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Chapter 5 - Data Communications: Market Competition 1969-1972

5.9 Firms and Collective Behavior: The Creation of the IDCMA 197

For Carr and Codex the upcoming International Communications Association (ICA) trade show in Atlanta in June 1971 couldn’t have been better timed. By far the largest industry trade show, the ICA served as a giant magnet to decision makers and purchasing agents of firms contemplating the use of data communication products. With every significant vendor assembled under one roof, customers could comparison shop, viewing the latest and greatest products every firm had to offer, especially those from firms not yet advertising or too small or too new to have established adequate product distribution. And for those attendees simply trying to make sense of the dazzling explosion of products promising to save money, improve performance, or revolutionize how corporations used computers, seminars and tutorials conducted by company representatives or industry consultants ran back-to-back from morning to night. In compressing the normally diffused interactions of buyers and sellers into a three-day public fishbowl, a young company’s future easily could rest on the outcome of this one show, and Carr intended to make ICA an unqualified success for Codex and the 4800.

However, AT&T’s proposed private-line modem tariff announcements drowned out any hopes that the 4800 would dominate the buzz of ICA: AT&T wanted all customer-supplied private-line modems to use DAAs, and it intended to slash the lease rates of its modems. Since third-party modems had been safely connected to private-lines for years, show goers wondered why the sudden change in AT&T policy other than to justify their inane policy requiring DAAs for dial-up modems? AT&T appeared to be closing the barn doors after the proverbial horses had escaped. One question dominated every conversation: What could, or would, the independent modem manufacturers do to fight this blatant attempt to squash competition and their futures?

The small dial-up modem manufacturers couldn’t have been happier and did all they could to stir the controversy. Maybe now the larger private-line modem firms would conjoin their fight, finally realizing that if they did not fight AT&T tooth and nail, they might all be put out of business. It seemed that no matter where one turned, the conversation remained the same: What could be done?

Outraged along with everyone else, Carr tried to remain focused, knowing if he didn’t capitalize on the early success of the 4800 before competitive products emerged, it mattered little what AT&T did because Codex might not be around to compete. Still losing money and having invested time and scarce resources into having a new 9600 bps modem, Carr argued that as egregious as the proposed tariffs were, they had little real effect on Codex. Even if you added $10 a month to the cost of buying a $5,000 to $10,000 modem, it did not change the significant economic advantages of ownership. Since AT&T only leased their modems. Equally, AT&T could lower their lease rates as called for in their new Information System Access Line (ISAL) pricing, but their new 4800 bps modem did not even bear comparison to Codex’s 4800. Moreover, AT&T did not offer a 9600 bps modem. So yes, AT&T needed to be reined in, but for now that had to be left for others as Carr had neither the time nor money to join the fight.

Edward Bleckner and Matt Kinney, President and Vice President of Sales of Milgo, on the other hand, had urged modem manufacturers to protest AT&T’s filings with the FCC from the start and now carried their crusade to the floor of the convention.38 As executives of the largest independent data communications company – sales of modems were $9.8 million in 1970 out of total revenue of $14 million – they knew they did not have the means to fight AT&T on their own, yet would have to assume a leadership role if any coordinated response was to be made. But how were they going to stimulate collective action of competitive firms without running into legal problems?

As Bleckner and Kinney canvassed the other firms, they quickly found allies in Chuck Johnson and the executives of General DataComm (GDC). Since GDC also sold dial-up modems, they already fought the use of DAAs and welcomed the idea of new comrades in arms. When Bleckner and Kinney approached Joe Looney, President of Paradyne, they found him receptive, but with little time or money to contribute since Paradyne had just begun selling product. On the other hand, Looney agreed that if AT&T had its way, Paradyne might not have a future. So, yes, he was interested enough to listen to what might be proposed. Even Carr conceded the importance of unanimity and agreed to attend a group meeting.

Wanting to reach agreement on a plan of action before the show ended, Bleckner and Kinney invited executives of the other modem manufacturers to join them in their hotel suite after the close of the exhibitions one day. In an act of true mutualism, nearly a dozen firms agreed to form a trade association called the Independent Data Communications Manufacturers Association, or IDCMA. The purpose of the IDCMA would be to fight AT&T and lobby for market competition. Four companies, Milgo, GDC, Codex and Paradyne would be the four founding members with Bleckner, Johnson, Carr and Looney serving as the initial Board. One of their first acts would be to hire legal counsel and contest AT&T’s intentions to require DAAs for private-line modems – AT&T soon withdrew its filing. The IDCMA proved essential to the coming into being of the data communications market-structure and of users winning their rights of attachment and connection to AT&T’s telephone network.

The spirit of cooperation exhibited by the formation of the IDCMA did not affect the month-to-month slugging it out for sales, however, and 1971 proved a struggle for the nearly one hundred data communications firms.

  • [38]

    “PBX Suppliers Face Stifer AT&T Policy,” Electronic News, June 7, 1971 p. 1