Data Communications: Emergence 1956-1968
Modems and Multiplexers
1.1 Beginnings of Modem Competition: Codex and Milgo 1956-1967
Starting a company does not always begin
with a grand vision of the future. Sometimes the motivation can be wanting
simply to do what one enjoys most. Other times it might be the unwillingness
to work for others. More often it is some odd combination of reasoning
and feeling that is less important that having acted, as if what else
would one have done. Such was the case for Jim Cryer and Arthur Kohlenberg
in 1962 when their employer, Melpar Electronics, informed them that they
were closing the advanced research laboratory they had been running as
director and chief scientist, respectively. Even though offered the option
to move to Virginia, both men had little desire to leave the Boston area.
Rather they believed that they could win technology development contracts
being let by government agencies. So they incorporated a new company,
Codex, and joined thousands of other companies swept up in the Federal
government's funding of technology innovation.
The early 1960’s were a remarkable period
for scientists and engineers with an entrepreneurial itch. Federal government
funding for technological innovation seemed bottomless. Following President
John F. Kennedy’s challenge in May 1961 to put a man on the moon, funding
for advanced technologies surged again, adding to the sizable increases
that began after World War II when military spending grew to counter
the global threat of the USSR and communism. One of the most important
investments in the history of information technologies was the Air Force’s
SAGE (Semiautomatic Ground Environment) project; an air defense system
undertaken in 1951 to detect Soviet aircraft coming over polar routes.
When the USSR launched Sputnik in October
1957, US fear shifted into over-drive. Science
and engineering became instant national priorities.
In 1958, the ARPA (Advanced Research Projects Agency)
and NASA (National Aeronautics and Space Administration)
were created and monies flowed to technology as
never before. Then came President Kennedy’s rallying
vision in 1961. The large government defense contractors
found themselves too busy to compete for every
new contract, nor able to maintain technical superiority
given the explosion in new technologies. Opportunities
lay everywhere for a few scientists and engineers
to form a company and win development contracts,
even production orders. The Federal Government
effectively boot-strapped technological innovation
by playing both venture capital investor and ultimate
Cryer and Kohlenberg knew just such an
opportunity: the Air Force wanted better error-correcting codes for digital
transmission over telephone lines. They also knew Robert Gallager, then
a young professor at MIT, and his graduate student, Jim Massey, had developed
new error-correcting techniques, thought a sure bet to secure a development
Their instincts were right. Soon they had
a contract to develop exotic error-correcting codes
for the Air Force’s Ballistic Missile Early Warning
System (BMEWS): the successor to SAGE. BMEWS generated
radar data in Northern Canada that was then transmitted
over telephone lines to computers in the States.
The long telephone lines frequently experienced
noise, or worse yet, power outages, that corrupted
or destroyed the data being transmitted. Error-correcting
codes were needed to restore the lost data. Better
codes required more of the total capacity of the
communication lines, or bandwidth, leaving less
bandwidth for radar data. More powerful codes also
stimulated the need for faster modems: the devices
that transmit the discrete 0's and 1's of digital
data, or information, over the continuously varying
analog voltage of telephone lines. (See Exhibit
Modems were first innovated by AT&T
Bell Labs for the Air Force as part of the SAGE project. Those modems
transmitted data from remote radar sites in Canada to IBM 790 computers
in the United States at the speed of 2000 bits per second (bps).
A paper, "Transmission of Digital
Information over Telephone Circuits,"
describing this first modem implementation was published in the Bell
System Technical Journal in 1955.
The name modem comes from its function: modulating,
or suppressing, information onto a telephone line,
and then demodulating, or recovering, the
modulated information from the line. The design objective
is to accurately transmit as many 0's and 1's as
possible in a fixed period of time. Since each 0
or 1 is a bit, the convention is to rate modems by
how many bits per second (bps) they transmit.
The faster the modem, the more challenging it is
to innovate; particularly with lease-line modems, the
ones of interest to Cryer and Kohlenberg.
