Mukilteo company makes spy-proof phones

Steve Hill discovered his company’s phones were used in the White House after President George W. Bush left office.

The owner of Teo Technologies in Mukilteo was contacted by the George W. Bush Library and Museum.

The Dallas, Texas, library was building a replica Oval Office and wanted to know if Teo Technologies would donate phones that matched what had been there during the Bush years.

Teo Technologies has sold tens of thousands of phones to the federal government, including to the National Security Agency. That doesn’t mean the Mukilteo company knows where all the phones land.

“The NSA doesn’t reveal anything about anything they buy,” Hill said. “You just know some government agency purchased some phones and they end up somewhere at some point.”

Hill donated the phones in exchange for photos. He believes his company’s phones were used in the Oval Office at least through the first years of the Obama administration.

Building phones for the NSA, CIA, FBI and the U.S. Department of Defense comes with challenges. Any phone that’s used in a facility that handles classified documents needs to be secure and tested to ensure there can be no wiretapping.

“A typical phone … even when it’s on hook, when the phone is in the cradle and it’s not (used) in a phone conversation, someone who can get access to the wiring somewhere in the building can actually pick up audio signals from the room,” Hill said. “Not from any means you can even imagine.”

The most secure phones are encrypted, but those are also the most costly. Teo Technologies provides secure phones one step below at a cost of $600 per phone.

“If you have a phone in a room and you only use it to make non-secure phone calls out for pizza or whatever, the phone in the room has to be certified to meet these standards,” Hill said. “NSA does the testing and it’s pretty intensive and they’re very specifically designed equipment so there’s no possibility to pick up a signal.”

It took Teo Technologies two to three years to build phones to meet those standards. So how did the company build spy-proof phones?

“Well, that’s kind of the secret sauce,” Hill said. “There’s a lot of design precautions you have to put in there — specific disconnect circuitry — so that when the phone is idle there’s no chance that there’s any audio signal that can be picked up.”

Teo Technologies, at 11609 49th Place W, employs 40 to 50 people. It has a long history in the tech sector in the Puget Sound region.

While cellphones have changed the landscape of how most people make calls, businesses and government agencies still rely on desktop phones. (Many businesses and agencies are moving to “soft phones,” or software that allows people to make calls over the internet.)

Many telephone companies import phones built in Asia, and Teo Technologies does as well. But the high-end phones, including the secure ones, are made at the Mukilteo plant, said Gene Dodson, the company’s director of finance and administration.

“We’re one of the last made-in-the-USA telephone manufacturers here that I’m aware of,” Dodson said.

Secure phones for the government and for other businesses remain an important part of the business, but Teo Technologies focuses more nowadays on unified communications.

That’s putting together phones, instant messaging, voice mail, presence information and video into a single platform for businesses and governments, such as cities and school districts. Unified communications make up about half of Teo Technologies’ business.

“We’ve made the transition from a what you could call a widget supplier, from where we’re selling the phones and parts of the phones, to more of a service business,” said Lisa Nowak, the company’s partner success manager. “That’s where unified communications comes in.”

Teo Technologies is owned solely by Hill. He doesn’t release revenue figures. He said he likes to keep a smaller company so he knows everybody’s name. The company can do the work of a larger corporation with strategic relationships with outside contractors, vendors and suppliers.

That’s one of the reasons the average tenure of the company is 16 to 17 years, Dodson said. It used to be a quarter of a century.

Teo Technologies was originally named Tone Commander when it opened in 1972. The company built components for Western Electric, which was a supplier for Bell Telephone Co. Hill joined the company in 1976, getting summer work while he was still going to college.

“That was right after one of Boeing’s ups and downs, and it was really difficult to find jobs in the tech sector at all,” Hill said. “I was literally going through the phone book — the Yellow Pages, back in the day — and looking for anybody who I thought might be in the electronics business.”

One business recommended Tone Commander. Hill called the company looking for work and said he didn’t care what he was paid: “The guy said, ‘You don’t care what we pay you?’ I said, ‘I don’t care, I need the experience.’ He said, ‘You really don’t care what they pay you? I think they’ll like that.’”

The breakup of Bell Telephone Co. in the 1980s had a major impact on Tone Commander. The Baby Bells — the smaller, regional companies formed from Bell — could only sell services, not products. Tone Commander shifted to selling attendant consoles for the front desks at businesses. It was a small piece of a big market.

A couple of years after the breakup of Bell, Hill left for another tech company in the Puget Sound region. In the early 1990s, he heard from former co-workers that Tone Commander was for sale.

He inquired about buying the company but was told Tone Commander already had a letter of intent for a sale. When that fell through, Hill made the bid in 1992.

“I borrowed money, I mortgaged my house, I did a little bit of everything,” Hill said. “I arranged a buyout over time. It wasn’t a complete cashout.”

After he bought the company, Hill moved the business from Redmond to Mukilteo. The company had been just a couple of blocks from Microsoft, and traffic was becoming impossible. By moving to Mukilteo, the company was able build its own 32,000-square-foot facility.

Another change was in the works at the same time: the internet. All of a sudden, businesses and government agencies needed to use their phone lines to connect with the internet. Tone Commander — as it was still known at the time — evolved into helping companies connect.

“We reinvent ourselves continuously,” Hill said. “That’s the name of technology, really. The technology demands you keep adjusting. If you don’t reinvent and adjust to new markets, you’re going to die off. We’ve done that continuously.”

In 2009, Hill renamed the company Teo Technologies. Tone Commander was too tied to touch-tone technology from the 1980s.

“It seemed a little anachronistic to us,” Hill said. “It seemed like maybe both change from the older name, but also get to a name that didn’t imply a particular technology or a particular business model or segment we were in.”

Through its contacts with the Baby Bell companies — and the companies that eventually emerged from them, including AT&T, Verizon and CenturyLink — the company would get referrals for work.

That’s what led to the company picking up orders from the federal government. At one point in time, Teo Technologies had 16,000 telephones in the Pentagon, Hill said.

The Department of Defense doesn’t require all of their phones to be secure phones, but phones need to meet their stringent network and interoperability requirements.

“They have their own closed network, but they’re super-concerned about the security of that network and interoperability and you can imagine there are millions of endpoints on their network, all over the world at their military bases, and there are tons of people hooked onto their network,” Hill said.

Teo Technologies started selling secure phones in 2000. The company remains certified through the National Telephone Security Working Group to provide secure phones to the federal government.

The company sells some phones directly to the federal government and some through resellers. Teo Technologies also makes commercial secure phones for companies worried about corporate espionage.

While technology continues to change, Teo Technologies has proved to have staying power for a very non-technical reason.

“You can think about all the bleeding-edge technologies, but all of the bread-and-butter companies that are out there that we do business with want a solid reliable business from a provider that is there from them,” Hill said. “That’s what we focus on is the relationships both with our partners and customers, that’s the key for our company.”