Advanced Fibre Communications, Inc - Founding the Company in 1992

Founding the Company in 1992

AFC was founded in May 1992 by Donald Green, James Hoeck, John Webley, and Henri Sulzer. Hoeck and Webley were engineers with DSC Communications, who struck out on their own to design a product ultimately named the Universal Modular Carrier, or UMC 1000. The UMC 1000 was a variation on digital loop carrier technology (DLC) developed in the early 1980s, which used fiber to connect highly concentrated groups of customers, such as those found in a housing development or a rural community, to a telephone company's central office. Because fiber was not used in many locations, Hoeck and Webley developed the UMC 1000, which could use traditional copper wire to connect as few as six and as many as 672 subscribers.

Hoeck and Webley enlisted Donald Green, because of his reputation, management skills, and proven ability to attract venture capital. Green was regarded as the founding father of "Telecom Valley"—Sonoma County, California, which became the home of a number of telecom services companies, many of which had ties to the British-born Green. After receiving an engineering degree from the British Institute of Electrical Engineers, he worked as a design engineer, first with British Telecom, and later with U.K.-based RCA Standard Tele Cables and Lynch Communication Inc. He began his career as an entrepreneur in 1969 with the launch of Digital Telephone Systems, a Novato, California-based company that developed digital loop carriers for long distance signals. He later sold the business to Harris Digital Telephone Systems, where he served as vice-president until his first attempt at retirement in 1986. A year later he founded another start-up company, Optilink Corporation, a Petaluma company that developed a fiber digital loop carrier system called Litespan, supplemented later by an expanded version called Starspan. (Hoeck and Webley were both Litespan engineers who left in 1990 to cofound a design consulting company, Quadrium, before starting AFC.) In 1990 Green sold the business to DSC Communications, a Plano, Texas-based company, for $54 million. After staying on as a vice-president of DSC and president of DSC Optilink, in 1991 he retired a second time, only to change his mind a year later when he agreed to become involved in the creation of AFC.

One of the first moves that AFC made in 1992 was to enter into an agreement with the government of Taiwan and its Industrial Technology Research Institute (ITRI) to jointly develop telecommunications technology. It appeared to be a good deal at the time, bringing the young company much needed funding, engineering resources, and credibility. In exchange, ITRI and its member companies received the right to sell a European version of the UMC 1000 to markets outside North America on a royalty basis until 2002, after which ITRI members would be allowed to sell the technology anywhere in the world without paying a royalty. Because the two partners were competing against one another in a number of international markets, tensions developed, and eventually led to litigation. Before matters reached that point, however, AFC was already embroiled in legal problems.

In April 1993, Green sued DSC, claiming that the company still owed him millions of dollars for the stock he sold three years earlier. Several months later, in July 1993, DSC sued AFC for $20 million, claiming that it owned the UMC 1000 because the system relied on proprietary information used in the Litespan and Starspan products. Green responded by having AFC sue DSC, charging the Texas firm with violating antitrust provisions and engaging in sham litigation and industrial espionage. Green told Fibre Optics News that DSC was "attempting to put a competing company out of business by inappropriately using the legal system." He also suggested that DSC did not even care if it won the case: "All they have to do is spend enough of our money that we can't continue in business."