AT&T maintained their monopoly only with tacit approval from the government. This approval rested heavily on Bell Labs’ output - both continuous improvements to AT&T’s offerings and open licenses from the lab.
The “government approved monopoly” was basically a self-preservation tactic that Theodore Vail employed to prevent AT&T from anti-trust lawsuits in the early 20th century. As noted in gertnerIdeaFactoryBell2012, a key to this was the perception that AT&T was working on behalf of Americans, and a big way that happened was from a stream of improvements coming out of Bell Labs.
Avoiding anti-trust was a strong incentive for AT&T to improve its services both in terms of quality and price, which they achieved through technological improvement at Bell Labs. It seems fairly straightforward to measure the price and quality of a telephone system. By contrast, many of the modern monopolies have much less legible products. While Google, Facebook, and Amazon are continuously changing and adding to their products, it’s much harder to say whether they are improving them. It’s not germane to this note, but it’s worth wondering whether software products price and quality could be measured better and what the result would be. Of course, beware Goodhart's Law.
The pressure from government waxed and waned. Arguably, some of the most valuable of Bell Labs’ outputs (modern electronics and computers) happened because of particularly intense pressure in the 50s. The counterfactuals are intriguing. What would have happened if Bell Labs hadn’t opened the licenses and gone out of their way to help other people understand and use transistors? Arguably transistors are one of the exemplars of There is a significant class of innovations that would create drastically less value for the world if their value had been captured by their creators. The work at Bell Labs that was most valuable to AT+T and the work that was most valuable to the world was fairly disjoint.
Bell Labs could only begin work on mobile phones once the FCC released the spectrum for it.
It’s easy to think of Bell Labs researchers as being totally unfettered but Bell Labs did not give researchers complete freedom. One of the boundaries on exploration was driven by concerns over regulation, as illustrated by the pressure on Shannon when it was hard to justify that his work was tied to communication.It’s hard to know exactly where a line is until you cross it. This incident is an important case study because it emphasizes that Bell Labs was still behooven to the rule that Innovation orgs need to be aligned with their money factory and Alignment requires existential threats, it’s just that the existential threats came from different places than for many modern organizations.
Regulation’s influence on Bell Labs’ output raises some questions about the relationship between regulation and technological development in general. My bias is to lean towards the view that “regulation bad.” See Regulations slow down technological advancement. However, I find it hard to argue that the world would be a better place without the regulatory pressure on AT&T. Would it have poured as much money into Bell Labs? I suspect not. Either it would have maintained its monopoly and kept more of the profits instead of plowing them back into research (which didn’t help it maintain monopoly in the absence of regulatory pressure) or competition would have forced AT&T to think on shorter timescales, leading to adverse incentives on Bell Labs’ outputs. Bell Labs is figure 1 in the argument that the relationship status between technological development and regulation is “it’s complicated.” One tentative thought is that the beneficial regulations on Bell Labs were for the most part focused on the company, rather than the technology.