arc of empire: the federal telegraph company, the u.s ......stand in the way of america’s...

Stephen B. Adams

Arc of Empire: The Federal TelegraphCompany, the U.S. Navy, and the Beginnings

of Silicon Valley

The early history of Silicon Valley is incomplete unless it isframed within the context of American foreign policy. TheFederal Telegraph Company, the region’s first major high-technology firm, received its first contract from the U.S. Navyin 1913. Its subsequent success relied not only on navy con-tracts but also on State Department support and access toBureau of Standards technology. The company’s contributionsto America’s military-industrial complex began a pattern thatwould fuel the region’s development and growth for morethan a half century.

During the Cold War, crucial resources for California’s high-technology firms came from what Stuart Leslie calls “the biggest

‘Angel’ of them all,” the federal government.1 Yet, well before WorldWar II the region that later became known as Silicon Valley hadalready entered America’s modern military-industrial complex on theground floor as a source of communications technology.2 Without

The author thanks the National Museum of American History’s Lemelson Center, the U.S.Navy History and Heritage Command, and the Salisbury University Foundation for financialsupport. Special thanks to Roxanne Nilan at History San Jose, as well as to MadeleineAdams, Bernard Finn, Mark Fruin, Eric Hintz, Kurt Jacobsen, Naomi Lamoreaux, DavidLeeson, Stephen Mihm, Cate Mills, Elliott Porter, William Rowe, Joel West, and three anony-mous reviewers of this article, for helpful comments and suggestions.

1 Stuart W. Leslie, “The Biggest ‘Angel’ of Them All: The Military and the Making of SiliconValley,” in Understanding Silicon Valley, ed. Martin Kenney (Stanford, 2000), 48–67.

2 Arthur L. Norberg, “The Origins of the Electronics Industry on the Pacific Coast,” Pro-ceedings of the IEEE 64, no. 9 (1976): 1314–22; Timothy J. Sturgeon, “How Silicon ValleyCame to Be,” in Understanding Silicon Valley, ed. Martin Kenney (Stanford, 2000), 15–47;and Christophe Lécuyer,Making Silicon Valley (Cambridge, Mass., 2007), 29, 129–67. Schol-ars’ emphasis on the early Cold War period in Silicon Valley’s evolution is reflected in theirtitles: Margaret P. O’Mara, Cities of Knowledge: Cold War Science and the Search for theNext Silicon Valley (Princeton, 2005); Rebecca S. Lowen, Creating the Cold War University:

Business History Review 91 (Summer 2017): 329–359. doi:10.1017/S0007680517000630© 2017 The President and Fellows of Harvard College. ISSN 0007-6805; 2044-768X (Web).

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reliable, large-scale demand, American wireless (radio) development atthe turn of the twentieth century might have remained in the hands ofamateur inventors and academics. The federal government providedsuch demand. This article traces the establishment of this relationship,which set a pattern that proved crucial in the region’s development asa center of high-tech innovation.

The region’s first major high-tech company, Federal Telegraph(founded in 1909), began in 1913 to provide wireless communicationsequipment for American naval vessels and for high-powered radio sta-tions at U.S. overseas possessions newly acquired in the wake of theSpanish-American War. From 1913 to 1919, the company sold nearly$3 million of equipment to the U.S. Navy.3 Federal Telegraph developeda valuable knowledge base, targeted expansion to South American andAsian markets, and for a time thrived by meeting the telecommunica-tions needs of America’s nascent overseas empire. Federal Telegraph’sdefense work began a pattern that for the next half century defined theregion that later became known as Silicon Valley. Long before consumersbegan to snap up digital calculators, video games, and personal comput-ers, significant demand for the region’s high-tech products came fromthe U.S. Armed Forces and, in time, NASA. These customers soughtcutting-edge technology in telecommunications (especially radio andradar), advanced instrumentation, and electrical components thatwould enhance systems capabilities as the United States built a militarycommensurate with its economic might.4

Crucially, government contracts bought the area’s early high-techcompanies time to stabilize. Indeed, when Federal Telegraph’s commer-cial business floundered in 1912, steady government work saved the firm.Scholars of entrepreneurship have found that about half of all start-upsfail during their first five years, but casualty rates drop considerablyduring subsequent years.5 Venture capital firms have played a key rolesince the 1960s in protecting new companies from the “liability of

The Transformation of Stanford (Berkeley, 1997); Stuart W. Leslie, The Cold War and Amer-ican Science: The Military-Industrial-Academic Complex at MIT and Stanford (New York,1993). See also John M. Findlay, Magic Lands: Western Cityscapes and American Cultureafter 1940 (Berkeley, 1992), 117–59; and Gray Brechin, Imperial San Francisco (Berkeley,1999).

3 List of contracts, SRM264A, series 37, box 189, folder 1, George Clark Collection, NationalMuseum of American History, Washington, D.C. (hereafter GCC).

4 Fareed Zakaria, FromWealth to Power (Princeton, 1998). By 1900, the United States hadsurpassed Great Britain as the world leader in GDP and manufacturing output. JeffreyW. Meiser, Power and Restraint: The Rise of the United States, 1898–1941 (Washington,D.C., 2015), xv.

5 Scott Shane, Illusions of Entrepreneurship: The Costly Myths that Entrepreneurs,Investors, and Policy Makers Live By (New Haven, 2010), 97–100.

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newness.”6 Access to resources during this vulnerable period, before suf-ficient revenue is generated, helps a fledgling company survive longenough to stand on its own. The federal government, as what MartinKenney terms “a price-insensitive lead customer,” provided the samesort of incubation to early start-ups like Federal Telegraph.7

Federal Telegraph Company’s development as a public-sector storyreflects larger forces in American technological history. By the beginningof the twentieth century, and accelerating with World War I, Americanmilitary interests drove not only technical innovation but also institu-tional relations. This emergence of a “military-industrial complex” wasspearheaded by the U.S. Navy.8

Federal Telegraph often appears in the growing literature on govern-mental influence on the development of the American telecommunica-tions industry.9 Similarly, studies of the distinctive technologicalactivity on the West Coast during the first half of the twentieth centuryshow small western firms (such as Federal Telegraph) competing witheastern giants. Some of these studies feature the start-up/spin-offcycle of university-business relations as a foundation for an active elec-tronics industry along the San Francisco Peninsula.10 Not until we tracethe inception of the region’s governmental relationships, however, canwe determine how Silicon Valley came to be.

This article takes an explicitly institutional approach, focusing onthe relationship between Federal Telegraph Company and the U.S.Navy and, to a lesser extent, the U.S. State Department.11 During a

6Arthur L. Stinchcombe, “Organizations and Social Structure,” inHandbook of Organiza-tions, ed. James March (Chicago, 1965), 153–93; Howard Aldrich and Ellen R. Auster, “EvenDwarfs Started Small: Liabilities of Age and Size and Their Strategic Implications,” Organiza-tional Behavior 8 (1986): 165–98.

7Martin Kenney, Introduction to Understanding Silicon Valley, ed. Martin Kenney(Stanford, 2000), 5.

8Merritt R. Smith, Introduction to Military Enterprise and Technological Change: Per-spectives on the American Experience, ed. Merritt R. Smith (Cambridge, Mass., 1985), 1–2;Thomas P. Hughes, American Genesis: A Century of Innovation and Technological Enthusi-asm (New York, 1989), 97–137; Carroll W. Pursell Jr., The Military-Industrial Complex(New York, 1972); Paul C. Koistinen, The Military-Industrial Complex: A Historical Perspec-tive (New York, 1980), 8–9.

9On Federal within a broader story of the navy’s importance in telecommunications devel-opments, see Hugh G. J. Aitken, The Continuous Wave (Princeton, 1985); Susan J. Douglas,Inventing American Broadcasting, 1899–1922 (Baltimore, 1987); Linwood Howeth,History of Communications-Electronics in the United States Navy (Washington, D.C.,1963); and Jonathan R. Winkler, Nexus: Strategic Communications and American Securityin World War I (Cambridge, Mass., 2008).

10 See Norberg, “Origins of the Electronics Industry”; Sturgeon, “How Silicon Valley Cameto Be”; and Lécuyer, Making Silicon Valley.

11 Henry Etzkowitz calls such university-industry-government relations a “triple helix.”Etzkowitz, The Triple Helix: University-Industry-Government Innovation in Action(London, 2008).

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period when the road to success was littered with wireless company casu-alties, Federal Telegraph lasted two decades in the San Francisco BayArea because it became an industrial extension of American foreignpolicy. In an industry where, as Richard John states, “technology andpolitics have been inextricably linked,” the company exploited opportu-nities provided by American geopolitics while its well-being became agoal of navy department officials as well as company employees andinvestors.12 Examining the opportunities and challenges faced by thisparticular company helps us understand central aspects of the region’ssubsequent high-tech path—not only how distinctive features of post-1945 Silicon Valley developed, but also how the region has changedsince its first half century. Silicon Valley today symbolizes the confluenceof various forms of change, from disruptive technology to creativedestruction, and for a time, some corners of the Valley embraced the1960s counterculture.13 Yet during Silicon Valley’s first fifty years, signif-icant opportunities were shaped in Washington, D.C., and the region’senterprise embodied policies of the national establishment.

The Rise of Wireless—and American Empire

The United States’ initial overseas expansion coincided with the firstAmerican wireless age, when imperial ambition fueled technologicaladvance. America’s brief 1898 conflict with Spain ended with its firstacquisition of lands beyond North America: the Philippines, Guam,and Puerto Rico. Soon after, the United States acquired the easternislands of Samoa, annexed Hawaii and the Canal Zone, and establishedCuba as a protectorate.14

Aftermaking these acquisitions, the American government sought toexpand its telecommunications capabilities. Prompt exchange of infor-mation had immense military and economic value. At the time, thefastest transoceanic form of communication was via undersea cable,and information could be selectively delayed, distorted, or denied bythe cable’s owner. Great Britain owned about two-thirds of the world’scable system; it was, as Hugh Aitken notes, “not a neutral carrier.”15

American vulnerability was summed up by the American statesmanElihu Root: “No message which might be of value either to the British

12Richard R. John, Network Nation: Inventing American Telecommunications(Cambridge, Mass., 2010), 6.

