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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 Five
Data Communications: Market Order 1973-1979
LSI Modems, Statistical Multiplexers and Networks

5.5   Codex: The LSI Modem and Competition 1974-1975

By year end 1974, Carr and Pugh’s decision to invest in LSI semiconductor technology took on new meaning. First, AT&T finally introduced a 9600 bps modem: the 209A that leased for $230 per month. Two other competitors also began selling 9600 bps modems: Paradyne (M-96: $6,500) and ESE Ltd., a Canadian Corporation (96/QMP: $7,000). The even more crowded 4800 bps modem market numbered at least a dozen competitors included 1974’s new entrants, IBM and Intertel. No longer did Codex and Milgo exclusively control the rarefied realm of high-speed modems. Also of concern was IBM’s announcement of its Systems Network Architecture (SNA) providing a single standard access method and link control for terminals connected to IBM host computers. [30] While not an immediate threat, it implied computer firms eyeing control of data communications in competition against AT&T. The future looked bleak for independent modem manufacturers.

As bleak or not as the future picture was, Forney had committed to have the LSI modem ready for introduction by the fall, which was when management expected the Milgo announcement. As a reminder that they were not alone in anticipating the importance of LSI technology, in April 1975, Paradyne announced an “all-digital 9600-BPS “stripped” modem being manufactured on special order for Datran,” for its digital data network. [31] It would be sold OEM for prices as low as $2,000. Forney lost little sleep over this announcement for he knew his modem was anything but stripped down. His technical team had conspired with their counterparts at Rockwell to significantly upgrade the C series design, not simply converting the C design to LSI as had been negotiated by the “business people.”

At the fall 1975 Interface trade show, Codex, with fanfare befitting their accomplishment, introduced their L series modems. They caught the world by surprise: here was a 9600 bps modem (LSI 9600) the size of a shoebox and for only $8,500. [32] Carr remembers with excitement:

“We expected we were in a death race with Milgo.  In fact, we went to the show sure we would see theirs, and we were going saying:  "Whew, at least we're going to be in the same show," and they didn't have anything, and they didn't have anything for over a year after that, and we just -- I mean, it just wiped them out. We heard, later, from people that worked at Milgo, that the day we introduced it, they had a 12 or 13 hour meeting, and concluded that we had put them out of business. it was such a major shock to them.

It was an enormous cost -- it was probably the biggest single thing Codex ever did.”

Fear that Milgo would beat them to market blinded Carr and management to the impact announcing the L series would have on their existing sales of C series modems. Carr recalls:

“The problem we had was we introduced the L-series in the fall of '75, which was during the '74 -'75 downturn, and we weren't in product. We had made some, but we weren't really in production, and all the C-Series business dried up, because everybody wanted the L's, so we had, in the fourth quarter of '75, a really -- that's the closest Codex came to losing money from the time we turned it around in '72.  It was a very hard lesson.... But we just didn't think we dared wait. Then we found out, much to our chagrin, we were a year early.”

In 1976, the QAM technology that Codex had brought to market would become the CCITT international 9600 bps private line standard. While this made the QAM technology public and thus invited competition, it also confirmed Codex’s technical leadership and was a coup over AT&T.

[30] “Before the introduction of SNA, IBM had more than 200 communications products requiring 35 teleprocessing access methods and 15 different data link control procedures. The goal of SNA was to provide a unified approach to IBM networking by introducing a single standard host access method and link control procedures. The use of these standards would achieve terminal compatibility at the communications line level as well as independence between network devices (e.g., terminals) and host applications. This represents a major step forward in IBM’s recognition of networks as a vital element of future computing systems,” Data Communications in the ‘70s: A Decade of Birth, Computerworld, Jan. 7, 1980, p. 41

[31] Electronic News, April, 21, 1975, p.

[32]Carr: “I'll never forget, we introduced it in Europe and our distributors in Europe used to drive me up a wall, because if Milgo would do some small thing like put an indicator on each mux channel, they would tell us that without that, we were no longer the technological leader and this and that. So we introduced this thing in a hotel, and we had all the distributors in the room, and I arranged two of these L-Series on a table with a tablecloth over them, and they all knew there was a new modem coming, but they didn't know anything. We had really kept it tight to our vest, and they were all looking at the shape of this, and when I pulled the cloth off and they saw there were two in there, it just absolutely blew their minds. Absolutely blew their minds. And I said to them, I'll never forget, I can almost give you a direct quote, I said: "If you fuckers tell me one more time that I'm not the technology leader after today, I'm going to fire you. I don't ever want to hear that again."