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%. 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.
