Northern
Telecom, as it is known by today, marked its 100th anniversary in 1995. Since
its modest beginnings in the late 1800s, it has evolved from being a small
Canadian telephone equipment supplier to an architect of a world of networks.
This achievement is not surprising, however, when you consider its history of
anticipating change and taking full advantage of it. Here is a glimpse into the
past.
Northern Telecom
entered its second century in 1995. The company basically started by accident.
An accident of Canadian patent law.
Back in 1881, a
former New England sea captain named Charles Fleetford Sise, who had come to
Montréal in 1880 to create The Bell Telephone Company of Canada, was writing to
Theodore Vail, who was then-president of the National Bell Telephone Company of
Boston. Vail was also a major shareholder in the fledgling Canadian telephone
business, and would be best-remembered in the history books as the creator of
the nationwide American Telephone and Telegraph (AT&T) network.
Sise needed Vail's
help. He was worried because his domestic supply of telephone equipment had
vanished with the death from tuberculosis of James Cowherd, who operated the
world's first telephone manufacturing plant. Sise tried to find other Canadian
suppliers, but without success. If he couldn't find an alternative Canadian
supplier he would lose the Canadian patent rights. Had it not been for this law,
Sise may not have been so determined to start his own manufacturing plant.
"We should ...
be doing this work in our own shop, where we have one or two very good
workmen," he wrote to Vail. Within months, Sise had hired an experienced
foreman from Vail's Boston plant, a man named Charles W. Brown, and rented two
floors of a building in Montréal. While a separate company called Northern
Electric wouldn't actually exist for another thirteen years, it was conceived
with the arrival of Brown, the rental of those two floors, and the creation, in
1882, of the Manufacturing Branch of The Bell Telephone Company of Canada.
The Early Years
To really understand
how Northern Telecom got started, you have to go back to Scottish-born inventor
Alexander Graham Bell himself, who invented the telephone in 1874 at his
parent's home in Brantford, Ontario. Bell patented his new invention in the
United States in 1876, and in Canada in 1877, where 75 percent of the Canadian
telephone patent was assigned to his father, Melville.
Within two years,
Melville Bell had sold his share of the Canadian Bell patent to National Bell,
the predecessor of AT&T. And in 1880, The Bell Telephone Company of Canada
was formed. The Manufacturing Branch flourished and, in 1895, was incorporated
as a separate company, called Northern Electric and Manufacturing Company
Limited.
That's the true,
legal ancestor of today's Northern Telecom.
In 1899, The Bell
Telephone Company of Canada purchased a Montréal wire and cable factory which
later would be called the Imperial Wire & Cable Company Limited. In 1914,
the two companies amalgamated to form The Northern Electric Company Limited. It
was owned 44 percent by Western Electric, which was the manufacturing subsidiary
of AT&T Company of the United States, and the remainder by Bell of Canada.
For the first fifty
years of the company's existence, Northern Electric essentially manufactured
equipment based on designs and processes licensed from Western Electric. It made
products primarily for the use of the Bell Telephone Company of Canada, although
it did make some consumer electronics products, such as radios, television sets,
console radio-phonographs, hi-fi amplifiers, movie theater sound equipment, and
fire and police call boxes--even Hammond organs.
Birth of R&D
The Western Electric
involvement continued until the Consent Decree of 1956. Under the decree,
Western Electric terminated its patent and licensing relationship with Northern
Electric. Northern Electric began to achieve technical independence in 1957 by
creating its own research and development facilities in Belleville, and, in
1959, established Northern Electric Research and Development Laboratories in
Ottawa, Ontario. At the same time, Bell Canada began stepping up its own
development activities.
The sixties were an
era of self-examination. If Northern Electric was going to survive as a company,
it had to become leaner, more focused, and more innovative. In response to the
latter, Northern Electric and Bell Canada merged their R&D activities in
1971 to form BNR. This merger happened a critical time. Engineers were already
talking about the feasibility of electronic telephone switches. In the early
seventies, BNR would do more than talk. It began developing what it called the
"E-thing," an electronic switching system. By late 1972, Northern
Telecom had its first electronic switch on the market, the SG-1--also known as
PULSE--private branch exchange (PBX). Within three years, some 6,000 had been
sold.
