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. 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. 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. 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.
