Shoulders that Steve Stood On.
From Our Chairman, Kevin Kimberlin
This is dedicated to an unsung hero at the birth of the mobile phone industry I have had the privilege of working with many industry giants, sometimes before there was even an industry. One of them was Swedish entrepreneur Jan Stenbeck. While many are unaware of his impact on the worldwide mobile telecommunications market, I was fortunate enough to be able to help him at a pivotal moment as he began to turn his startup, Millicom, into an industry giant.
An In the Room Series
The Origin of the Smartphone
The kudos keep rolling in as the iPhone celebrates its 10th anniversary: the most successful product ever….one trillion dollars in iOS revenues, etc. It’s no wonder that many people think that Steve Jobs invented the smartphone.
But he didn’t. Its foundations in fact, had been on the market for years, based on two decades of Pocket phone innovation and 50 years of computing progress. What Jobs did so brilliantly was package his device with an Operating System, an app ecosystem, an awe-inspiring design and a totally unique business model to create something the world had never seen before.
But what about foundations? On whose shoulders did Steve stand? While large corporations AT&T and Motorola get most the history book credit, a handful of entrepreneurs first commercialized innovations that made the iPhone possible.
THE FIRST CELLULAR NETWORK
The smartphone is built upon three foundations: 1.) a cellular network and 2.) a pocket phone with 3.) access to data. Let’s look at some pivot points for each of these pillars, that time when the raw potential became the real thing.
We start with the fundamental basis — the cellular communications network. Where did it come from? The discovery of radio transmission by Guglielmo Marconi kicked off a century of broadcast innovation. One of the most impactful applications was the mobile two-way radio, invented at Bell Laboratories in 1924.
In the following decades, mobile telephony subsisted on niche markets. The Detroit police for instance, used early mobile phones to combat the Mafia, broadcasting from transmitters in the trunk of the police car. Walkie-talkies, Citizen Band (CB) radios, and similar mobile devices gave soldiers, truck dispatchers and rural workers remote connections. Many of these phones came from major firms like Motorola and RCA, while the ‘Cadillac’ of the industry, the high-end radio-phone, came from a small business in Waseca, Minnesota, the E.F. Johnson & Co., run by a Swedish American. The prowess of E.F. Johnson & Co. was such that all three Presidents during the 1970s (Jimmy Carter, Gerald Ford and Richard Nixon) advertised on its behalf — all while still in office.
Not only did E.F. Johnson & Co. make the high-end phones, but also, with the acquisition of Rydax Corporation, it made mobile transmission equipment as well. Martin Cooper, the inventor of the Motorola cell phone, commented on its role in pre-cellular telephony:
“The development of public radio telephone in the U.S. was led by Bell Laboratories with its creation of Interim Mobile Telephone Systems (IMTS). Claude Davis at Bell Labs, Chandos Rypinski of Rydax and I led the IMTS industry.”1
‘Chan’ Rypinski, before and after he joined E.F. Johnson & Co., made several crucial contributions to cellular networking. He patented the first automatic switch for mobile central offices (which he licensed to Bell Labs). He invented a method to ‘hand-off’ calls from one radio tower to the next — a key to cellular. He worked on the “first cellular order for mobile radios with the cellular supervisory logic” and he also helped with the transition from the Interim Mobile to the Advanced Mobile Phone System that became the first cellular standard in the U.S. He wrote: “from that procurement, the real definition of the mobile equipment emerged.”2 In short, while Bell Labs dominated, Rypinski and the firm he joined, E.F. Johnson & Co., were major forces in the formative years of cellular networks.
As these foundations for cellular telephony took shape, Mr. Johnson did something else that had an enormous impact on the global rollout of the cell phone when he teamed up with another Swede, a blonde-haired entrepreneur named Jan Stenbeck. No one grabbed the opportunity more vigorously than Stenbeck.
THE FIRST POCKET PHONE
Jan Stenbeck started with a bang by acquiring the only private mobile telephone operator in Sweden that he named ‘Comvik.’ He promptly converted this to the new cellular format by deploying six E.F. Johnson-Rypinski automated switches.3 This conversion allowed him to launch, on October 1, 1981, “the world’s first cellular system in commercial operation,”4 beating the much vaunted Ameritech (Bell Labs) to the market by two years.
