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Entrepreneurial Capitalism and Innovation:
A History of Computer Communications 1968-1988
By James Pelkey

Entrepreneurial Capitalism & Innovation:
History of Computer Communications
1968 -1988
By James Pelkey

This history is organized by three co-evolving market sectors and also standards making.
An overview of the schema is presented in the Introduction.

Ch. 1: Emergence
Ch. 3: Competition
Ch. 5: Market Order
Ch. 11: Adaptation

Ch. 2: Vision
Ch. 4: Arpanet
Ch. 6: Diffusion
Ch. 7: Emergence
Ch 8: Completion
Ch. 10: Market Order

Ch. 9: Creation

Ch. 12: Emergence



Chapter 3
Data Communications: Market Competition 1969-1972
Modems and Multiplexers

3.13   Data Communications 1972

As of year-end 1972, AT&T continued to dominate data communications although its estimated share of the modem market had dropped to 70%. [44] Not until early 1972 did AT&T offer a high-speed modem: its 4800 bps lease-line 208A Data Set. AT&T did not compete in the multiplexer market.

In 1972, modem sales, exclusive of those of telephone companies, were estimated at $38 million and multiplexer sales at $21 million. (See Appendix 3.1 Data Communications Market) Total sales of $59 million were up more than six times those of 1968, or a compounded annual growth rate of 55%. Ninety-seven companies sold modems, only nineteen sold high-speed modems (4800 bps or higher). Nineteen companies sold TDM’s and twenty companies sold the older technology frequency division multiplexers (five companies sold both types of multiplexers). Twenty-two companies sold both modems and multiplexers. Frost and Sullivan, the market research firm whose estimates and information are used in this section, forecasted in 1972 that modem sales would peak in 1976 at $67 million and multiplexers would peak in 1977 at $75 million.

The future would prove to be very different, however, for before 1988, modem sales would top $1 billion and multiplexer sales would exceed $500 million!

Returning to 1972, the leading independent modem firm, Milgo, had sales of an estimated $12 million; or more than 25% of all modem sales and more than 50% of high-speed modem sales. Milgo did not compete in the multiplexer market, having ended its OEM relationship with Timeplex at year-end 1971. Milgo’s success stemmed from having a broad modem product line and a sales distribution strategy using manufacturing representatives rather that hiring its own sales force. Manufacturing representatives are independent organizations that sell the products of many manufacturers to end users.

Codex had captured the role of technological leader with the introduction of its QAM-based 4800 bps and 9600 bps modems. Even so, since it declined to participate in the lower speed modem categories (for reasons of corporate credo), Codex would not overtake Milgo as market leader for many years. Codex was, however, the only company to innovate high-speed modems and TDM’s.

General DataComm joined Milgo and Codex as a public company in 1972. In that year, 70% of GDC’s sales would be to common carriers (telephone companies) and only 30% to end users.  Sales to Western Union would account for 42% of their sales. GDC had not yet broadened their product line to include modems.

Timeplex’s sales for 1972 doubled those of 1971, and, in February 1973, Timeplex would become a public company. Infotron, Paradyne, Vadic, UDS and Intertel remained modest companies struggling to survive.

ADS, the early star of data communications, was firmly under the control of North American Rockwell by year-end 1972, and had an uncertain future.

Some of the companies continued to compete. Ultronics had estimated sales of modems and multiplexers of $12 million. Western Union continued to be a purchaser of product used in its networks. Stelma’s sales persisted flat at roughly $15 million.

Finally, the great project war between AT&T and IBM heated up when IBM entered the market in December 1971 with a line of modems and communication processors. AT&T continued to dominate the market for computer terminals through its Teletype division of Western Electric. IBM was second to AT&T.


[44] All data in theis section from the Frost and Sullivan report “The Data Communications Market: Modems, Multiplexers and Communication Processors” dated December 1972. Frost and Sullivan was a highly-regarded market research firm.