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Exhibit E: VoIP, Instant messaging, and Web conferencing are helping. Voice over IP may be coming on fast, but its a risky business. The market is getting crowded and prices are dropping fast, eating into profits. The best way for a VoIP vendor to succeed is to take advantage of IPs flexibility to build more profitable services on top of voice. Since video over IP is essentially an extension of VoIP, expect most major VoIP vendors to offer it in 2005. In fact, AT&T may gamble everything on establishing itself as the leader in the field.

Internet messaging, which like videoconferencing is real-time (well, nearly), is another growing springboard for the technology. Earlier this year, America Online introduced a 5.5 version of AOL Instant Messenger, which supports links to video chat. Meanwhile, Microsoft (Windows Messenger) and Apple (iChat AV) have also added webcam support. In all these cases, videoconferencing is not incorporated directly within the messaging interface, but users can be invited to a videoconference via IM, and a single click then opens up a SIP-based software package that activates the webcam. For videoconferencing vendors, IM offers a huge ready-made directory of real-time users. Along with the H.350 standard, IM could finally make videoconferencing a spontaneous act.

In similar ways, the steady spread of Web-based document conferencing packages such as Microsoft NetMeeting and WebEx offers another entry point. The software for switching between voice, video, and data conferencing (most of it associated with H.323) is becoming more sophisticated, allowing all three modes to intermingle in a single conference. In this way, video can be incorporated incrementally, easing individual concerns about privacy and quality. For example, its fairly typical now for two remote groups to be connected by a room-based videoconferencing system, both a PowerPoint presentation and video sharing a screen. In addition, however, with some systems individual remote users can be invited to join (perhaps via IM) and can participate via desktop videoconferencing, voice only, or voice combined with remote document conferencing.

Exhibit F: Travel is problematic. Even with signs of growth in consumer videoconferencing, the biggest market for some time to come will be for business meetings. (Vertical applications such as remote education and healthcare will also continue to grow as videoconferencing mainstays.) Although business travel has crept up lately, a recent survey by Smith Barney found that 54 percent of corporate travel managers said their companies are investing more in teleconferencing and videoconferencing equipment. The driving force here is that air travel is growing ever slower and more expensive. Rising gas prices could also put a dent in longer car trips that might be replaced with videoconferencing.

Although the evidence points to a rising tide for videoconferencing in the years ahead, some say the core problem of the technologylatency–will never really be fixed until we get a new Internet. Yet TV took off without color; the Web was a winner despite slow dial-up connections; and cell phones continue to be popular despite static and disconnects. Its possible that theres an innate psychological resistance to video telephony thats more stubborn than our tendency not to want to fly around in a tin can or answer a business call at the beach.

Yet if so, why has the videophone played such a central role in our vision of the future? Long before AT&T decided (a bit prematurely) to promote videoconferencing as the next big thing back in the early 1960s, our popular culture embraced the concept. In fact, Charlie Chaplin featured the technology in his 1936 film, Modern Times, more than a decade before video hit the scene. True, Chaplin revealed the potential privacy fears about video communications that still make some consumers hesitant today, but the idea stuck, and videoconferencing became an absolute assumption of sci-fi futurism. Once a concept becomes so deeply engrained, and once affordable technology arrives to fulfill its destiny, all thats required is a tipping point.

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