Modems come in two types: dial-up or lease-line.
Dial-up modems are used with the public switched
telephone network (PSTN, or more familiarly, POTS:
plain old telephone system). Lease-line modems
are used with leased lines (also known as private
or dedicated lines). The distinction is important
for dial-up modems make connections when used and
only incur telephone line charges for the time
connected. The technical challenge arises from
the fact that a user may not be using a dial-up
modem from the same manufacturer as the one being
connected to. Hence, inter-compatibility or inter-operability,
and the role of standards, are crucial. Lease-line
modems, on the other hand, always remain interconnected
over a leased line and bear the cost of the line
whether in use or not. Since lease-line modems
are invariably from the same manufacturer, standards
are less important than are the questions of speed
and reliability. The two types of modems require
very different technologies to be mastered.
The modem AT&T introduced in February
1958, the Bell System Data Set 103, was a 300 bps dial-up modem. At the
time, no one thought 300 bps unduly restrictive as neither computer terminals
nor most printers operated at faster speeds. Next AT&T introduced
the 1200 bps Data Set 202 series, again dial-up modems. Finally, in 1962,
they announced the 2400 bps Data Set 201 series for leased or private-lines.
Throughout this period, AT&T had little
competition. By 1965, however, competition emerged
in lease-line modems where AT&T did not posse
the monopoly powers they did for dial-up modems.
This poised little immediate concern to AT&T
as leased lines represented approximately 2 percent
of telephone line use.
But speed had mattered from the beginning.
Even before taking possession of their first AT&T modems in the 1950’s,
the Air Force wanted faster ones. The need for speed came from wanting
to create and maintain a worldwide command and control system for air
defense. Brigadier General H. R. Johnson, Director of Point to Point
Planning for Headquarters Airways and Air Force Communications Systems
(AFCS), USAF, from 1950 to 1955, remembers a senior member of his technical
staff, Bill Pugh, calculating: “a suitable goal would be 10,000 bits
per second in a voice band” for modems. That goal was then set forth
in 1956 in: “the proposed General Operational Requirement that AFCS sent
to the Air Force, which subsequently became the research document for
the Air Force Communications System.”
Yet a decade later, reliable modems operating
at that speed remained an illusive goal.
Such was the background in 1966, when
Cryer and Kohlenberg began taking seriously the idea of Codex developing
a lease-line modem to sell to the Air Force. That they knew the Air Force
yearned for higher speed modems for their air defense system made the
opportunity seem a sure bet. Only to-date, they had little experience,
or for that matter any real interest, in selling products. Their competence
lay in solving difficult technical problems, not in managing what they
imagined as the boring business of stamping out the same products, day-in,
day-out. The very prospect demeaned Codex’s proud corporate ethos of: "if
not technically challenging, it was not worth doing."
Even so, Cryer and Kohlenberg worried about
Codex’s dependence on the feast-or-famine nature
of government contracts; when sales could be $1
million one year and nothing the next. Selling
a product, such as modems, did have imagined advantages.
In discussing the subject with MIT’s Gallagher,
Cryer and Kohlenberg learned a high-speed 9600 bits per second (bps)
modem - four times faster than the fastest commercial modem then available
from AT&T - was possible. Wanting to know how, Gallagher told them
about Jerry Holsinger, a 1965 MIT Ph.D. graduate whose thesis had been
on high-speed data transmission over telephone lines. He last heard Holsinger
had left MIT Lincoln Labs and was employed by a small R&D shop on
the West Coast named Defense Research Company (DRC). Intrigued, Cryer
and Kohlenberg convinced themselves that a 9600 bps modem would give
Codex the competitive edge and hopefully the financial security they
needed to be successful while upholding their proud tradition of solving
On meeting Holsinger in early 1967, Cryer
and Kohlenberg discovered he had already formed a company, Teldata, and
was soliciting investment from venture capitalists or anyone else who
had money. Holsinger claimed he had a working prototype of a 9600 bps
modem, one developed at Defense Research Corporation with funding from
the National Security Agency (NSA).