13 John Markoff, What the Dormouse Said: How the Sixties Counterculture Shaped thePersonal Computer Industry (New York, 2005); Fred Turner, From Counterculture to Cyber-culture: Stuart Brand, the Whole Earth Network, and the Rise of Digital Utopianism(Chicago, 2008).

14 Zakaria, Wealth to Power, 77.15 Aitken, Continuous Wave, 258.




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foreign office or to the British Board of Trade is assured of secrecy if atany point in its journey it passed over a British line.”16 By 1900, theUnited States had fought two wars with Great Britain and they hadnearly come to blows three other times as the British attempted tostand in the way of America’s “manifest destiny” in Texas, California,and Oregon.17

Guglielmo Marconi’s December 1901 transatlantic wireless trans-mission signaled the development of a technological alternative. Unfor-tunately, Marconi’s Wireless Telegraph Company, established in 1897,was headquartered in London.18 Instead of threatening British globaltelecommunications hegemony, this new technology appeared to rein-force it. “Never before or since in history,” writes Daniel Headrick,“has communications power been so concentrated and so effective.”19

If information was power, the United States was still no match forGreat Britain.

The initial attraction of wireless technology was for maritime use.Communicating with ships at sea provided flexibility that fixed point-to-point undersea cable systems lacked.20 As early as 1904, U.S. Navyleaders had expressed the desire for a chain of wireless stations toprovide fleet-wide global communications, specifically including theCanal Zone, Samoa, Hawaii, Guam, and the Philippines.21 The navy’sgoals for the chain were manifold: “control of the fleet, for the handlingof Governmental business with important points across the seas, to coverpossible breakdowns of cables in time of peace and cutting of same intimes of war.”22

Government contracts represented the primary early source ofrevenue for wireless firms. By 1899, Marconi Wireless TelegraphCompany customers included the British Admiralty and the Italiannavy.23 During the first eight years of German firm Telefunken, a 1903joint venture of Slaby Arco and Braun-Siemens-Halske, more than

16 Leslie B. Tribolet, International Aspects of Electrical Communications in the PacificArea (Baltimore, 1929), 5. Between 1899 and 1915, Root had served as secretary of war, secre-tary of state, and U.S. senator from New York.

17 Edward P. Crapol, America for Americans: Economic Nationalism and Anglophobia inthe late Nineteenth Century (Westport, Conn., 1973), 70; John A. Britton, Cables, Crises, andthe Press: The Geopolitics of the New International Information System in the Americas,1866–1903 (Albuquerque, 2013), 153–71.

18Gleason L. Archer, A History of Radio to 1926 (New York, 1938), 57–58.19Daniel R. Headrick, Invisible Weapon: Telecommunications and International Politics,

1851–1945 (New York, 1991), 169.20Douglas, Inventing American Broadcasting, 102.21 George H. Clark, “Radio in War and Peace,” p. 215, series 100, box 289, folder 2, GCC;

Howeth, History of Communications, 221.22 “Memorandum concerning High Powered Wireless Telegraph Stations,” n.d., Perham

History Files, 2033-33-1554, History San Jose (hereafter HSJ).23Howeth, History of Communications, 22–23, 34, 40; Headrick, Invisible Weapon, 118.

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70 percent of its revenue came from the German navy.24 In the UnitedStates, Professor Reginald Fessenden, as an employee of the U.S.Weather Bureau, became in 1900 the first to transmit and receive wire-less voice messages. Two years later, Fessenden and two investors estab-lished the National Electric Signaling Company (NESCO), whichreceived nearly all of its business from the U.S. Navy.25 Customers forDanish inventor Valdemar Poulsen’s wireless system were also fromthe military.26 Ultimately, Poulsen’s “arc” system would replaceMarconi’s “spark” system as the long-distance wireless leader,providing the foundation for Federal Telegraph’s military wireless busi-ness model.

Inception of the Federal Telegraph Company

Federal Telegraph Company owed its 1909 beginnings to regionaltechnological enthusiasm (including Stanford University faculty andalumni), the death of an inventive prodigy, and an act of internationaltechnology transfer.27 Marconi’s demonstrations had inspired manyWest Coast youths to take up wireless as an avocation. The area wassoon awash with inventors exploring wireless ship-to-shore and air-to-land transmissions. None received more contemporary publicity thanSan Francisco’s Francis J. McCarty. Co-founder of the McCarty WirelessTelegraph Company (1905), McCarty was a gifted inventor as well aspromoter, embodying a contemporary American archetype: the heroic“boy inventor.”28 After the eighteen-year old McCarty’s tragic death in1906, Oakland banker Tyler Henshaw, McCarty’s principal financialbacker, contacted Professor Harris Ryan, chair of Stanford’s electrical

24Heidi J. S. Tworek, “Political and Economic News in the Age ofMultinationals,”BusinessHistory Review 89, no. 3 (2015): 455.

25George H. Clark, “John Firth, Radio Gentleman” (1941), p. 3, series 4, box 12, folder 26,GCC; Clark, “Radio in War and Peace,” 54, GCC; Howeth, History of Communications, 142.

26 “Report by Mr. H. P. Veeder,” in Report on Poulsen Wireless Corporation and FederalTelegraph Company, June 1, 1914, p. 2, 2003–37–9, Federal Telegraph Company Collection,HSJ.

27 Informative works on the Federal Telegraph Company include F. J. Mann, “Federal Tele-phone and Radio Corporation, A Historical Review: 1909–1946,” Electrical Communications23 (Dec. 1946): 377–405; Thorn L. Mayes,Wireless Communication in the United States: TheEarly Development of Early Radio Operating Companies (East Greenwich, R.I., 1989); andHarry W. Kirwan, “Federal Telegraph Company: A Testing of the Open Door,” Pacific Histor-ical Review 22, no. 3 (1953): 271–86. See also Jane Morgan, Electronics in theWest: The FirstFifty Years (Palo Alto, Calif., 1967). Relevant primary sources regarding Federal can be foundat the Bancroft Library, University of California, Berkeley; History San Jose; the Library ofCongress; the National Archives; the Smithsonian’s National Museum of American History;and the Stanford University Archives.

28San Francisco Chronicle, 3 Sept. 1905. See also “The McCarty Wireless Telephone,”San Francisco Chronicle, 3 Apr., 5 Apr., and 7 Apr. 1950; Douglas, Inventing American Broad-casting, 27, 190–93.




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engineering department, in search of someone to continue McCarty’swork. Ryan referred Henshaw to one of his recent graduates thenserving as a lecturer, Cyril F. Elwell, setting in motion events thatwould bring large-scale electronics manufacturing to the San FranciscoPeninsula.29

In 1908, Elwell began wireless experiments in a Stanford engineer-ing laboratory attic (the same space William Hewlett would use forexperiments in the 1930s before joining David Packard in a Palo Altogarage).30 He soon abandoned McCarty’s spark-based system anddecided to start his own company, forgoing Henshaw’s support.31

Elwell was enticed by the work of Poulsen, the Dane, whose arc transmit-ter proved quieter and more efficient than the spark system used byMarconi, McCarty, and others.32 After visiting Poulsen in 1909, a tripfinanced in part by Stanford friends, Elwell agreed to pay $450,000for rights to use Poulsen’s system in the United States and its posses-sions.33 Elwell tried to raise the funds among New York financiers, butthey had seen too many wireless company frauds in the previousdecade.34 Poulsen agreed to finance Elwell’s enterprise. With anominal down payment of $1,000, Elwell agreed to pay the rest overtime.35

Elwell established the Poulsen Wireless Telephone & TelegraphCompany (soon after renamed the Federal Telegraph Company) inSan Francisco, with experimental and, later, manufacturing operationsforty miles to the south, in Palo Alto (Stanford University’s collegetown).36 Just as Stanford faculty had assisted the long-distance electricalpower industry since the 1890s, C. D. Marx and C. B. Wing (civil engi-neering) and Ryan (electrical engineering) advised the new company.Several other professors made early investments in the firm—as didStanford’s president, David Starr Jordan—and a number of alumni

29Elwell received bachelor’s (1907) and master’s (1908) degrees from Stanford. IanL. Sanders, Cyril Frank Elwell: Pioneer of American and European Wireless Communica-tions, Talking Pictures and founder of C.F. Elwell Limited, 1921–1925 (Morgan Hill, Calif.,2013). On early electronics interests in the area, see Morgan, Electronics in the West, 7–43.

30 Sanders, Cyril Frank Elwell, 10.31 C. F. Elwell, “Pioneer Work in Radio Telephony and Telegraphy,” pp. 1–4, SRM 4 1568,

series 4, box 11, folder “Elwell, C. F.,” GCC.32Kurt Jacobsen, “Wasted Opportunities? The Great Northern Telegraph Company and

the Wireless Challenge,” Business History 52, no. 2 (2010): 235.33 The contract gave Elwell rights to seven Poulsen patents as well as patents “to be issued.”

Fuller to Veeder, 28 Sept. 1915, Series 4, box 17, folder “Poulsen, Valdemar,” CWC4 2299A,GCC.

34Howeth, History of Communications, 133.35 Aitken, Continuous Wave, 109. Elwell also paid six thousand dollars for two sets of

apparatus to be used in California demonstrations. Elwell, “Pioneer Work,” 5.36 Veeder, Report on Poulsen Wireless, 6, Federal Telegraph Company Collection, HSJ.

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initially sat on its board of directors.37 From the beginning, the firm’sworkforce included numerous young Stanford engineering graduates.38

In 1910, Elwell met Stanford alumnus Beach Thompson, who had ledinvestment groups in California’s hydroelectric power industry.39

Thompson bought out Elwell, replacing him as company presidentwhile Elwell assumed the role of chief engineer.40 In telecommunica-tions, as in railroads and electrical power, the American private-enterprise model involved not only know-how but also know-who:relationships with government officials as well as investors.41 Thompsonhad access to sources of financing and experience with the public sector.

