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Northern Electric - A Brief History

The following information was extracted from
NORTEL's history web page:
(broken link when last checked).

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.

All original material on this web site is copyrighted ©1997 - ©2005 by David Massey.