City of Light: The Story of Fiber Optics

THREE GENERATIONS IN FIVE YEARS 199
down ITT’s American fiber operations, as well as claiming financial damages.
If Corning threatened to play that card if the suit came to trial, ITT may have
swallowed hard and signed a license rather than risk being shut out of the
American market.
With that suit settled, Corning started looking at other fiber companies.
They could do nothing about AT&T, but they could go after other competitors.
Valtec was at the top of the list, and Corning filed suit in July 1982. 111
Valtec was growing, but it still was losing money—$1.3 million in the last
three months of 1982—and its patent position was weak. M/A Com held on
for a few months, but in early 1983 it bailed out, selling its interest to Philips.
112 The Dutch giant soon realized that it couldn’t win against Corning’s
formidable patent position, and put Valtec up for sale. With Corning’s lawyers
closing in, Philips was desperate to close a deal before the courts shut down
its fiber plant. They turned to ITT, now licensed for the Corning patents and
needing production capacity to fill a big contract from AT&T.
With 14 days to go to the deadline, ITT sent three executives to Massachusetts
to close the deal. The three worked day and night, amazed to find
how much Valtec had achieved with minimal resources. They closed the deal
on a Sunday morning, facing a midnight deadline, but that didn’t end the
crisis. Many top Valtec people didn’t want to work for ITT. Jim Kanely, the
cable industry veteran who had rebuilt Valtec, quit immediately as president.
Others followed, including Dobson and Hudson. 113 Paul Lazay, who had left
Bell Labs to try his hand at business, shuttled from Virginia to Massachusetts,
trying to reassure employees and integrate operations. 114
Corning turned its patent artillery elsewhere and soon forced small companies
to surrender. The toughest battle was with the Japanese giant Sumitomo,
which had built a fiber plant in North Carolina. Corning needed heavyduty
maneuvering with the courts and the International Trade Commission
to extract hefty damages and force Sumitomo to idle its plant until the last
of Corning’s fundamental patents expired. 115
A Technology Takes Off
The fiber-optics market took off in the mid-1980s. The deregulation of longdistance
telephone service in America created a market for long-distance
transmission. MCI, Sprint, and smaller carriers spread tendrils of fiber networks
across the country, along railroad lines, gas pipelines, and other rights
of way. AT&T was not far behind.
As the largest independent American maker of long-wavelength lasers,
Lasertron was able to cash in on the growing market, although not without
problems. The Reagan Administration had settled into Washington, and fresh
Cold War chills blew through the Pentagon. Military planners counted on
American technology giving them an edge on the battlefield, and they waxed
paranoid about potential enemies gaining American technology. Their main
worry was the Soviet Union, but the Chinese were communists, and com-