Terrorism Brings Videoconferencing Into Focus

Even before terrorists destroyed the World Trade Center, interest in videoconferencing was growing as financially strapped corporations looked for ways to reduce costs and improve efficiency.

For years, companies that sell videoconferencing equipment have struggled to overcome some bad first impressions. Now, the days of technologically challenging systems that cost a minimum of $50,000 and provide balky communications via exorbitantly expensive networks are over, the new message goes.

For about the price of a first-class airline ticket, you can buy a videoconferencing unit that is easy to operate and continues to pay for itself as network costs continue to fall.

More significantly, videoconferencing systems these days are really collaborative tools that allow participants to share files, manipulate designs and make decisions on the spot.

Despite the advances, videoconferencing has often proved a hard sell - until this year.

Even before terrorists destroyed the World Trade Center, interest in videoconferencing was growing as financially strapped corporations looked for ways to reduce costs and improve efficiency. But the destruction and horror of Sept. 11 added a sense of desperation, as companies and their employees sought ways to avoid air travel.

Collaborating in a program called Video Relief, the videoconferencing companies used their Web sites to coordinate offers of loaner equipment and requests for free use of the equipment. The companies themselves offered free use of their own equipment.

Vendors described a sudden upturn in calls from customers and prospects.

"Some of these have come back and referred to ads we ran in 1999 and 2000," said Ned Riley, president of NuVision, a subsidiary of Oslo, Norway-based Tandberg. "Whats interesting is they had video on the back burner, and now its moved to the front burner."

Polycom, the largest and most successful videoconferencing provider in the U.S., is expanding its market share by acquiring rival PictureTel. Eight days after the terrorist attack, Polycom won Department of Justice approval for its purchase of the videoconferencing pioneer that had struggled to survive.

For many business executives who watched Cable News Networks coverage of the terrorist attack, the most convincing demonstration of videoconferencing may have come from reporters in the field whose images and sound arrived via videophone. One reporter was even able to broadcast images of a rocket attack on Afghanistans capital of Kabul via telephone.

While videoconferencing vendors gear their equipment toward traditional telephone networks, a push toward videoconferencing over cable networks is also gaining momentum, according to Cynthia Brumfield, president of Broadband Intelligence.

With videoconferencing on the up end of the seesaw, online travel sites and professional travel services are on the downside. According to the National Business Travel Association, 58 percent of travel managers said they will cut company trips over the next several months. Those moves come after travel cutbacks were already in place due to a slowing economy. Telecom equipment vendor Alcatels U.S. office in Plano, Texas, had already eliminated travel for internal meetings last spring, and asked employees to rely more on videoconferencing.

If a more clearly defined marketplace for videoconferencing emerges from the ashes of the Twin Towers, some broadband carriers and network operators may begin acquiring videoconferencing companies to provide a visual component to their services, according to Wainhouse Research analyst Andrew W. Davis.

Davis wonders, for example, how beleaguered [email protected] might have fared with a videoconferencing product.

Before Sept. 11, Wainhouse predicted that equipment sales in the videoconferencing business would rise to $1.25 billion in 2005, up from $375 million in 2000.

Another big driver for videoconferencing equipment will be the convergence of voice, video and data over IP networks during the next two years, analysts said. As network costs fall in the transition from ISDN to IP, equipment purchases are expected to rise from $780 million in 2001 to 1.1 billion by 2005, according to Boston-based research firm The Yankee Group.

One intangible impact from the terrorist attack is an emotional component that has infused the business world. For many, face-to-face contact has never seemed as important as it does now.

"I think what struck me was just how small the world was," NuVisions Riley said. "When the terrorists struck, I was holding a videoconference with our headquarters at Tandberg, and we were all watching the news coverage on TV. Heres a guy in Oslo, Norway, talking to a guy in Dallas, Texas, talking via video about an event that was happening in New York in real-time. And I have to tell you, I was bowled over by how quickly the Norwegians came to our aid."