Some argue that Nippon Telephone and Telegraph had a working cellular system prior to Comvik in Tokyo. Though the NTT service was launched in 1979, it was “more out of technical curiosity rather than serious commercial intent.”5 More importantly, the NTT cell phones were not portable; their phones were tethered to a vehicle and thus mobile only in the sense that an automobile is mobile. Comvik customers, on the other hand, could take their phone out of the car, “a radical innovation, as all phones at that time were quite large and could only be mounted in vehicles.”6 Since it debuted on an obscure Swedish venture, the breakthrough of that portable cell phone received little attention, but Jon Agar, Professor of Science and Technology at University of London, spotted it: “In North Carolina, a small cellular company called Millicom adapted a phone made by the E.F. Johnson firm, producing the first portable cellular phone.”7
As the first few thousand landmark phones were put into service in Sweden, technology entrepreneur Kevin Kimberlin discovered Millicom in the U.S when he read that the startup was selected by the FCC to demonstrate the viability of cellular.8 He met the CEO, Orhan Sadik-Khan, also a resident of Old Greenwich, CT9 who shared the plan for a pocket-size cell phone and a honeycomb cellular network. Filed with the SEC in 1982, this description was a fairly comprehensive description of what became the smartphone — and the network required to operate it. Millicom would develop a “voice and digital, high speed data communications…portable telephone (weighing 1-pound or less)….to interface directly with computers.” 10
In other words, Millicom set out to make a VOice and DAta phONE small enough to fit in your pocket. Kimberlin calculating that only 8% of the people in the world owned a telephone of any kind at that time, so he began calling the Millicom pocket phone “the phone for the rest of the human race.” To pay for this vision, Millicom needed capital, but investors were scarce in the tight market of 1982, especially for a young firm with only $131,000 of paid in capital and only five as-yet unpaid employees. One board member summed up the predicament: “Comvik and Millicom were having difficulty in finding others to invest in the idea. We were given the cold shoulder….It was difficult to raise money. Everyone is so wise today about how great the business is, but they weren’t so wise in the early days.”
Calculating that only 8% of the people in the world owned a telephone of any kind at that time, Kimberlin began to call the Millicom pocket phone “the phone for the rest of the human race.” Millicom needed capital to pursue this vision, but investors were scarce in the tight market of 1982, especially for a young firm with paid in capital of $131,000 and only five as-yet unpaid employees. One board member summed up the predicament: “Comvik and Millicom were having difficulty in finding others to invest in the idea. We were given the cold shoulder….It was difficult to raise money. Everyone is so wise today about how great the business is, but they weren’t so wise in the early days.”
Despite this cool environment, Kimberlin became an advisor to Sadik-Khan, invested in the company and structured the funding that created the capital for Millicom.11 This financing was an impetus to its joint-venture12 called Racal- Millicom which won a cellular license for the United Kingdom. Stenbeck was under pressure to deliver the pocket phone in order to earn its 10% royalty in Racal-Millicom.
E.F. Johnson & Co. slimmed down its first cell phone into the sleek ‘Lunch Box’ — so named since it looked like it could carry a thermos and a ham sandwich. The partners continued to shrink the size. “The plan was that Millicom, together with E.F. Johnson, Racal and others, develop a hand-portable mobile telephone” wrote British researchers John Metcalf and Uwe Cantner.13
The miniaturization effort hit a snag, however, when Western Union, the 132-year old telegraph company, acquired E.F. Johnson & Co. When they bailed out, the resilient Stenbeck quickly regrouped from this setback by obtaining the design and intellectual property from E.F. Johnson & Co. so he could continue his work with other manufacturers. A Japanese firm produced for them ‘the world’s smallest phone” but still, it weighed nearly eleven pounds. Racal hoped to take the Millicom-Johnson design “for U.K. use and manufacture at its Seaton Plant in Devon and sent a team of engineers to the U.S. to carry out the necessary development.”14
Meanwhile, competition emerged from the famous Motorola ‘Brick,’ the hand-portable that most people think of as the first cell phone. Shaped like a cowboy boot, the Brick was commercially released in October 1983 (after 10 years of testing). But it too was unwieldy and heavy.
For most consumers, the Brick and the Lunch Box were simply not practical. So Jan Stenbeck pressed on. Showing how desperate he was for a pocket-sized phone to earn the 10% royalty, Stenbeck made a deal with a newly formed company with only two employees at the time, a venture named Technophone.15 On behalf of Comvik and Racal-Millicom, he commissioned the pocket phone, supplementing a grant from Britain’s Department of Trade and Industry. Working feverishly in a small lab in Britain, the third Swede in this saga, CEO Nils Martensson, focused his team on three innovations: 1.) stacking 12 interconnecting layers in one circuit board, 2.) mounting with a new surface-mount production technique, and 3.) placing the electronics on both sides of the board. Hoping to solve the power problem, he promised his engineers a cash bonus for every milliamp they stripped from the phone’s power demands.
These pieces all came together in 1986 when Martensson unveiled the first mobile phone to fit in a pocket. “An extremely influential phone in the history of mobile radio,” it “turned the hand-portable into the world’s first pocket-sized cell phone.”16 It took the cellphone out of the hand and put it in the pocket. Its trailblazing thin, rectangular shape, form and function — imitated in a myriad of styles by countless manufacturers over the following three decades — was the leap to what we think of today as the mobile phone.
The Pocket Phone was the leap to what we think of today as the mobile phone.
