Can Cisco be a video star?

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But Cisco's videoconferencing package is considerably less expensive than competing products from Hewlett-Packard and others. HP launched its videoconferencing product, Halo, a year ago. Like Telepresence 3000, Halo requires a special room with three high-definition screens and a full array of audio and visual equipment. HP's set-up costs $425,000. HP also manages the data service for its customers, charging $18,000 per month for each data connection.

"There is no question that HP's solution is expensive," Daley said. "At least Cisco's is cheaper, and they can also tie nicely in with their unified communications platform. But I still only see this as something that will be used in the executive suite and not by average workers."

"I still only see this as something that will be used in the executive suite and not by average workers."

--Ellen Daley, analyst, Forrester Research

But Cisco and its partners, like AT&T, insist that videoconferencing hardware and service pay for themselves. Companies can cut travel expenses and operate more efficiently because more people are in the office instead of on the road, they argue.

"It won't replace business travel completely," DeBeer said. "But if I am Daimler-Benz buying Chrysler, it would probably cut down on the number of times I had to fly planeloads of people back and forth between Detroit and Germany."

Joe Weinman, a strategy and emerging services vice president at AT&T, backed that notion. He said companies spend hundreds of thousands of dollars on travel expenses each month. Reducing that travel even by a fraction can translate into significant savings.

"When I go on a trip, I can easily spend $1,000 to $2,000 just on airfare," he said. "We're at a tipping point, where the high-definition video technology is so good that virtual meetings are worthwhile. So eliminating even some of this travel, companies can make back what they spend on the equipment and service pretty quickly."

Consumer pitch
Cisco also plans to tweak its technology for consumers. Within the next two years, Telepresence should be integrated into set-top box technology that the company acquired in its purchase of Scientific Atlanta, DeBeer said.

While other forms of interactive communications--like e-mail, instant messaging and SMS text messaging--have all become popular with consumers, video communications haven't found an audience, according to Jupiter Research. In a recent study published by Joe Laszlo, an analyst at Jupiter, he found that 40 percent of broadband consumers use IM regularly; 19 percent use IM voice chat; and only 5 percent use Internet video chat tools.

Laszlo said one reason people seem less interested in video chat is that most people multitask when they are talking on the phone or instant messaging. That's harder to do when the person you're talking to is looking at you, or when you have to be sitting in front of a camera.

Aside from basic behavioral barriers, Cisco will also have to address the cost issue. The technology in its current form is very expensive, and its costs will have to fall dramatically in order for it to be a viable addition in a consumer device.

In addition, because telepresence requires a high-speed data connection and a high-definition screen, the market is also dependent on the number of people who subscribe to very fast broadband services and have HD TVs able to support video conferencing. One of today's most popular flat-screen HD TVs, made by Samsung, costs about $1,400. An ultraHD TV with 1080p resolution costs about $3,722.

"Everybody has those specific instances where video would be a great thing to have," Laszlo said. "But those moments are limited and probably won't justify the cost of buying the hardware or subscribing to a new service. And if the resolution is really that good, do you really want people seeing that you haven't dusted your bookshelf in weeks?"

[cfriedberg]

Seems to me its a very expensive version of iChat

would be a lot cheaper to buy an iMac for each exec...

[Seaspray0]

ichat an expensive version of AIM

I'd be even cheaper just to get all the exec's an IAM account which is free.

[Seaspray0]

The expensive version of AIM or Windows Messnger

AOL Instant Messenger offers video chat capability, the ability to transfer files peer to peer, and a whole lot more. The same can pretty much be said for Windows Messenger. Windows Messenger offered the ability to also connect peer to peer without going through a service (you dialed the ip address of the other computer directly). Even at low bandwidth connections, it can be impressive. I've seen services such as these implimented in corporations several times. I can see them pumping out the cash for something like this. What would be nice is if you could pay for the bandwidth on demand, similar to paying for minutes of long distance time. Not every company is going to need a full time high bandwidth pipe available for something like this. Have the telco's ever thought about supplying a burst of bandwidth to be sold by the minute?