused to do that. The result was that the British Post Office had to put in, in the city of London, a system which they knew was inferior to the one which was available and was in use generally in the United States.

124491-39-pt. 3- -9

The CHAIRMAN. Well, the sum total is that in the minds of those who have directed and planned the growth of the Bell telephone system, the patenting of devices and manufacturing of devices which are invented and patented is a wholly subordinate thing to the larger concept of the work of the system.

Dr. JEWETT. Absolutely.

The CHAIRMAN. That is to say that the manufacturing of these devices for the return to be derived from them is not the main objective.

PATENTS RESPONSIBLE FOR DEVELOPMENT OF TELEPHONE

Dr. JEWETT. Absolutely not. And as long as you have mentioned patents now, Senator, I will go back and say that the Bell system is somewhat unique in another respect in connection with patenting. It is a type example of rather ancient age now. When was the telephone invented, '76? It is sixty-odd years ago. In its early stages it was completely dependent on patents, that was its lifeblood; it could not have come into being except for the protection which the patent laws of the United States gave. It was a toy; it was looked upon as a toy when it was invented. Some people had some vision and some courage. They were living in an era in which they were not afraid, and they had reason to believe that the patent system as it existed at that time was a stable thing, that it would persist for a number of years, and they risked their money on this thing. I doubt, with that some thing coming into the picture just at this moment, whether the same course could be pursued, but that is because there are a lot of other factors mixed up in it.

As time went on their complete dependence on patents existed for a good time, 10, 15, or 20 years, as is evidenced. Of course I have to get it from the lore of the tribe, I wasn't old enough to know about it, but it is perfectly clear from the record how vital was this patent business to this small industry which has now become vast. It grew from a little bit of a thing. All you have to do is to look at the records of suits and the scraps in the Patent Office to know how vital it was at that time. But as time went on and the business grew bigger, the same thing happened to us that happens to every great industry. While patents are still of very great importance to us, particularly important in stimulating the ideas which come to us from the outside relatively, they become less vital to the business than they were at the start, and in the case of an industry like ours which for quite natural reasons is not subject to competition in the ordinary sense, our interest in patents is largely an interest of freedom to use whatever is best in the business. The result of it is that I think I am safe in saying that not one-hundredth of 1 percent of the research and development work in the Bell Telephone Laboratories, vast as they are, is done with the idea of getting patents. Patents are a pure incident in the business. Our job up there is to solve problems, is to find new and better, more satisfactory ways of doing the kinds of things we are now doing, or doing other kinds of things.

The CHAIRMAN. If you were to adopt a phrase that is in more or less common use when economic systems are discussed would it be proper for me to say that within the Bell telephone system the theory is: patenting and production for use rather than for profit?

Dr. JEWETT. Yes, I think that is quite right.