SIC 3661 Telephone and Telegraph Apparatus
SIC 3661
This industry covers establishments primarily engaged in manufacturing wire telephone and telegraph equipment. Included are establishments manufacturing modems and other telephone and telegraph interface equipment. Establishments primarily engaged in manufacturing cellular radio telephones are classified in SIC 3663: Radio and Television Broadcasting and Communications Equipment.
334210
Telephone Apparatus Manufacturing
334416
Electronic Coil, Transformer, and Other Inductor Manufacturing
334220
Radio and Television Broadcasting and Wireless Communications Equipment Manufacturing
While the telecommunications equipment manufacturing industry was strong and growing during the late 1990s, by the early 2000s conditions had worsened. Ambitious infrastructure build-outs during the prosperous 1990s were not met with anticipated demand. For telecommunication service providers, this situation led to overcapacity and high levels of debt. By 2003 a number of providers had declared bankruptcy or were in poor financial shape. Subsequently, capital investment fell considerably, which was bad news for telecommunications equipment companies. In 2005 several mergers and acquisitions among major telecommunications companies were in progress or in place, negatively affecting network equipment and core technology sales.
The Telecommunications Industry Association (TIA) reported that in 2001, the industry as a whole saw revenues fall for the first time in a decade, and the decline continued for each of the next two years for a cumulative decline of $30.5 billion. The equipment sector shipped $21.4 billion in products in 2003. TIA projected network equipment sales of $22.0 billion by 2008.
Into the mid-2000s, the industry continued to change in response to rapid advances in technology after the deregulation of the telecom services industry. The shift from analog transmission to digital was virtually complete and the next phase in the evolution of communication networks, the shift from separate networks for voice and data to a single network for both, was underway. This change prompted the leading companies in the industry, formerly focused on only one kind of network, to move to establish themselves as capable for the coming converged network. However, by 2003 the movement toward "convergence" had not materialized as expected. Within the corporate sector, instead of investing in new infrastructures, many firms remained content with their traditional networks, which affordably met their needs. In these years, the deregulation of the telecommunications services industry enabled service giants such as AT&T to diversify their offerings, which expanded the market for equipment. Moreover, the explosive growth of the Internet created demand for further advances in equipment.
The telephone and telegraph equipment manufacturing industry can be divided into two broad categories: service carrier network equipment manufacturers, which sell telephone switching and switchboard equipment primarily to local and long distance phone companies; and end-user or enterprise equipment manufacturers, which sell data and voice communications equipment, facsimile equipment, call/voice processing equipment, consumer communications electronics, private branch exchanges (PBX), and videoconferencing equipment to both businesses and residential users alike. By the end of the 1990s, however, significant changes were taking place in the telecommunications industry that tended to blur such distinctions. Technological changes made possible the convergence of voice communication networks and data networks. In addition, some consolidation was taking place as industry leaders acquired or established partnerships with smaller companies that had particular technological or marketing strengths. The result was that the industry leaders began manufacturing equipment for all segments of the telecommunications market. Small start-up companies, created around a particular advance in technology, were also an important part of the industry because they were the source of important innovation. Such companies were often the targets of acquisition by a larger company in the industry.
American Samuel F. B. Morse introduced the first commercially successful telegraph in 1844. "What hath God wrought?" was the first message to be transmitted on the 37-mile pole line between Baltimore, Maryland, and Washington, D.C. Under Morse licenses, open-wire pole lines were soon erected all over the United States and Canada.
Alexander Graham Bell patented the telephone in 1876, beating Elisha Gray by a matter of hours. The technology was immediately put to use in telephone systems by the National Bell Telephone Company (originally the Bell Telephone Company). Western Union Telegraph Company also began offering phone service, using technology developed partly by Gray and Thomas Edison. But as a result of an out-of-court settlement in a patent dispute, Western Union sold its phone operations to Bell in 1879. Bell also purchased its manufacturing arm, which became the Western Electric Company.
Bell's phone service was immediately popular. By March of 1880 there were more than 30,000 U.S. telephone subscribers and 138 telephone exchanges. By 1887, just ten years after the commercial introduction of the telephone, there were more than 150,000 subscribers and about 146,000 miles of wire. In addition, nearly 100,000 people had phone service in Europe and Russia.
Developments in the switching equipment were necessary to make this growth possible. The first switchboard was installed in Boston in 1877. Before, this date one telephone had to be directly connected to another in order to make a call; 1,000 connections were necessary for fifty telephones to call each other. In 1891, American Almon B. Strowger patented the first automatic switchboard. As telephone services proliferated, a demand for long-distance services arose, and Bell established the American Telephone and Telegraph Company in 1885 as its long-distance subsidiary. Important equipment and wire advances allowed commercial service to be implemented between Boston, Massachusetts, and Providence, Rhode Island, by the 1890s. Distances gradually increased with the introduction of new equipment, such as relays, loading coils, amplifiers, and repeaters. Radiotelephone service to Europe was established in 1927, but large-scale wire-line telecommunications were not available until 1956 when the first transatlantic cable was completed.
Broad patent rights enabled the National Bell Telephone Company, which became the American Bell Telephone Company in 1878, to completely dominate the telephone service and equipment industry. Bell built a nationwide network by licensing local operating companies to deliver service for five to ten years. Bell received $20 per phone each year and reserved the right to buy the local network at contract expiration. Although Bell's patent rights terminated in 1894, only a few independent companies emerged as competitors. By 1899, Bell maintained a network of 800,000 lines.
AT&T became the parent company of the Bell system in 1899 and grew steadily through the first half of the century. Demand surged during the 1950s and 1960s, with an influx of new products, services, and technological breakthroughs. Despite pressure by anti-trust regulators to cede its market dominance, AT&T continued to grow during the 1960s and 1970s, becoming the largest company in the world. In 1974, however, anti-trust suits filed separately by MCI (now MCI World Com) and the Justice Department signaled an end to the company's unfettered reign. Ten years later the monopoly was finally broken when AT&T was divided into eight pieces.
Prior to the 1980s, business telecommunications were more or less a straightforward matter. Services were provided by AT&T with its undisputed monopoly as the carrier of voice, data, and text communications. Large business users had private branch exchanges (PBXs) for internal and external voice traffic, telex machines for...
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