i3 | April 03, 2019

How the Consumer Technology Industry Was Almost Never Born

Stewart Wolpin

What we now call the consumer technology industry was born November 30, 1920, when the first consumer electronics product, the two-piece RA-DA, the first commercially produced radio designed for the mass market, rolled off the Westinghouse assembly line in East Pittsburgh. After a two-year period of hectic technological, business and legislative/regulatory developments following the end of World War I, the Westinghouse RA-DA and the entire radio industry emerged, becoming the dominant consumer technology product for three decades. On the centennial of our industry, let’s take a look at the events of 1919-1920 that cleared the way for the future.

Owen D. Young was not easily intimidated. Colleagues and competitors knew the tall, serious yet personable pipe-smoking VP and general counsel of General Electric, the largest technology company in the world, for calmly and firmly dealing with a variety of powerful business executives and negotiating multi-million-dollar deals.

But even Young was intimidated when ramrod U.S. Naval officers Admiral William H.G. Bullard and Commodore Sanford C. Hooper, impressively decked out in their crisp double-breasted Navy blue dress uniforms adorned with military ribbons, marched into GE's midtown New York City headquarters on April 8, 1919.

Bullard and Hooper's mission: stop GE's impending sale of multiple Alexanderson alternators, the most powerful radio transmitter extant to American Marconi, the U.S. subsidiary to the early British telecom creators, the Marconi Company. The Alexanderson alternator, invented by GE engineer Ernst Alexanderson, was the only transmitter capable of trans-Atlantic wireless transmission, and the only viable alternative to the fragile and vulnerable transatlantic telegraph cable relied upon to maintain contact with Europe.

Negotiations between GE and Marconi had started in 1915 but stalled during World War I, during which the Navy essentially commandeered all domestic U.S. radio gear – commercial and amateur (see "The Day Radio Died"). Once the war ended, negotiations for the $45 to $60 million Alexanderson alternator sale to Marconi (in 2019 dollars) resumed.

Radio Control as National Security

Bullard, Hooper and especially Secretary of the Navy Josephus Daniels, considered government control of radio a matter of national security, even now that the war was over. Just weeks after the Armistice on November 11, 1918, Democrats introduced H.R. 13159, "Government Control of Radio Communication," which would have made permanent the complete control the Navy had assumed over U.S. radio during the war.

Continued post-war Naval control would have stifled radio innovation, which the Navy tacitly admitted, and would have kept the consumer technology industry from being born. Fortunately for the future, more business-centric House Republicans tabled the bill after taking office in January 1919 following their midterm election sweep.

Despite Congress' regulatory reticence, Bullard and Hooper were determined to keep radio out of what they saw as the unpredictable and uncontrollable hands of commercial and amateur interests, especially since the government was due to lift the wartime ban on amateur radio reception on April 15.

An even worse prospect than amateurs dabbling in radio was non-U.S. domination of the new technology. Britain’s Marconi Company was the world's biggest radio company. Owning or even just exclusively operating the Alexanderson alternators would essentially give the British company a worldwide radio monopoly. Bullard, Hooper and the Navy certainly didn't want the world's most powerful radio transmitter under the absolute control of a foreign power – even a friendly one.

Radio in 1919

Not that any of the parties understood what they were actually arguing about. In 1919, radio largely meant one thing: wireless telegraphy. According to early radio historian Thomas H. White, 99.9 percent of all pre-war radio traffic was Morse code.

What the Navy feared about amateur and commercial radio use was interference. Spark-based radiotelegraphy prevalent at the time was notoriously imprecise, and the Navy wanted to make sure its critical communications could not be eavesdropped or jammed, accidentally or on purpose. And it was concerned only with ship-to-shore transmissions; the Navy couldn't foresee development of inland radio, since wired telegraph and the telephone served these land-locked communication needs.

Largely beyond the knowledge of the Navy, however, were new vacuum tube-based continuous wave AM transmitters and more precise reception technologies, along with new vacuum tube-based amplified radio receivers, all of which enabled the transmission and reception of voice and music. But in April 1919, vacuum tube-powered voice and music transmissions were rare and experimental and didn't impact the Naval view of radio.

If the Navy, with all its radio expertise, couldn't see a future for radio beyond wireless telegraphy, GE’s Young admittedly hardly understood anything about the technology at all. But he was described in his Time Magazine Man of the Year profile a decade later as "prescient," and "obsessed with the idea that some day [sic] it may be possible to write a message on a pad at one's desk or bedside and have it instantaneously transmitted to the addressee anywhere on earth."

In April 1919, however, Young's immediate concern was less technological and more pure business economics – making sure GE profited from equipment in which the company had made a sizeable R&D investment.

Ultimately, as an American company, what was Young's and GE's priority: business or patriotism?

The Naval Solution

Ironically, the Navy provided GE the solution. As Young memorialized in an internal memo two months after their meeting, Bullard and Hubbard:

…suggested that the Navy Department would be sympathetic with the formation by the General [Electric] Company and other clearly American interests of an American-owned, worldwide, radio-operating company, which would be strong enough to deal with the Marconi Companies as an equal.

Create its own American customer for its wares? Now there was a novel business idea, and Young ran with it.

Over the next several months, Young herded, negotiated with, cajoled, and strong-armed the largest commercial radio patent owners of the time: the Navy, AT&T, Westinghouse, American Marconi and United Fruit – which operated a large fleet of ships around Latin America equipped with the latest wireless gear – into investing in an American radio company and into access to the Alexanderson alternator.

The result: the founding of the Radio Corporation of America, which would become commonly known as RCA, on October 17, 1919, with Young serving as the new entity's first CEO and president.

With all the major radio patents now collected in the new corporate entity, the commercial development of radio – and the founding of the consumer technology business – was not only possible, but inevitable.

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