Under Thompson, Federal Telegraph’s business model changedfrom transmitting voice wirelessly to challenging existing Morse code–based cable telecommunications networks, such as by offering lowerper-word telegraph rates than those of Western Union’s wirednetwork. The system’s first six months of operation, from June toDecember 1911, brought total revenue of less than four thousanddollars.42 The ever-optimistic Thompson promised, “Give us time andwe will grow up.”43 In January 1912, Thompson negotiated a deal tohandle transmissions of Publishers Press Association, a news agencythat provided many newspapers with stories beyond their respectiveregions. This one customer was expected to make Federal Telegraph’sfirst stations profitable.44

The company’s prototype network, which connected cities along thePacific Coast from San Diego to the Pacific Northwest and, with an eye toPacific traffic, a notable Hawaiian station, gave the new management

37 James Williams, Energy and the Making of Modern California (Akron, 1997), 193–94;Fuller to Clark, 8 Apr. 1940, SRM37 106, series 37, box 188, folder 1, GCC. Jordan invested fivehundred dollars. Elwell, “Autobiography,” pp. 43–44, 2003–37–36, Federal TelegraphCompany Collection, HSJ.

38HaroldM. Shafer, “Stanford in Radio,” in Stanford on the Job in Electrical Engineering:A Report on the Activities of the Staff and Graduates of Department of Electrical Engineering(Stanford, 1941), 1–2, 16, HSJ.

39 “Beach Thompson,” Notables of the West, vol. 1 (New York, 1913), 867; “PromoterThompson Passes Out; Well-Known San Franciscan Dies Suddenly While in New York,”San Francisco Bulletin, 30 Oct. 1914.

40 “Local Men in Wireless Company,” San Francisco Call, 21 Dec. 1910, 1–2; “WirelessWizard to Work Wonders,” Hawaiian Gazette, 30 Dec. 1910, 3; “Circular Issued in 1911 byPoulsen Wireless Corporation and Federal Telegraph Company,” 15 Feb. 1911, Federal Tele-graph Company Collection, HSJ.

41 Thomas P. Hughes, Networks of Power (Baltimore, 1983); John, Network Nation;Richard White, Railroaded (New York, 2011).

42 Veeder, Report on Poulsen Wireless, 14, Federal Telegraph Company Collection, HSJ.43 Thompson to Veeder, 13 Dec. 1911, MSS 2009/145, box 1, folder “Federal Telegraph

Company,” Bancroft Library, University of California, Berkeley (hereafter BL).44 Francis P. Farquhar, “Federal Telegraph Company, Poulsen Wireless Corporation—

History—1909–1912,” 15 Nov. 1956, box 3, folder 48, Federal Telegraph Company Collection,HSJ.




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false optimism about the company’s ability to scale up the networkinland. After expanding to El Paso, Fort Worth, and Kansas City, thecompany experienced disastrous Midwest thunderstorms in 1912; theassociated static caused inland customers to experience dropped con-nections. Federal had closed all but one of its stations east of thePacific Coast by the end of 1913.45 Like many American start-ups, thecompany faced the possibility of falling by the wayside.46

Becoming a Government Contractor

Federal Telegraph’s salvation came from Washington, D.C. InAugust 1912, Congress appropriated one million dollars to establish achain of stations, as first envisioned by the U.S. Navy nearly a decadeearlier, and these stations required powerful transmission equipment.47

In September, Elwell met with naval officials in Washington to discussFederal Telegraph’s long-distance overseas transmission capabilities.Following the meeting, Rear Adm. Hutchinson I. Cone, commander ofthe Bureau of Steam Engineering (overseer of the navy’s radio capabili-ties), granted Federal Telegraph permission to conduct a demonstrationat the new naval station in Arlington, Virginia.48 Cone was skeptical,however, and prohibited Federal Telegraph employees from putting“any holes or screws in the floors, walls, or ceilings of the station.”49

The December 1912 demonstration of Federal Telegraph equipmentinvolved an exchange of messages from Arlington to the U.S. battleshipArkansas as it traveled to the Canal Zone and back. Additional tests inearly 1913 involved transmission with the U.S. cruiser Salem during itstrip to and from Gibraltar, as well as messages with Federal Telegraph’sstation in Honolulu, more than 4,500miles away—a record transmissiondistance.50 A subsequent report by George H. Clark, the navy’s first civil-ian “Expert Radio Aide,” who was on board the Salem, confirmed thatFederal Telegraph’s arc was just what the navy sought.51 With Clark’sendorsement, Elwell promised Lt. Cdr. A. J. Hepburn, chief of the

45Aitken, Continuous Wave, 132–34; “Leonard Fuller—For Defendant—Direct,” 352,BANC MSS 79/91, folder 32, “De Forest-Armstrong Patent Litigation,” BL.

46Howeth, History of Communications, 48–49, 132–50.47 Ibid., 221.48 Cone to Thompson, 25 Sept. 1912, 2009/145, box 1, folder “Federal Telegraph Company

1911–1912,” BL.49Mann, “Federal Telephone and Radio,” 392; Elwell, “Autobiography,” 63.50 Veeder, Report on Poulsen Wireless, 11, Federal Telegraph Company Collection, HSJ;

Mann, “Federal Telephone and Radio,” 393; Cyril F. Elwell, “The Poulsen Arc Generator”(1923), 24, CWC 37-392A, series 37, box 189, folder 3, GCC.

51 Aitken, Continuous Wave, 93.

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Radio Division of the Bureau of Steam Engineering, that Federal Tele-graph would provide what the navy needed.52

The result of an April 1913 meeting between Thompson, navysecretary Josephus Daniels, and assistant navy secretary FranklinD. Roosevelt was a contract written in such a way that only Federal Tele-graph Company could meet the navy’s requirement to supply a 100-kilowatt arc for the Canal Zone station.53 Commander Hepburn laterrecalled that “we advertised for the bids to be submitted within theleast time the law allowed.”54 The sole-source contract was intended topreclude a bid from the Marconi Wireless Company of America,Federal Telegraph’s most formidable competitor. Established in 1899,American Marconi had exclusive American rights to Marconi’s patentsand benefited from access to the resources of the British MarconiCompany (a partial owner). Management experience was anotherasset: general manager E. J. Nally had decades of telecommunicationsexperience, while company president JohnW. Griggs, a former governorof New Jersey and U.S. attorney general, was a special resource in a liti-gious industry dependent on ownership of, and access to, intellectualproperty. American Marconi was on its way to earning more than fivetimes Federal Telegraph’s level of revenue in 1913.55

Setbacks and failures among other wireless firms left AmericanMarconi and Federal Telegraph as the navy’s two most reliable contrac-tors.56 For the next five years, the fortunes of both companies wereshaped by policies of the secretary of the navy and actions of his staff.By June 1913, the navy’s strong preference for dealing with Americanfirms combined with what navy sub-inspector Guy Hill called the arc’stechnical superiority “from amilitary point of view” to give Federal Tele-graph Company (a company with just over eighty thousand dollars oftotal revenues since its 1909 inception) a fifty-thousand-dollar contract

52Howeth, History of Communications, 183–84.53 Thompson to Veeder, 18 Apr. 1913, 2003-37-6, Federal Telegraph Company Collection,

HSJ.54Howeth, History of Communications, 184.55 AmericanMarconi was ten years older (1899 versus 1909) and had ten times the assets of

Federal in 1917. Wireless was still a tiny niche of the electrical industry—American Marconiwas barely one-tenth the size of Western Electric, America’s third-largest electrical firm(behind General Electric and Westinghouse). Marconi Wireless Telegraph Company ofAmerica, Report of the Directors and Statement of Accounts for the Year Ending 31st Decem-ber 1913 and Report . . . for the Year Ending 31st December 1917, series 5, box 104, folder 1,GCC; Veeder, Report on Poulsen Wireless, 16, Federal Telegraph Company Collection, HSJ;Walker’s Manual of Western Corporations (San Francisco, 1918), 236; and AlfredD. Chandler Jr., The Visible Hand: The Managerial Revolution in American Business (Cam-bridge, Mass., 1977), 510.

56Douglas, Inventing American Broadcasting, 183–85.




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from the wireless industry’s biggest customer.57 Within a year, in addi-tion to the Canal Zone work, Federal Telegraph received contracts tosupply smaller apparatus for naval stations in Massachusetts, Texas,and Cuba.58

Securing that first contract was one thing; meeting its requirementswas another. When Thompson agreed to supply a 100-kilowatt arc forthe Canal Zone station, the company’s engineers had yet to figure outhow to do so. The task of keeping the company’s technical promiseswent to recent Cornell graduate Leonard Fuller (see Figure 1). After aconfrontation with Thompson, Elwell had left the company in spring1913; young Fuller, who became an expert on ever-larger arc transmit-ters, replaced him as chief engineer. During the next six years, Fullertook out twenty-three patents related to arc transmitters and equipmentand completed a doctorate at Stanford (the navy classified his thesis).59

As the navy pushed for greater transmission distance, the maximumpower of Federal Telegraph’s arc sets increased by a factor of twohundred in the decade following its 1909 founding.60

Completed in 1914 and commissioned in 1915, the 100-kilowatt arcfor the Canal Zone (Darien) allowed “continuous reliable communica-tions” between Arlington and Darien, a distance of 1,791 nauticalmiles.61 Navy secretary Daniels’s 1914 annual report highlights theCanal Zone station and singles out “the co-operation of the progressiveAmerican manufacturers of the apparatus”—that is, Federal TelegraphCompany and its arc.62

Thanks to Fuller and Federal Telegraph, the American chain of high-powered radio stations became the world’s best. Meanwhile, FederalTelegraph’s directors saw the manufacture of devices as a means toestablish its own far-flung wireless network. Thompson hoped torebuild the continental commercial wireless system that had falteredin 1912 due to static interference. He began negotiating with government

57Hill to Bureau of Engineering, 28 Feb. 1913, series 37, box 188, folder 3, GCC; Fuller,interview by Norberg, 1973–75, 56, BANC MSS 77/105, BL; “Abstract of contract 1948-B.G. H. Clark,” 2Oct. 1939, series 37, box 189, folder 1, GCC; Veeder,Report on PoulsenWireless,16, Federal Telegraph Company Collection, HSJ.

