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The next major advance in modems was the Smartmodem, introduced in 1981 by Hayes Communications. The Smartmodem was an otherwise standard 103A 300-bit/s modem, but was attached to a small controller that let the computer send commands to it and enable it to operate the phone line. The command set included instructions for picking up and hanging up the phone, dialing numbers, and answering calls. The basic Hayes command set remains the basis for computer control of most modern modems.

Prior to the Hayes Smartmodem, dial-up modems almost universally required a two-step process to activate a connection: first, the user had to manually dial the remote number on a standard phone handset, and then secondly, plug the handset into an acoustic coupler. Hardware add-ons, known simply as dialers, were used in special circumstances, and generally operated by emulating someone dialing a handset.

With the Smartmodem, the computer could dial the phone directly by sending the modem a command, thus eliminating the need for an associated phone instrument for dialing and the need for an acoustic coupler. The Smartmodem instead plugged directly into the phone line. This greatly simplified setup and operation. Terminal programs that maintained lists of phone numbers and sent the dialing commands became common.

The Smartmodem and its clones also aided the spread of bulletin boards systems (BBSs). Modems had previously been typically either the call-only, acoustically coupled models used on the client side, or the much more expensive, answer-only models used on the server side. The Smartmodem could operate in either mode depending on the commands sent from the computer. There was now a low-cost server-side modem on the market, and the BBSs flourished.

Almost all modern modems also do double-duty as a fax machine as well. Digital faxes, introduced in the 1980s, are simply a particular image format sent over a high-speed (commonly 14.4 kbit/s) modem. Software running on the host computer can convert any image into fax-format, which can then be sent using the modem. Such software was at one time an add-on, but since has become largely universal.

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