But the real story
behind the "E-thing" was its evolution to an all-digital switch. That
first all-digital switch would be the SL-1 PBX. The SL-1 design was so
successful, it was logical to extend the new powerful digital technology to the
telephone central office. Thus, BNR developed the DMS-10 for small central
offices in 1977, followed two years later by the DMS-100 digital switch for
large central offices.
In a few bold
strokes, the company leapfrogged over its competition. The development of the
DMS-100 digital central office switch, combined with the breakup of AT&T and
the formation of the regional Bell holding companies in the United States in
1984, resulted in explosive growth through the rest of the 1980s.
Global Growth
The rapid growth in
the United States became a model for further expansion in the Caribbean, Europe,
and the Pacific Rim. The company quickly found itself a major supplier in the
Caribbean. In Europe, Northern Telecom gained an important foot-in-the-door with
products, such as the SL-1 fully digital PBX, and later, the DPN family of
digital data packet switching systems, which Northern Telecom successfully
marketed to governments and private banks around the world.
In Japan, the DMS-10
proved to be the decisive factor in Northern Telecom's ability to become the
first non-Japanese supplier to Nippon Telegraph and Telephone (NTT). And, a few
years later, it opened the doors for growth in the burgeoning markets of China
and Eastern Europe.
The changes marked
by Northern Telecom's response to globalization, new directions in the business,
and new organizational structures were symbolized at the beginning of 1995 with
a new logo: NORTEL.
The
Historical Relationships of
Northern Electric / Western Electric / Bell System / Bell Canada
as told by Claude
Sterling - ATCA member #1437
In the good old
days, Northern Electric in Canada was a wholly owned subsidiary* of Western
Electric. Western Electric in turn was the official manufacturing arm of the
Bell System. The Bell System was comprised of a number of <US> operating
companies such as Pacific Telephone, Nevada Bell, New Jersey Bell to name a few,
as well as AT&T Long Lines. Bell Canada was part of the system as was Bell
Labs that did R&D for both the US and Canada.
Sometime in the late 60's or early 70's the <US> Feds determined that the
Bell System must divest of the Canadian holdings. Bell Canada ceased to be part
of the US Bell System as did Northern Electric. BNR (known as Bell Northern
Research) was formed in Ottawa to carry on the work for Bell Canada that was
formerly done at Bell Labs.
Northern Electric almost mirrored the WE product line including telephone sets,
1317, 202, 302, 500's no name a few and the unusual "Uniphone" that
looked like a 302 turned sideways. It is my understanding that this set was
never used by Bell Canada but by the subsidiary holdings such as New Brunswick
Tel and Maritime Tel ant Tel. Thus the Canadian and US sets differ only by the
label in some cases.
Northern Electric furnished a lot of equipment to the independent companies in
the US that wanted WE equipment. Graybar carried the line for some time. NE also
made #5 crossbar which was marketed by Stromber Carlson in the US for the
Independent market. At one time, Las Vegas was 100% NE #5 Crossbar.
Another interesting sidelight. When Bell Canada had to separate from Bell Labs,
the Canadian folk had been doing a lot of work on digital switching. Someone at
Bell Labs made the decision that since everyone knows that voice communication
is analog, you Canadians can take your digital research with you.
Western Electric, per se, bit the dust in 1984. Northern Electric test marketed
in the US with the SG-1 "Pulse" electronic PBX. One small problem,
there already was a company in the US known as Northern Electric that made
appliances and other consumer good. Northern Electric restructured as Northern
Telecom and entered the US market with the SL-1 digital PBX in competition with
the WE Dimension which was Electronic but not fully digital. The SL-1 (Meridian)
is alive and well today.
Where are we today? Bell Canada, Northern Telecom (now Nortel Networks) and BNR
comprise the "Tri Corporate Structure" of Bell Canada enterprises.
Western Electric was absorbed into AT&T which subsequently spun off
manufacturing to Lucent. Hence today we have Nortel and Lucent which used to be
part of the same organization in fierce competition.