58 Veeder, Report on Poulsen Wireless, 12, Federal Telegraph Company Collection, HSJ.59Mayes, Wireless Communication, 150; Fuller, interview by Villard, 1973–75, 20, BANC

MSS 77/105, vol. 2, folder 1, BL.60 Stanford C. Hooper, “Transcript of Research for Naval History,” 805–906, 3 May 1954,

box 25, 72R176, Stanford C. Hooper Papers, Library of Congress, Washington, D.C. (hereafterSCH); Fuller to Clark, 8 Apr. 1940, series 37, box 188, folder 1, GCC; Veeder,Report on PoulsenWireless, 3, Federal Telegraph Company Collection, HSJ.

61 Chronology (document #CWC37-366A), series 37, box 189, folder 3, GCC; Howeth,History of Communications, 222; Aitken, Continuous Wave, 94.

62Annual Report of the Secretary of the Navy, 1 Dec. 1914, container 496 (reel 24), subjectfiles, 1829–1947, “Navy, 1829–1947,” Josephus Daniels Papers, Library of Congress, Washing-ton, D.C. (hereafter JD).

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officials from Brazil, Argentina, Chile, and Peru regarding commercialsystems that would connect South America with the United States.Thompson also began negotiations with officials from the governmentsof Japan and China regarding construction of stations in the Far East.

A June 1914 report to Federal Telegraph’s board of directors demon-strates the centrality of these commercial systems in Thompson’s plans.The manufacture of equipment for the U.S. government is discussed ononly four pages, of more than one hundred; there is no mention that theU.S. government could block Federal Telegraph’s commercial goals.Even after its public-sector manufacturing work had become far morelucrative than its private-sector operations, the company hesitated todefine itself as a manufacturer and government contractor rather thanas a commercial telecommunications operating firm.63 As the company’smanagement vacillated, the navy became both its greatest source ofrevenue and the biggest barrier to its global wireless commercial ambi-tions. With the onset of World War I, Federal Telegraph quicklylearned that the navy giveth and the navy taketh away.

Figure 1. Federal Telegraph Company’s engineering staff (1917) standing in front of a 500-kilowatt arc. Chief engineer Leonard Fuller is on the left. (Source: Perham Collection ofEarly Electronics, History San Jose, San Jose, Calif.)

63 Veeder, Report on Poulsen Wireless, 14–20, Federal Telegraph Company Collection,HSJ.




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The Lead Customer

As war engulfed Europe in August 1914, the U.S. governmentworried that Germany and Great Britain, each with a wireless presencein the United States and South America, would expand their WesternHemisphere presence.64 The British were first to act, cutting a Germantransatlantic cable and censoring transatlantic messages carried ontheir cables. The result was an increase in the transit time of round-trip messages between New York and London from forty minutes toseven hours.65 These actions, and their impact on American commerceand diplomacy, reinforced the navy’s suspicions of the British MarconiCompany and its American offspring. During World War I, the navyrewarded the Federal Telegraph Company (with its American ownership,management, and engineering talent) while penalizing AmericanMarconi for its British connections. Meanwhile, the navy became apotential competitor for both firms.

When the United States entered the war in April 1917, the U.S. gov-ernment took an unprecedented step: government ownership of rail-roads, telephone, and radio.66 Aside from the U.S. Post Office, thefederal government had hitherto hesitated to rely on state-owned enter-prise. For example, unlike other major nations, the U.S. retained a pri-vately owned telephone system.67 Nevertheless, Progressive politicalmomentum advocating public ownership of utilities had preceded Amer-ican entry into the war. Woodrow Wilson’s administration (1913–1921)stood out for its comfort with the concept of federal governmentownership.68

Within the Wilson administration, two leading figures stronglyadvocated for government ownership: postmaster general AlbertS. Burleson, who sought government control of “electrical means of com-munication” and led the charge for “postalization” of the telephonesystem, and navy secretary Daniels, who argued for government owner-ship of wireless (later known as “radio”).69 Daniels made a national

64 James Schwoch, The American Radio Industry and Its Latin American Activities,1900–1939 (Urbana, Ill., 1990), 33, 45.

65 Ibid., 36.66Woodrow Wilson, “Executive Order 2585”, 6 Apr. 1917, box 3, folder 1, SCH; Josephus

Daniels, The Wilson Era: Years of War and After, 1917–1923 (Chapel Hill, 1946), 105.67 Louis Galambos, “State-Owned Enterprise: The U.S. Experience,” in The Rise and Fall of

State-Owned Enterprise in the Western World, ed. Pier A. Toninelli (New York, 2000), 274–75; Michael A. Janson and Christopher S. Yoo, “The Wires Go to War: The U.S. Experimentwith Government Ownership of the Telephone System during World War I,” Faculty Scholar-ship, paper no. 467 (Philadelphia, 2013), 995–96.

68 John, Network Nation, 363, 371.69 Ibid., 356, 365, 367. Burleson and Daniels were two of only three cabinet members to

serve throughout the Wilson administration.

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security argument: transmissions from private radio stations mightinterfere with military communications during a national emergency.70

Daniels’s opinions on wireless policy mattered beyond the purviewof his office. The navy was the federal government’s leading buyer ofwireless equipment and was more knowledgeable about the technologythan other branches of government. President Wilson supportedDaniels regarding government ownership of radio. As a result, StateDepartment policy was, notes Jonathan Winkler, “largely ad hoc, reac-tive, and dependent upon the navy’s initiative.”71

Daniels’s commitment to government ownership already hadcrossed paths with Federal Telegraph Company’s strategic plans in thePacific. Federal Telegraph’s transpacific network was expected to cost$1.6 million, but could possibly yield more than $4 million of annualearnings (after operating expenses) if run at 20 percent of capacity.72

A Manila station was crucial to the system’s viability. In spring 1914, ayear after American Marconi had proposed building a commercialstation in the Philippines, Federal Telegraph president Beach Thompsonrequested permission to build commercial stations in Guam (controlledby the U.S. Navy) and Manila (under U.S. Army control).73

Momentum halted with Thompson’s sudden death in October,however.74 Leadership of the company fell to his brother-in-lawHoward P. Veeder, who had worked with Thompson on hydroelectricpower projects in Northern California before becoming Federal Tele-graph’s vice president and secretary-treasurer in 1910.75 Veeder waitedmore than six months to follow up with Daniels regarding the Manilastation.76 Daniels subsequently convinced army secretary Lindley Garri-son to deny Veeder’s proposal.77 Federal Telegraph’s transpacific com-mercial network tottered.

The U.S. Navy was more concerned about South America. Echoing alongstanding concern about, and proprietary feeling for, its hemisphericneighbors, navy officials endorsed a “Monroe Doctrine” for radio com-munications policy in the region.78 In August 1914, two weeks after theoutbreak of war in Europe and two days before the opening of the

70Winkler, Nexus, 67.71 Ibid., 78, 86.72 Veeder, Report on Poulsen Wireless, 37, Federal Telegraph Company Collection, HSJ.73 Thompson to Sec. Navy, 18 Apr. 1914, RG 38, 248 (9,196)–249 (19,767), box 559,

National Archives, Washington, D.C. (hereafter NA).74 “Alva Beach Thompson,” Michigan Alumnus, Jan. 1915, 210–11.75 “Local Men in Wireless Company,” San Francisco Call, 21 Dec. 1910, 1–2.76 Veeder to Sec. Navy, 7 May 1915, RG 38, 248 (9,196)–249 (19,767), box 559, NA.77Daniels to Sec. War, 5 June 1915, RG 38, 248 (9,196)–249 (19,767), box 559, NA; Wright

to Veeder, 12 May 1916, RG 38, 248 (9,196)–249 (19,767), box 559, NA.78Hooper to Todd, 30 July 1917, 2, RG 38, Director of Naval Communications, Office files

of Captain D. W. Todd, box 2 (1916–1919), G–Mc (1916–1917), NA.




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Panama Canal, Panama’s president granted control of American wirelessstations in the country to the U.S. government.79 Equally concernedabout Central and South American stations financed and staffed byEuropeans, Daniels wrote in June 1915 to the new secretary of stateRobert Lansing, promoting the idea of government control for all sta-tions within the U.S. “sphere of influence.”80

If American regional telecommunications hegemony could not beachieved through government control, American corporate activityrepresented an attractive alternative. Federal Telegraph entered theLatin American commercial radio sweepstakes with a proposed $1.2million network expected to return more than $2 million annuallyif operated at 20 percent capacity.81 In September 1915, Federal Tele-graph won a concession from Argentina to build a station in BuenosAires—an important toehold for a South American network.82 In aletter to Secretary Lansing, Daniels derided the Marconi WirelessTelegraph Co. of America as not as American as it appeared. IfAmerican Marconi obtained South American radio station conces-sions, he wrote, “the apparatus used would be of foreign manufactureand under foreign patents and installed by foreign personnel, andfinally operated in the interests of foreign capital.” His departmentconcluded that Federal Telegraph deserved preference.83

Throughout 1915 and 1916, the Federal Telegraph Company wasthe vessel of U.S. policy in the region. The State Department deferredto the navy’s preferences. U.S. diplomats in five South Americancountries helped Chauncey Eldridge, who headed the Federal HoldingsCompany. Prodded by the United States, Brazil’s foreign ministerblocked American Marconi’s concession in favor of Federal Telegraph.84

In South America, U.S. telecommunications influence mattered, and theinfluence of the navy department mattered most.

The navy’s most knowledgeable figure regarding wireless technologywas Lt. Cdr. Stanford C. Hooper, the navy’s primary contact with poten-tial radio contractors. In April 1915, Hooper became head of the Bureauof Steam Engineering’s Radio Division, and he held that position (or wasdirector of naval communications) for three stints ending in 1934.Hooper developed the world’s foremost global communications system

79Bryan to Daniels, 17 Aug. 1914, RG 38, 248 (9,196)–249 (19,767), box 559, NA.80Daniels to Secretary of State, 16 June 1915, RG 38, 248 (9,196)–249 (19,767), box 559,

NA; Ray S. Baker, Woodrow Wilson Life and Letters: Neutrality, 1914–1915 (New York,1968), 357.

81Report on Poulsen Wireless, 47, Federal Telegraph Company Collection, HSJ.82Winkler, Nexus, 93.83Daniels to Secretary of State, 18 Nov. 1915, RG 38, Division of Naval Communication,

Confidential Correspondence, 1917–1926, box 17, folder “Pan American Wireless,” NA.84Winkler, Nexus, 93; Schwoch, American Radio Industry, 37.