He confided his original design had not worked
on normal telephone lines, but he had perfected
the design, and had a working breadboard prototype.
All he needed to do was convert his modem to printed
circuit boards to have the world’s first 9600 bps modem.
Holsinger thought of himself as an entrepreneur,
not an employee working for a salary or as a research scientist. Only
he was having trouble convincing others that they should invest their
money with him, not surprisingly given he lacked business experience
and was only two years out of graduate school. Cryer and Kohlenberg persuaded
Holsinger they were serious about building a modem business and, lacking
an alternative, Holsinger agreed to sell Teldata to Codex in May 1967.
Codex acquired 82.36% of Teldata's shares for $94,000.
Codex embarked on its journey into modems
by way of acquisition. Many other defense contractors and electronic
companies, like Rixon Electronics, Collins Radio and Stelma, began selling
modems, like AT&T had, by using technology they developed for the
government. The first independent company really to challenge AT&T,
Milgo Electronics Corporation (Milgo), hired a talented individual, Sang
Whang, and funded the project internally.
Monroe Miller and Lloyd Gordon, hence
the name Milgo, had served the defense agencies and NASA ever since founding
their company in 1956. They, like Cryer and Kohlenberg, learned that
NASA and military agencies wanted faster modems. In 1965, they hired
Sang Whang out of Brooklyn Polytechnic Institute to develop a line of
modems to sell to the Kennedy Space Center for down range instrumentation.
In 1967, Milgo introduced its commercial 2400 bps modem, the 4400/24PB.
Edward Bleckner, head of Milgo’s efforts to enter the modem business,
hired an executive search firm to find a seasoned sales/marketing executive
with modem experience. They luckily caught up with Matt Kinney on the
telephone as he was stranded in an airport by a snowstorm. He remembers:
“They asked me if I'd like to come and talk to them about a job, and I said: "Where
are you?" They said: "Miami, FL." The answer: ‘You
bet your sweet life!’"
In joining Milgo in January 1968, Kinney
brought to Milgo needed experience in selling commercial data communication
products and an understanding that significant changes might soon propel
the demand for data communications; that is, if Tom Carter won his case
against AT&T. Kinney remembers:
"Tom Carter is one of
my oldest and dearest friends. Hell I knew in '66 that if Carter prevailed,
which seemed highly unlikely at the time, that the industry would take
back to top
"Codex -- The Early Days,"
Multipoint, p.2, Codex publication
Engineering and Science in the Bell System, p.420
This paper indicates the first modem operated at 650 bps,
not the 2,000 in “Engineering and Science in the Bell System. For
many years, AT&T called modems Data Sets.
Baud is a more technical measurement of modem transmission.
Input bits to a modem are accepted in groups of bits, from one
to six, called symbols. Baud rate is the number of symbols per
second transmitted. However, bits per second, or bps, is
the preferred convention and the one used herein.
There are other types of modems, but the focus is on telephone
modems and the two dominant types by far are dial-up or lease-line.
G.David Forney, Jr., Robert G. Gallager, Gordon R. Lang, Fred
M. Longstaff and Shahid U. Qureshi, “Efficient Modulation for Band-Limited
Channels,” IEEE Journal on Selected Areas in Communications, Vol.
SAC-2, No. 5, Sept. 1984, p. 632-633. The 201 was the first synchronous
modem; the data is accompanied by the clock signal. The reader
interested in a more technical discussion of modems is referred
to” John A. C. Bingham, “The Theory and Practice of Modem Design,”
John Wiley & Sons, 1988
Interview with author: May 3, 1988
Carr interview with author: April 6, 1988
NSA wanted to transmit digitized speech over telephone circuits
A breadboard is when the semiconductor logic is wired together,
not interconnected with solder as on a printed circuit board.
In June 1968 they would acquire the balance of the shares
and merge Teldata into Codex.
Kinney interview March 9, 1988. Tom Carter was the aggressor
against AT&T in the Carterfone Case( See Chapter2).