*This is not really accurate as pointed
out on the Nortel website. Here is
a
timeline from Nortel's website:
-
1880 - Bell Telephone Company of Canada
founded. In 1879, Melville Bell sells his 75 percent of the Canadian Bell patent
to National Bell, the predecessor of AT&T. And in 1880, Bell Telephone Company
of Canada is formed, owned 25 percent by National Bell, a relationship that
lasts nearly a century.
-
1885 - Establishment of Northern Electric and
Manufacturing Company.
-
1895 - A Dominion Charter granted to The
Northern Electric and Manufacturing Company, Limited, which took over the Bell
Factory. The initial share ownership of the company was based on authorized
capital stock of $50,000 divided into 500 shares of $100 each, with 465 shares
owned by The Bell Telephone Company of Canada.
-
1899 - A Quebec Charter granted to The Wire
and Cable Company Inc. Authorized capital stock $100,000, divided into 1,000
shares of $100 each, with 500 shares allotted to The Bell Telephone Company of
Canada.
-
1901 - Authorized stock capital for Wire and
Cable increased by supplementary letters patent to $1,000.000, with 400 shares
sold at par by Bell Telephone Company to Western Electric Company.
-
1906 - issue of capital stock values at
$200,000 (Canadian) sold by Northern Electric & Manufacturing Company to Western
Electric Company for $400,000.
-
1911 - The Wire and Cable Company is renamed,
under a Dominion Charter, as Imperial Wire and Cable Company, Limited;
additional block of Northern Electric and Manufacturing stock, valued at
$104,000 (Canadian), is sold to Western Electric Company, reducing Bell
Telephone Company holdings to 50 percent.
-
1913 - Northern Electric and Manufacturing
and Western Electric sign an agreement governing reciprocal purchases and
exchange of patents.
-
1914 - The Northern Electric Company
incorporated, consolidating Imperial Wire and Cable with Northern Electric and
Manufacturing. Share ownership: B.T.Co., 50 percent; WECo., 43.6 percent;
others, 6.4 percent. In 1929, share ownership: Bell ownership became 56.31
percent; WECo., 43.57 percent; others, .01 percent. In 1957, Bell ownership was
raised to 89.97 percent; WECo., 10.02 percent; others, .01 percent.
1949 - The percentage of holdings of the capital stock of NE is Bell Telephone
Company of Canada: 456,760 shares/56.39 percent; Western Electric Company:
353,160 shares/43.6 percent; others: 80 shares/ .01 percent.
-
1962 - Bell purchased remainder of Western's
interest in Northern and now owned 99.99 percent of Northern Electric.
-
1964 - Northern Electric became 100 percent
Bell-owned.
-
1971 - Northern Electric Laboratories became
Bell-Northern Research, jointly owned by Bell Canada and Northern Electric.
-
1973 - Northern Electric makes an initial
public offering of 2.6 million common shares from treasury; as a result, Bell's
shareholding in Northern Electric is now 90.1 percent of total outstanding
shares.
-
1974 - Bell's shares reduced to 89.9 percent.
-
1975 - Bell's shares reduced to 69.2 percent.
-
1978 - Bell's shares reduced to 61 percent.
-
1979 - Bell's shares reduced to 54.5 percent.
-
1983 - After establishment of BCE as the new
parent company of the corporation, BCE owned 53.4 percent of the
then-outstanding shares of Northern Telecom.
-
1998 - Following Nortel Networks' acquisition
of Bay Networks, BCE's ownership in Nortel Networks was diluted from around 51
percent to approximately 41 percent.
-
1998 - Nortel Networks' acquisition of all
the remaining common and preferred shares of Nortel Technology Limited (formerly
Bell-Northern Research Ltd.) from Bell Canada, increasing its ownership to 100
percent.
-
1999 - BCE ownership reduced to 39 percent.
-
2000 - BCE announced its intent to distribute
an approximately 37 percent ownership interest in Nortel Networks to its
shareholders, confirming Nortel Networks as a truly independent global Internet
powerhouse.
For additional Nortel history, click
HERE.