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connecting naval bases with one another and with vessels of the fleet. Hisstewardship of navy radio and promotion of those capabilities led him tobe dubbed the “Father of Navy Radio.”85

During Hooper’s first year as division head, financial constraintsspurred his push for technological advances with the planned chain ofhigh-powered stations.86 He realized that, beyond the Canal Zonestation (with Federal Telegraph’s 100-kilowatt arc), his budget wouldnot have sufficient funds for five additional high-power stations (SanDiego, Guam, Samoa, Hawaii, and the Philippines). Hooper sought toeconomize by reducing the number of stations to three, each with anincreased transmission capacity.87 He asked Federal Telegraph’s chiefengineer, Leonard Fuller, to equip the San Diego station with a 200-kilowatt arc and the stations in Hawaii and the Philippines with 1,000-kilowatt arcs. “The cries of anguish which arose from the FederalTelegraph Company,” wrote George Clark, “could almost be heard asfar as the intended reach of the stations.”88 Fuller subsequently con-vinced Hooper to accept 350-kilowatt arcs for both Hawaii and the Phil-ippines.89 In February 1916, the company signed contracts totaling$400,000 to supply sets for navy stations in the Philippines, Hawaii,and San Diego.90

Its role as supplier of apparatus for U.S. naval vessels and high-powered stations put Federal Telegraph on a better financial footingand changed company operations. In early 1916, its facility at Channingand Emerson streets in Palo Alto, a bungalow and out-buildings,employed twenty to thirty individuals. The shop lacked machine tools,crane facilities, and space. The largest arc that could be built there wasa 100-kilowatt model, weighing between one and two tons.91 A ten-minute walk from the Palo Alto train station, the site was too distantfrom the tracks to conveniently receive enormous bronze chamber cast-ings from a San Francisco supplier; now, it was contractually obligatedto ship 350-kilowatt arcs weighing sixty tons apiece.92 Anticipating

85Hooper was an accomplished telegraph operator by the age of ten. After serving as headof the Radio Division (1915–1917, 1919–1923, 1926–1928), he became director of naval com-munications (1928–1934). Hooper oral history, 633, SCH; Howeth, History of Communica-tions, 113–14; Aitken, Continuous Wave, 552.

86 Leonard Fuller, “Comments on the attached eleven pages titled Federal Telegraph,”April1972, 2003–37, HSJ.

87Winkler, Nexus, 70.88 Clark, “Radio in War and Peace,” 218, GCC.89Hooper oral history, 805–6, SCH; Secretary of the Navy, annual report, 1 Dec. 1914,

subject files “Navy, 1829–1947,” reel 24, JD.90 Contract list, series 37, box 189, folder 1, GCC.91 Veeder, Report on Poulsen Wireless, 9, Federal Telegraph Company Collection, HSJ.92 Fuller, interview by Norberg, 9, 50, 53, 79, BL; Veeder, Report on Poulsen Wireless, 9,

Federal Telegraph Company Collection, HSJ; Aitken, Continuous Wave, 154.




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increased navy business, the companymoved its manufacturing to a spa-cious facility next to the train station, with 25,000 square feet onthe ground level and 3,500 square feet of office space on the secondfloor (see Figure 2). Rail tracks ran directly into the new building.93

The new factory, completed that spring, allowed Federal Telegraph toexpand its manufacturing workforce by a factor of ten to meet its con-tractual obligations.

Regional Disadvantage

Bymid-1916, Federal Telegraph Company appeared well positioned.Its intellectual property for wireless transmission, particularly Fuller’simprovements to the Poulsen patents, were on the verge of becomingthe industry standard. A prized customer, the U.S. Navy, sought asystem around which to build technical compatibility among its stationsand vessels—and seemed to have found it with Federal Telegraph’s arc.In addition to apparatus for high-powered navy stations, Federal

Figure 2. Federal Telegraph Company’s Palo Alto factory, constructed in 1916 to keep up withthe needs of the U.S. Navy. (Source: Perham Collection of Early Electronics, History San Jose,San Jose, Calif.)

93 “Palo Alto to Have Big Wireless Plant,” San Francisco Examiner, 30 Jan. 1916.

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Telegraph had dozens of contracts to provide arcs for army poststhroughout the United States and hundreds of arcs for the ShippingBoard’s Liberty Ships.94 Federal Telegraph’s technical prowess, com-bined with its position as a favored “all American” firm, gave it whatClark called a “natural design monopoly.”95

One issue bedeviled the company, however: location. As the Euro-pean war expanded in 1916, America’s neutral position appeared lesstenable. As it ramped up production of radio sets, the navy, with itsEast Coast–based fleet, worried about Federal Telegraph’s West Coastlocation. In September 1916, Lieutenant Commander Hooper recom-mended a licensing agreement that would allow the navy to produce,or have other manufacturers produce (presumably on the East Coast),radio sets covered by Federal Telegraph’s patents.96 Little came of thatplan.

In late 1916, Rear Adm. Robert Griffin, now commander of theBureau of Steam Engineering, complained about Federal Telegraph’sshipment delays. “Such delays and explanations would be obviated,”he concluded, if the company “had a representative on the AtlanticCoast, to look out for the details of delivery, etc., in a manner similarto that in force in various other concerns dealing with the Gov’t.”97

Federal Telegraph responded by sending Ralph Beal as “resident engi-neer” to Washington, where he represented the company for the nextthree years.98 Beal’s presence helped, but ultimately did not solve theproblem.

Federal Telegraph Company’s regional disadvantage became agreater concern in early 1917. With increased congressional appropria-tions, the navy’s attention shifted from budget constraints to timeconstraints.99 In March, Hooper wrote that the navy had more thanfour times the radio apparatus under contract as “in any year previ-ously,” but identified some serious bottlenecks. Under increasedtime pressure, Federal Telegraph’s West Coast location was becominga handicap.100 Lieutenant Commander Hooper staggered Federal

94 “Data re arc transmitters purchased by U.S. Navy from Federal Telegraph Company”(document #CWC 37-388A), series 37, box 189, folder 3, GCC; Fuller, interview by Norberg,14, 16, 51, BL.

95 Clark, “Radio in War and Peace,” 282, GCC.96 “Memorandum of Agreement with the Federal Telegraph Company relative to Arc Radio

Apparatus,” 12 Sept. 1916, “Navy Contracts, Reports, 1907–1946,” series 100, box 294, folder 3,GCC; Clark, “Radio in War and Peace,” 282, GCC.

97 Aitken, Continuous Wave, 289.98 Tuel to Pratt, 27 Oct. 1919, 72/116z, box 2, folder “Tuel, A. Y. Letters, June November

1919,” Pratt Papers, BL.99Aitken, Continuous Wave, 295.100Hooper to Sweet, 12 Mar. 1917, box 1, folder 7, SCH.




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Telegraph’s executives shortly after America’s April 1917 entry into thewar by asking them to establish a factory on the East Coast.101

Hooper surprised them again that summer. Since January 1917, hehad expressed doubts about Secretary Daniels’s plan for complete gov-ernment ownership of radio in the United States (Daniels and Hooperin Figure 3). While Hooper supported government ownership of coaststations because of their importance to national security, he believedthat prohibiting high-powered commercial stations inland might restrictAmerica’s capacity to assume a dominant position in the radio world.Dubious that a single firm could accumulate the necessary patents,Hooper suggested that rivals American Marconi and Federal Telegraphform a joint venture to establish a communications network in LatinAmerica.

The result was establishment of the Pan American Wireless Tele-graph and Telephone Company in October. It was to be “all American”to the extent that its directors and officers would be U.S. citizens, andno more than three-eighths of the stock would be in British hands.

Figure 3. Secretary of the navy Josephus Daniels, sending radio greetings to PresidentWoodrow Wilson, 1918. Stanford C. Hooper is second from the left; Robert S. Griffin, chiefof the Bureau of Steam Engineering, stands behind Daniels. (Source: Photo NH 57302, U.S.Navy History and Heritage Command, Washington, D.C.)

101 Sweet to Hooper, 10 May 1917, box 1, folder 7, SCH.

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Although Hooper thought this extension of American radio enterprise toLatin America “a great step in advance,” his boss did not. Daniels suc-cessfully urged Wilson to unite with the South American countries tocreate a system run by the respective governments.102 This decisionfavoring nationalization over private enterprise stunned AmericanMarconi, particularly E. J. Nally, slated to become Pan American’sfounding president.

Nally kept his job with Marconi; Veeder, at Federal Telegraph, wasnot as fortunate. By summer 1917, Federal Telegraph’s main customerwas frustrated with the company’s location and unhappy with its leader-ship. That May, Hooper learned (but not from Federal Telegraph offi-cials) that the Australian government had engaged the company to bidon two 1,000-kilowatt arcs. Hooper felt betrayed that Federal Telegraphhad broken a promise “to keep us informed of any contracts they werenegotiating.”103

In early October, Veeder and Charles W. Waller, Federal Tele-graph’s East Coast sales representative, met with D. W. Todd, direc-tor of naval communications, to discuss the Pan American venture.Veeder left the meeting once the formal agenda had been covered,but Waller remained. The navy had complained, and Waller, onbehalf of the company’s directors, offered Veeder’s head on aplatter. He told Todd that under a new president, Federal TelegraphCompany would dispose of its operating business and focus on man-ufacturing, and it would open a new plant on the East Coast, to becloser to the navy.104

In December 1917, San Francisco banker Washington Dodgeassumed the presidency of Federal Telegraph. Trained as a physicianat the University of California, Dodge entered San Francisco politics inthe 1890s, was elected supervisor in 1898, and served four terms asthe city’s assessor. A survivor of the Titanic, in 1912 Dodge became avice president of the Anglo and London Paris National Bank ofSan Francisco, and through the bank’s relationship with Federal Tele-graph joined the company’s board of directors.105 As president, Dodge

102Hooper to Bastedo, 3 Nov. 1917, box 1, folder “Feb.–Dec. 1917,” SCH; “Friday, November23, 1917,” The Cabinet Diaries of Josephus Daniels, 1913–1921, E. D. Cronon, ed. (Lincoln,Nebr., 1963), 240–41; Daniels to Secretary of State, 24 Nov. 1917, RG 38, box 17, NA.

