Hayes Microcomputer Products - Competition

Competition

The modem market in the 1970s was very simple and stagnant. Modems tended to sell at US$1 per baud. Hayes saw no need to be different — the original Hayes 300 baud modem sold for US$299 retail. At that price point, Hayes could build a "Cadillac of modems", using high-quality components, an extruded aluminum case, and a plexiglas front panel with a number of LED indicators.

As the modem market expanded, competitors quickly copied the Hayes command set and often the Hayes industrial design as well. To compete with Hayes on price, early competitors manufactured modems using low-cost components that were often unreliable. Hayes quickly gained a reputation for high quality, and for a time held a 50% market share.

Also differentiating Hayes from its competition was the Smartmodem's use of the guard time. Hayes had patented this concept in 1985 in patent #4,549,302, the Modem With Improved Escape Sequence With Guard Time Mechanism, generally referred to as the "Hayes '302 patent". Hayes licensed the guard time to other manufacturers for $1 a modem – a charge which competitors derisively termed the "modem tax". A number of manufacturers banded together and introduced the Time Independent Escape Sequence, or TIES, but it was not as robust as Heatherington's system and never became very successful.

In 1982, at the Spring Comdex in Atlantic City, Hayes introduced the Bell 212-compatible Smartmodem 1200 for $699, the first practical all-in-one 1200 bit/s Bell 212-compatible modem. The earlier design was redesignated the Smartmodem 300. At the time, Hayes was one of the few modem companies with the capital and engineering wherewithal to develop entirely new modem architectures. However, this was only a limited competitive advantage, since it was not long before companies offering Hayes "clones" introduced derivative 1200 bit/s models of their own.

The 1200 bit/s market existed for a relatively short time; in 1984 the CCITT introduced the v.22bis standard for 2400 bit/s operation. This was the first time that the CCITT's standard predated Bell's introductions, avoiding compatibility issues that had plagued earlier standards. Modem companies quickly incorporated v.22bis into their product lines. Hayes was no exception; the company introduced its v.22bis Smartmodem 2400 at US$549 in 1985 (the 1200 bit/s Smartmodem also remained available at a lower price point). Competition drove prices rapidly downward, and by 1987 a clone 2400 bit/s modem was generally available for around US$250. After 1987, modems increasingly became a commodity item.