WIRELESS ACCESS TO DATA
Stenbeck at last had the pocket-phone in his back pocket, literally. Still, he wasn’t satisfied. It wasn’t smart; it couldn’t transmit data; it wasn’t the ‘voice and data phone’ he demanded. So Nils Martensson dove back into his lab. Less than a year later, he emerged with a pocket phone with storage and processing capabilities far beyond the phone numbers of the Brick. The two-line crystal screen, the width of a strip of Scotch tape, could display, for instance, instructions on how to use the phone. On July 13th, 1987, The Daily Telegraph broke the news: the “intelligent portable telephone has been launched.”17
This Technophone M2 met all the specifications that Stenbeck had previously established at the start of the cellular revolution. It was a 7 inch by 3 inch intelligent mobile phone that fit into a hand, a purse or a pocket. Kimberlin noted the weight advantage: it was 1/10th of the weight of the Lunch Box and 60 percent lighter than the Brick. Offering true mobility and a primitive sort of smarts, this precursor to the smartphone was well received; the Pocket Phone “caused a small sensation in Europe” as it captured a 25% share of the mobile market in the UK. The company was, within 4 years, Europe’s second largest mobile phone manufacturer by volume,18 with a 25 percent share of the U.K. cell phone market and 15 percent in America.
Still, for technical and regulatory reasons, the cellular networks of that time could not transmit data. Here, once again, Millicom broke down the barriers. First, in Sweden, Comvik offered both data and voice services, albeit on two separate networks — a Millicom paging service for texting up to 1500 characters, ran in parallel with the cell phone voice service described earlier. Second, data transmission was only technically feasible when the digital network upgrades of the early 1990s. With this, Stenbeck’s vision was fully realized: on December 3, 1992, as the first text message was sent on a cellular network. It was a 14-character message: ‘Merry Christmas.’ This text, as the first data connection between a cellphone to a computer over a cellular network, marked the moment, the pivot point, when the smartphone revolution began. It was transmitted on the Vodafone network. Starting from that point, texting became the most popular smartphone application. Some 96% of smartphone users sent texts in 2016 — 8 trillion in all!
The Racal-Millicom partnership, having driven the cellular data network all along, changed its name to ‘Vodafone’ — a combination of the ‘voice, data and telephone.’ Thanks to the appeal of applications like texting and the convenience and portability of the voice and data pocket phone, the name “Vodafone” became the 5th most valuable brand in the Global 500 — helping the company grew into the world’s 7th most valuable company, by the year 2000. The power of the Voice and Data phone was finally recognized. The vision of Millicom, vindicated.20
By instigating these activities, Jan Stenbeck thus played a significant role in commercializing key elements that enabled the smartphone revolution. He 1.) initiated the first commercial portable cell phone network, 2.) he commissioned the first pocket phone and, 3.) he created the venture that built the cellular network that first transmitted data between a computer and a cell phone. He directed entrepreneurs in Waseca Wisconsin, Old Greenwich Connecticut, Surrey England and elsewhere to transform the two-way radio from a niche product into an omnipresent, ‘must have’ essential of modern life. They led an upheaval, an inversion that turned the ownership of phones upside down — from 8% with a telephone when the cell phone was first introduced — to an expected 90%21 by 2020. The pocket phone really was the phone for the rest of the human race.
Like every innovative genius, Steve Jobs stood on many shoulders. For this reason, when Apple CEO, Tim Cook calls the iPhone “one of the most important, world-changing and successful products in history,” he might also, in the same breath, tip his hat to those who made it possible.
2. Rypinski, Chandros. “Radio and Wire Data Communication — A Retrospective.” October 5 2007.
3. Hultén, Stephan and Mölleryd, Bengt. “Entrepreneurs, Innovations and Market Processes in the Evolution of the Swedish Mobile Telecommunications Industry.” Paper presented at the Eighth International Joseph A. Schumpeter Society Conference. Pg. 18. 28 June – 1 July 2000.
4. Andersson, Per and Sundh, Lars. Stenbeck. “Biography of a successful Businessman.” Modernista Press. 2012.
5. Garrard, Gerry A. “Cellular Communication: Worldwide Market Development.” Artech House. 1998.
6. Hultén, Stephan and Mölleryd. Bengt, ibid. Pg. 19.
7. Agar, Jon. “Constant Touch: a Global History of the Mobile Phone.” Totem Books. December 2004.
8. Forester, Tom. “The Information Technology Revolution.” MIT Press. Pg. 142. 1985.
9. The New York Times. August 7 2007.
10. Securities and Exchange Commission. “Millicom Prospectus and Proxy Statement.” October 20 1982.
12. Merriden, Trevor. “Rollercoaster, the Turbulent Times of Vodafone and Chris Gent.” Capstone Publishing. Pg 18. 2003.
13. Metcalfe, J. S., and Uwe Cantner. “Change, Transformation, and Development.” Heidelberg: Physica-Verlag. Print. Pg 333. 2003.
14. Garrard, Gerry A. Ibid.
15. Hultén,Staffan and Mölleryd, Bengt. Ibid. Pg 22.
16. “The History of GSM — Birth of the Mobile Revolution.”
17. Becket, Michael. “Excell unveils new portable telephone.” The Daily Telegraph. Pg 20. July 13 1987.
18. “The History of GSM — Birth of the Mobile Revolution.”
20. “The World’s 100 Largest Public Companies.” The Wall Street Journal. September 25 2000.
21. Ericsson Mobility Report. “90 percent will have a mobile phone by 2020.”