103 Sweet toHooper, 10May 1917, andHooper to Sweet, 21May 1917, both in box 1, folder 7,SCH.

104 “Memorandum of Conference, Sunday, October 7, 1917,” 8 Oct. 1917, RG 38, Division ofNaval Communication Confidential Correspondence, 1917–1926, box 17, folder “Pan AmericanWireless,” NA.

105 Chauncey Eldridge, untitled appendix dated June 1, 1914, in Report on PoulsenWireless, 5–6, Federal Telegraph Company Collection, HSJ; “Dr. Dodge to Head Federal Tele-graph,” San Francisco Examiner, 8 Dec. 1917.




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set out in the direction Waller had indicated: that of making FederalTelegraph a manufacturing firm.

Meanwhile, the American Marconi Company was in a difficult posi-tion. Navy secretary Daniels’s rejection of the Latin American jointventure denied American Marconi access to Federal Telegraph’sarc technology, the navy’s preferred transmission system. AmericanMarconi’s trump card, however, was its superior resources. Thecompany played that card, offering $1.644 million for Federal Tele-graph’s nine stations on the West Coast as well as its patents, therebygaining access to Fuller’s improvements to the Poulsen system. Attractedby the cash settlement, which would allow the company to finally get outfrom under its longstanding $500,000 of debt obligations for Elwell’soriginal acquisition of the Poulsen rights, Federal Telegraph initiallyagreed to the deal.

Waller then offered the navy right of first refusal on the deal—notonce but three times—in April 1918. The navy, sensing an opportunityto block a company with British connections from gaining key intellec-tual property and strategic radio stations, took the bait. On May 18,the navy acquired most of Federal Telegraph’s real properties, includingstations in Los Angeles, San Diego, and San Francisco. The navy alsoreceived American rights to eighteen patents by Poulsen and colleaguesP. O. Pederson and C. L. Schou, four patents and sixteen patents pendingfor technology developed at Federal Telegraph’s Palo Alto facility(mainly by Fuller, including his Stanford doctoral research), and otherintellectual property, for $1.6 million.106

Why was Federal Telegraph so eager to deal with the navy ratherthan with American Marconi? It had less to do with patriotism thanwith form of payment. Instead of writing a check to Federal Telegraph,the navy provided $1.6 million in Liberty bonds. The lack of acompany name on the bonds apparently opened the door to chicanery.Only $1.12 million made it to the corporate coffers of Federal Telegraph.The rest—nearly a half million dollars—went to an entity called theValencia Improvement Company, controlled by Dodge’s brother-in-law. A 30 percent “finder’s fee” (in this case, $480,000) was not uncom-mon in some circles; indeed, when Elwell first sold stock, he provided 40percent to his agent, John C. Coburn. Details soon emerged, however,indicating that Dodge had done the negotiating himself as part of hispresidential duties, for which he was paid $18,000 a year. It wasagainst California law for an executive to receive both forms of compen-sation. Furthermore, Federal Telegraph’s decision to approve Dodge’scommission was made at an illegal board meeting, to which corporate

106 Federal Telegraph Company contract with U.S. Navy, 18May 1918, box 2, folder 2, SCH.

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secretary Augustus Tayler and certain directors were not invited.107 Thescandal broke in January 1919 amidst a confrontation with newlyinstalled board member Hiram Johnson Jr. (son of former CaliforniaProgressive governor and now U.S. Senator Hiram Johnson). Dodgeresigned on January 17; he committed suicide in June.108

The bad publicity came at a difficult time for Federal Telegraph’sprimary customer. Congressional hearings in late 1918 regarding govern-ment ownership of radio had indicated a turn back to privatization. InDecember 1918, as Daniels testified before the Merchant Marine Com-mittee regarding government monopoly of wireless, the navy’s 1918radio spending attracted scrutiny.109 Subsequent to the Federal Tele-graph deal, the navy had bought shore stations and radio installationson hundreds of vessels from American Marconi for $1,450,000.110 Con-gressmen wondered whether there were better uses for the $3 millionpaid to Federal Telegraph and American Marconi. In January, therewere calls for recovery of the money and for the impeachment of Secre-tary Daniels.111

Having lost faith in Federal Telegraph in the wake of the Dodgescandal, the navy attempted to find a second source for arcs. In May1919, the navy sold one of Federal Telegraph’s 30-kilowatt arcs to theWestern Electric Co. “so they could make another like it and show thenavy whether they could or not enter into real competition withthe Federal Co.,” surmised Clark, “and if so, thus provide an EastCoast manufacturer of arcs.”112 Western Electric’s attempt at reverse-engineering appears not to have succeeded.113 After six years ofmanufac-ture for the navy, an exclusive license to Poulsen’s patents was notFederal Telegraph’s only competitive advantage. Chief engineer Fullerand his staff, along with the company’s manufacturing organization,had developed what Aitken calls “a body of design and manufacturingexperience to be found nowhere else in the world.”114 This was an

107 Elwell to Stone, 2 Apr. 1954,M0049, box 2, folder 14, Elwell Papers, Stanford UniversityArchives; Pratt to Simon, 1 July 1963, 72/116z, box 3, folder “Letters Written by Pratt, 1961–1964,” Pratt Papers, BL.

108 “Dodge Out as Wire Co. Head,” San Francisco Examiner, 8 Jan. 1919; “Fraud Laid toDodge by Telegraph C.,” San Francisco Examiner, 22 May 1920.

109 “Thursday, December 18, 1918,” Cabinet Diaries of Josephus Daniels, 355.110History of the Bureau of Engineering Navy Department during theWorldWar (Wash-

ington, D.C., 1922), 114–15.111 “Wants Radios Returned: Congressman Rowe Also Thinks $3,000,000 Should be

Recovered,” New York Times, 18 Jan. 1919; “Wants Daniels Ousted: Mann Says He ShouldBe Impeached for Radio Purchases,” New York Times, 30 Jan. 1919.

112 “Arc Transmitters Sold to U.S. Government,” SRM 37 263A, series 37, box 189, folder 1,GCC.

113 “Navy Department Arc TransmittersMade For:” SRM 37 277A, series 37, box 189, folder2, GCC.

114 Aitken, Continuous Wave, 288.




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impressive knowledge base that evenWestern Electric, a firm nearly onehundred times the size of Federal Telegraph, could not quicklyreplicate.115

The navy’s 1919 offer toWestern Electric came within a new postwarcontext for the radio industry. In March, Congress reflected newlywon Republican majorities in both Senate and House. Support forgovernment ownership of radio both from the president and withinthe navy ranks dissipated. What endured, despite a wartime alliance,was a desire to displace Britain as global communications hegemon.During the 1919 Paris peace talks, Wilson confided to RearAdm. W. H. G. Bullard that he considered three areas crucial to globalinfluence: petroleum, transportation, and communications. The UnitedStates dominated petroleum and Great Britain controlled shipping. Incommunications, America’s ability to lead in radio could balance Brit-ain’s dominance in cables.116 The navy had a solution: an Americanradio monopoly, regulated by the U.S. government, that could competewith the British Marconi Company.

In April, Hooper and Bullard approached General Electric (GE)about creating a new radio giant. The Radio Corporation of America(RCA), based in New Jersey, would feature a telecommunicationsnetwork, manufacturing capabilities, American management and direc-tors, and no more than 20 percent foreign ownership. The goal, as RCA’schairman Owen Young wrote, was “to set up an all American owned andoperated wireless company.”117 The creation of RCA meant the disap-pearance of the American Marconi Company. Its intellectual propertyand stations went to RCA, and its manufacturing facilities to GeneralElectric. RCA’s president was Nally, American Marconi’s erstwhilegeneral manager.118

RCA involved cross-licensing among AT&T, GE, Westinghouse, andthe United Fruit Company, but not Federal Telegraph.119 Having alreadyassigned its intellectual property to the navy a year earlier, Federal Tele-graph Company had forfeited its primary asset. The loss of intellectualproperty, combined with the company’s reputation for poor manage-ment and its West Coast location, assured its exclusion from the creationof a new monopolistic East Coast firm.

115 Stephen B. Adams and Orville R. Butler, Manufacturing the Future: A History ofWestern Electric (New York, 1999), 221; Chandler, Visible Hand, 510.

116Howeth, History of Communications, 354–56. The U.S. Joint Army and Navy Boardperiodically reviewed war plans versus Great Britain until June 1939. Plans for War againstthe British Empire and Japan: The Red, Orange, and Red-Orange Plan, 1923–1938, ed.Steven F. Ross (New York, 1992).

117 Young to Sheffield, 7 Dec. 1921, box 3, folder “Nov.–Dec. 1921,” SCH.118Howeth, History of Communications, 358.119 Ibid., 358–63.

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When R. P. Schwerin replaced Dodge as Federal Telegraph’s presi-dent in January 1919, he faced myriad problems: exclusion from theRCA deal, termination of defense contracts after World War I, and adeteriorating relationship with the company’s foremost customer.120

Schwerin wrote to the navy’s Hooper, “I have been working in every pos-sible way to rehabilitate this organization, put it on its feet.” Schwerinresolved “to make good with the Federal Government all the obligationsthe Federal Telegraph Company was under.”121 Hooper responded with adiagnosis of Federal Telegraph’s problems. Echoing earlier critiques of thecompany, Hooper noted two major reasons why it had failed to benefitfrom its considerable technological accomplishments. The first was thecompany’s location, “so far from the center of business on the EastCoast.” The second: the “organization of the Company has not been aworking one . . . with the proper organization and propermanagement.”122

Although not a telecommunications veteran, Schwerin broughtseveral assets to the job. He was an Annapolis graduate of the sameclass as Rear Admiral Griffin, chief of the Bureau of Steam Engineering,which controlled navy radio.123 After a few years in the navy, Schwerinhad run the Pacific Steamship Company (an early Federal Telegraph cus-tomer) formore than twenty years. Seeking federal subsidies for the firm,he had learned the ropes in Washington, D.C.124 Given the requirementsof the job, Schwerin had a more relevant background than had his pre-decessors at Federal Telegraph. The biggest concern was whether hehad accepted too great a challenge. As A. Y. Tuel suggested in 1919, allthat seemed to remain of Federal Telegraph was “just a leased lineservice and a factory on the wrong side of the U.S.”125 It would not belong, however, before other branches of the U.S. government acted onthe company’s behalf.

The Open Door and a Window of Opportunity

In April 1913, Federal Telegraph president Beach Thompson pro-vided Veeder an update on the company’s efforts to establish a

120 Fuller, interview by Norberg, 71, BL.121 Schwerin to Hooper, 25 Nov. 1919, box 2, folder 2, SCH.122Hooper to Schwerin, 27 Dec. 1919, box 2, folder 6, SCH.123 “Dodge Out as Wire Co. Head,” San Francisco Examiner, 18 Jan. 1919; Tuel to Pratt, 19

Jan. 1919, box 2, folder “Tuel, A. Y. 1913–May 1919,” Pratt Papers, BL; Pratt to Simon, 1 July1963, box 3, folder “Letters Written by Pratt, 1961–1964,” Pratt Papers, BL.

124 San Francisco Chronicle, 5 Jan. 1913; “Our Flag Stays on the Pacific,” New York Times,14 Dec. 1915; San Francisco Examiner, 15 Nov. 1915; “Schwerin Asks for Federal Aid forSteamships . . . Urges Federal Subsidies,” San Francisco Chronicle, 29 Aug. 1913.

125 Tuel to Pratt, 23 Sept. 1919, 72/116z, box 2, folder “Tuel, A. Y., Letters, June–November1919,” Pratt Papers, BL.




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network in the Far East: “Ministers from both China and Japan toldme that the probability is, that they will not allow us to own stationsin their territory.”126 Seven years later, Schwerin and his attorneynegotiated a deal for Federal Telegraph to build high-powered wire-less stations for the Chinese government in Shanghai, Harbin,Canton, and Peking.127 News of the 1921 contract, worth $13million (about $170 million in 2015 dollars), was greeted with enthu-siasm at the U.S. State Department, where American access to theChina market had long been a holy grail. Heretofore, communicationwith individuals or organizations in China had passed through eitherBritish or Japanese cables; uncensored arrival of such messages wasnot guaranteed. Concerns about Japanese censorship were reflectedin correspondence from a Federal Telegraph contractor (inSan Francisco) to Schwerin (in China) that bore a stamp that read“POSITIVELY Do Not Send on JAPANESE STEAMERS.”128 FederalTelegraph’s contract represented what Harry Kirwan called a“testing of the Open Door,” an American statement of “principlesof equal and impartial trade” with China.129 The State Departmentput its money where its policy was, providing Federal with$50,000 to cover the costs of obtaining the contract.130

One of the requirements of the China contract was that the supplierown relevant patents, but Federal Telegraph’s patents had been con-veyed to the government as part of Dodge’s 1918 deal. Schwerinargued that the government had never actually owned the patents,having instead obtained licensing rights.131 His legal position wasshaky, but the State Department was eager to establish relations withChina. Therefore, in March 1921, a mere two weeks after WarrenHarding took office as president, the secretary of state Charles EvansHughes wrote to navy secretary Edwin Denby emphasizing “the para-mount importance to the United States of the development ofadequate . . . communication service between the United States and itsPacific possessions.”132 The navy agreed to “sell” the patents back to

126 Thompson to Veeder, 18 Apr. 1913, 2003-37-6, Federal Telegraph Company Collection,HSJ; Eldridge, untitled appendix, in Report on Poulsen Wireless, 11, Federal TelegraphCompany Collection, HSJ.

127Mann, “Federal Telephone and Radio,” 396.128 Charles C. Moore & Co. Engineers to Schwerin, 3 Nov. 1922, 2003-36-89, box 21, folder

2, Elliott Papers, HSJ.129 Kirwan, “Federal Telegraph Company.” Federal’s share of the contract was $6.5 million.130 “Contract for China and U.S. Radio Signed,” San Francisco Examiner, 10 Aug. 1923.131 Schwerin Memorandum, n.d., and Schwerin to Beach, 23 Dec. 1920, both in RG 80,

1916–1926, 8247 (350)–8247 (407), box 393, NA.132Hughes to Navy Secretary, 22 Mar. 1922. U.S. Department of State, Papers Relating to

the Foreign Relations of the United States 1 (1922), 848–52.

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Federal Telegraph—at little or no charge.133 Ultimately, for its 1918investment of $1.6 million, the navy kept only four of theWest Coast sta-tions (having closed five others) and no intellectual property.134 The realvalue to the navy had been assuring that American Marconi, a firm withBritish connections, did not acquire Federal Telegraph’s arc patents.

In China, the United States was a relatively late wirelessmover. Barely a month after the contract was signed, in February 1921,complaints emerged that the contract violated China’s earlier agree-ments with Denmark (1913, the Great Northern Telegraph Company),Japan (1918, the Mitsui Company), and Britain (1919, the MarconiCompany).135 Yet Federal Telegraph entered the fray with a valuableally. After the initial British complaint, Secretary Hughes conveyed amessage to the Chinese premier that cancellation of the contract“would be regarded by the American Government as an unfriendlyact.”136

Federal Telegraph had trouble obtaining financing for the project.137

As a result, in August 1922, Schwerin negotiated a joint venture withRCA called the Federal Telegraph Company of Delaware. Althoughheaded by Schwerin and run by Federal Telegraph’s engineers, thejoint venture was 70 percent owned by RCA and 30 percent owned byFederal.138

The next hurdle proved insurmountable: a combination of Japaneseinfluence and Chinese political instability. The Japanese government,protecting a seven-million-dollar Mitsui Corporation contract for con-struction of a Peking station, strategically planted seeds of doubt inthe minds of Chinese officials regarding the U.S. venture.139 Thisdelayed Federal Telegraph’s construction of the stations. In 1926,when secretary of state Frank B. Kellogg weighed his options regardingFederal Telegraph’s contract, the U.S. envoy to China conveyed doubtsthat “in the near future a government will exist to which the American

133 “Navy contract with Fed. Tel. Co., 19March, 1921,” box 3, folder “Jan.–April 1921,” SCH;Roosevelt to Secretary of State, 6 Apr. 1921, RG 80, 1916–1926, box 393, folder 8247 (383–384: 7), Apr. 1921, NA.

134 Pacific Coast Communications Superintendent to Director Naval Communications, 21Aug. 1918, RG 38, Director of Naval Communications General Correspondence, 1912–1921,249, box 560, NA.

135Daqing Yang, Technology of Empire (Cambridge, Mass., 2010), 65–68.136Hughes to Minister in China, 8 Feb. 1921, Foreign Relations 1 (1921), 410–11.137Notes, Hooper meeting with Hoover, 21 Dec. 1921, box 3, folder “Nov.–Dec. 1921,”

SCH; Dwayne R. Winseck and Robert M. Pike, Communications and Empire (Durham,2007), 297–98.

138 Schwerin to Acting Secretary of State, 29 Aug. 1922, Foreign Relations 1 (1922), 856.139 Ironically, a few years earlier the Japanese government had approached Federal about

purchasing radio transmitting devices. Waller to Chief of Bureau of Steam Engineering, 14Aug. 1918, RG 19 (Bureau of Ships), entry 1081, box 1, folder 3, NA.




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Minister can appropriately present an ultimatum.”140 The NationalistRevolution, one of whose platforms was to rid China of the dominationof foreigners, was underway—putting an end to Federal Telegraph’shopes of building radio stations in China.141

By then, Schwerin’s role had changed. He had headed both FederalTelegraph and the China joint venture for two years when San Franciscoindustrialist Rudolph Spreckels bought a controlling interest in theFederal Telegraph Company in 1924. Spreckels replaced Schwerin(who remained head of the China venture) with another navy man, Lt.Cdr. Ellery Stone, who had worked for one of Federal Telegraph’s suppli-ers.142 Although the navy’s return of the company’s intellectual propertydid not yield benefits that the company or the State Department hadwanted, it led Federal Telegraph to a different business model—againwith the help of the federal government.

Organizational Change and Departure

Federal’s reacquisition of its patents in March 1921 provided asecond wind to the company, but it was a last gasp for the arc. Just asarc technology had proven superior to the spark in 1913, by the early1920s the vacuum tube was becoming a preferred alternative—especiallyat lower-power applications.143 Nobody knew this better than the staff ofFederal Telegraph. In January 1919, Ralph Beal, the company’s Wash-ington representative, had written to Fuller, “If our cost figures cannotbe reduced we may as well face the fact at once that we cannotcompete with other manufacturers, especially in the small units.”144

The arc had served the company well as the navy expanded Americantelecommunications capabilities, but the technological climate hadchanged.

With the arc’s pending eclipse, Federal Telegraph needed somethingnew to remain viable—and found it.145 Included in the intellectual prop-erty that the government returned to the company were FrederickA. Kolster’s patents. Kolster had served as “radio specialist” for theU.S. Bureau of Standards (1911–1920), where he organized the radiosection and became recognized as one of the top radio men in the U.S.

140Minister in China to Kellogg, 19 May 1926, Foreign Relations 1 (1926), 1062.141 ClarenceM.Wilbur, TheNationalist Revolution in China, 1923–1928 (New York, 1984),

1, 189.142 Stone to Pratt, 29 Dec. 1921, 2003-36-86, box 20, folder 5, Elliott Papers, HSJ; Elliott to

Clark, 20 July 1922, 2003-36-88, box 21, folder 1, Elliott Papers, HSJ.143 Fuller, interview by Norberg, 90, BL.144 Beal to Fuller, 27 Jan. 1919, SRM 37 252, series 37, box 189, folder 1, GCC.145Wireless Specialty Co., memo, 5 Aug. 1919, SRM37 119, series 37, box 188, folder 1, GCC.

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government.146 While at the bureau, Kolster developed a radio directionfinder, a navigational device that improved maritime safety. Because hesuccessfully argued that he had done some of the relevant work beforejoining the bureau, Kolster retained rights (to the bureau’s regret) andthen sold his patents to the Federal Telegraph Company.147 As part ofthe deal, Federal Telegraph hired Kolster in 1921.148 Kolster’s arrivalallowed Federal Telegraph to develop the first commercial radio direc-tion finder, which became known as a “radio compass,” a significantdeparture from its prior emphasis on high-power arc transmissionsystems.149

During the 1920s, the formative years of commercial radio, Kolsterdeveloped a receiving set using the principles behind his radiocompass. The new product’s popularity transformed Federal Telegraphinto a mass production enterprise.150 The company’s location againbecame a concern. Distant from major suppliers and customers, theWest Coast was not an ideal place from which to compete on a cost/price basis in commercial markets. In January 1926, President Stonenegotiated a merger with the Brandes Companies, a New Jersey manu-facturer of headsets.151 Brandes manufactured the Kolster RadioCompass on the East Coast under the same umbrella firm that ownedthe Federal Telegraph Company.152

146Redfield to Director, Bureau of Standards, 23 Oct. 1917, RG 167, National Bureau ofStandards General Corr., 1901–1922 AG-AGA-AGL AGP-AF box 4, folder AP 1917, NA; Strat-ton to Bureau of Lighthouses, 26 Feb. 1921, RG 167, box 10, folder IEW 1921–1922, NA.

147 Commissioner, Bureau of Navigation to Director, Bureau of Standards, 5 May 1915, RG167, box 4, folder AGP 1901–1922, NA; History of the Bureau of Engineering, 96; Stratton toShoemaker, Patent Office, 28 Aug. 1919, RG 167, box 4, folder AGP, 1901–1922, NA.

148 “Comments on pages 12 to 116,” 54, box 3, folder “Notes on History of Radio,” PrattPapers, BL; “Report of Section 6, Division I, 1 July 1920 to 30 June 1921,” 15 July 1921, RG167, box 10, NC–76, Entry 75, folder “Annual Reports, 1919–1923,” Miscellaneous Papers,1875–1962, Records of J. Howard Dellinger, NA.

149 “NewDevice Saves Ships in Fog,”New York Times, 28 June 1921, 19; Federal TelegraphCompany, The Conquest of the Fog (ca.1924), p. 3, 2003-37-24, Federal Telegraph CompanyCollection, HSJ; Elliott to Schwerin, 22 Nov. 1923, box 22, folder 2, Elliott Papers, HSJ.Even when Kolster worked for the government, Federal had arranged for the rights to his pat-ented inventions. Federal Telegraph Company contract with Navy, 18 May 1918, box 2, folder2, SCH.

150 By early 1925, the company’s letterhead highlighted Federal’s transmitter and Kolster’sradio compass and receivers. Lee to Director, Bureau of Standards, 11 Feb. 1925, RG 167, NC-76, entry 52, “Blue Folder Files,” 1902–52, 63–138, box 2, folder 63c, folder IEW, NA.

151 Stone to Pratt, 29 Dec. 1921, 2003-36-86, box 20, folder 5, Elliott Papers, HSJ; Mann,“Federal Telephone and Radio,” 399; O. H. Fernbach, “Federal Telegraph Merger DetailsAnnounced; Rudolph Spreckels Enlightens Shareholders,” San Francisco Examiner, 28 Jan.1926.

152 “Frederick A. Kolster, Radio Research Engineer,” SRM 4 985, series 4, box 15, folder“Kolster, Frederick,” GCC; Leib, Keyston & Co., Kolster Radio Corporation: The StrategicExploitation of a New Science (San Francisco, 1928), chap. 5 [pages not numbered], 2003-37-23, HSJ.




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Stone dangled other intellectual property in front of a differentsuitor. During a brief (1911–1912) stint at Federal Telegraph, Lee deForest had developed an audion amplifier, which was adapted for useas a vacuum tube transmitter and used in several industries.153 Fifteenyears later, Stone found that Federal Telegraph had shop rights forde Forest’s work, meaning that the company could make and usevacuum tubes without risking patent infringement. The resulting nonex-clusive license from vacuum tube makers AT&T and RCA attracted theattention of the Mackay Radio and Telegraph Company.154 In October1927, Federal Telegraph became exclusive manufacturer and supplierof equipment for Mackay’s operating system (similar to Western Elec-tric’s role as equipment supplier for the Bell System). The InternationalTelephone and Telegraph Corporation acquired Federal TelegraphCompany the following year and in 1931moved its Palo Alto manufactur-ing and research operations to Newark, New Jersey.155 There it becamepart of a telecommunications cluster that also included AT&T, RCA, andWestern Electric. Fifteen years after the U.S. Navy had first complainedabout Federal Telegraph’s remote location, the company arrived on theEast Coast.

Conclusion

In 1964, Stanford University’s provost Frederick Terman wrote that“with the proper management, the Federal Telegraph Company couldhave been RCA”—the world’s most significant radio firm.156 ToTerman, the saga of Federal Telegraph was no abstract matter. Aftergraduating from Stanford in June 1920, he had worked for a summerat the company’s Palo Alto manufacturing facility. In 1923 he consideredquitting graduate school atMIT to join the company’s China venture, buthis thesis advisor, Vannevar Bush, persuaded Terman to complete hisPhD.157 When Terman joined Stanford’s engineering faculty in 1925,Federal Telegraph’s loss became the region’s gain: Terman subsequentlyhelped establish a “community of technical scholars,” including Stanfordprofessors and researchers, along with engineers at regional start-upsand at the local operations of companies based elsewhere. By 1964, thecommunity’s efforts had been aided by funding from several branches

153Aitken, Continuous Wave, 25–27.154 Fuller, interview by George T. Royden, 29May 1976, IEEE Oral History Project, 7, IEEE

History Center, Piscataway, N.J.155 “Federal Telegraph Bought by I.T. & T.,” San Francisco Examiner, 22 May 1931;

R. Sobel, ITT: The Management of Opportunity (New York, 1982), 59–60.156 Terman to Pratt, 20 Oct. 1964, 72/116z, box 2, folder “Terman, Frederick Emmons,

1900-five letters, 1963–64,” Pratt Papers, BL.157 Terman to Elliott, 2 Oct. 1923 and 15 Oct. 1923, box 22, folder 1, Elliott Papers, HSJ.

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of the federal government, particularly the Office of Naval Research(ONR). Terman’s success at bringing together representatives of acade-mia, industry, and government earned him the moniker of “Father ofSilicon Valley.”158

Terman’s community included Charles Litton, founder of thedefense giant Litton Industries (1946), who had designed and manufac-tured glass tubes at Federal Telegraph in the late 1920s and early 1930s.Litton collaborated with Heintz & Kauffman’s William Eitel and JackMcCullough, whose 1934 start-up grew to 3,600 employees duringWorld War II, based on government contracts. Litton mentored many,including the founders of Hewlett-Packard in the late 1930s, andRussell Varian and Sigurd Varian, whose groundbreaking prewar workon the klystron tube led to the 1948 establishment of Varian Associates.Technical knowledge and manufacturing practices stayed in the region,passed on from one enterprise to the next.159

Crucial to the region’s development was the larger context in which itoperated. Both know-how and know-who mattered as technologicalknowledge and practice were magnified by relationships with govern-ment officials. America’s modern military-industrial complex beganwith the U.S. Navy’s challenge of British global hegemony. Federal Tele-graph Company, as an independent enterprise (1909–1928), survived aslong as it did because its efforts aligned with that challenge. The navy,and to a lesser extent the State Department, served as incubator, provid-ing much-needed revenue and protection from competition of theBritish-funded American Marconi Company.

Location in the United States of the twentieth century became one ofthe competitive advantages of early Silicon Valley firms. Demand fromthe navy, the army, and the air force provided Federal Telegraph Com-pany’s successors with business until each built an organization able tocompete in commercial markets. In addition to Eitel-McCullough andLitton Industries, key entrants in electronics equipment (Hewlett-Packard, 1938), recording equipment (Ampex, 1944), power tubes(Varian Associates, 1948), and semiconductors (Fairchild Semiconduc-tor, 1957) followed this pattern. Government contracts sustained thesefirms within their first six years (Federal Telegraph Company, Eitel-McCullough, and Hewlett-Packard) or at the very beginning (Ampex,Litton Industries, Varian Associates, and Fairchild). Indeed, Varian

158 Leslie, Cold War and American Science; Stephen B. Adams, “Stanford and SiliconValley: Lessons on Becoming a High-Tech Region,” California Management Review 48, no.1 (2005): 29–51; Harvey N. Sapolsky, Science and the Navy: The History of the Office ofNaval Research (Princeton, 1990), 9–57; C. Stewart Gillmor, Fred Terman at Stanford: Build-ing a Discipline, a University, and Silicon Valley (Stanford, 2004).

159 Lécuyer, Making Silicon Valley, 22–30, 46, 49–50, 55–60, 73.




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cofounder Edward Ginzton called the acquisition of security clearancesthe “most important” event in the company’s founding.160

The Federal Telegraph Company is important because it blazed apath that subsequent Silicon Valley firms followed, and it illuminatesrelationships and dynamics we must explore in order to understandSilicon Valley’s development. By virtue of its relations with the U.S.Navy, Federal Telegraph contributed to and benefited from the mili-tary-industrial complex of the world’s budding superpower. The com-pany’s high-tech successors in the valley also grew up with, and wereincubated by, America’s defense agencies. Therefore, although theFederal Telegraph Company abandoned the region, it left behind animportant legacy that has less to do with its exit to New Jersey thanwith its entree to Washington, D.C.

. . .

STEPHEN B. ADAMS is professor of management at the FranklinP. Perdue School of Business, Salisbury University. His research on entrepre-neurship and the role of business/government relations and higher educationin regional economic development has been published in the California Man-agement Review, Enterprise and Society, Minerva, and Research Policy. Hisbook on government entrepreneurship, Mr. Kaiser Goes to Washington: TheRise of a Government Entrepreneur (1997), is available in paperback. He isat work on Before the Garage, a history of Silicon Valley’s first half century.

160 Timothy Lenoir, Instituting Science: The Cultural Production of Scientific Disciplines(Stanford, 1997), 336n27.

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arc of empire: the federal telegraph company, the u.s ......stand in the way of america’s...

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