When: 1964
Where: USA
Why: Instantaneous conferencing tools meant that flying executives round the world for a meeting was no longer necessary
How: AT&T used the World’s Fair as a platform to unveil a revolutionary type of telephone that could display picture messages
Who: AT&T
Fact: Experts predict that the value of the video conferencing industry will grow at more than 5% per year between now and 2016
When visitors to the 1964 World’s Fair wandered into the AT&T pavilion, it must have felt as though they were stepping into the future. Attendees were invited to try out the Picturephone, a strange new form of telephone that displayed a video image of the person on the other end of the line. Given that many homes were still without a television in the mid-1960s, this was a staggering leap forward.
The public had used ‘party lines’, in which more than two people could contribute to a phone call, for decades, but seeing the person you were speaking to on a screen was an alien concept. Picturephone opened a new frontier in the communications industry, and its legacy lives on in the video conferencing tools that today compete with and complement modern phone conference and Voice over Internet Protocol (VoIP) real-time video tools, such as Skype.
To the majority of the general public, the concept of a phone that could display video images would have seemed fantastical before 1964. However, the technology had been in the pipeline for over 40 years. Bell Laboratories, the research arm of AT&T, first started working on technology to send pictures with phone calls in the 1920s. In 1927, Bell Labs used telephone lines to transmit live television images of US secretary of commerce Herbert Hoover from Washington to New York. The USA wasn’t the only country dipping its toe in the water – the German post office developed a rudimentary system, consisting of two closed-circuit television systems linked by cable or radio, during the late 1930s.
However it wasn’t until the 1950s, following the invention of the transistor and a fall in the prices of cameras and display tubes, that the concept of video technology became viable, and development began in earnest. On 23 August 1955, two California mayors a mile apart spoke to each other via videophone. The following year, Bell Laboratories completed its first system for two-way video conferencing, the Picturephone.
But this early version was riddled with flaws; it broadcast only one image every two minutes, and exceeded the typical telephone bandwidth more than 300-fold. It took Bell and AT&T a further eight years of tweaking and honing before the device, known as Mod 1, was ready for use. The eventual design consisted of a cathode-ray picture tube, a vidicon camera tube, devices for scanning and synchronisation, and a loudspeaker.
Any hope AT&T had of rolling out the Picturephone was snuffed out by its exorbitant cost; a three-minute call from Washington to New York City cost $16.
By the early 1960s America was already waking up to the potential of high-profile, concerted marketing campaigns, and when the Picturephone was finally unveiled in 1964, AT&T plugged and promoted it with everything it had. The company held a grand Picturephone ceremony in Washington, with First Lady Lady Bird Johnson making the first call, to a Bell Labs scientist in New York.
Then came the stall at the World’s Fair: AT&T hooked up the Picturephone in its exhibitor pavilion, and created a similar booth at Disneyworld in California. World’s Fair attendees were invited to make a video call across the country, and afterwards were quizzed about their experience by marketers.
The problems were apparent as soon as the World’s Fair volunteers submitted their responses; they said the controls were baffling and the picture wasn’t big enough. Furthermore, any hope AT&T had of rolling out the Picturephone was snuffed out by its exorbitant cost; a three-minute call from Washington to New York City cost $16.
In 1970, AT&T rolled out the Picturephone once more, this time with trials across several cities. The new version, the Mod II, had a bigger screen, and the controls were supposedly more user-friendly. Plus there was a ‘zoom feature’ and a 12-button touch-tone telephone. But it was still expensive – $125 per month, plus $21 for every minute. Again, the product flopped.
Still, AT&T kept coming. In 1972, AT&T marketers were dreaming of selling three million units and reaping $5bn in revenue by the 1980s, figures quoted in Bell Labs telephone magazine, but it soon became clear that this wouldn’t materialise. In the late 1970s, it pushed to market yet again with a new name, the Picturephone Meeting Service – guaranteeing a rather unfortunate acronym. The AT&T marketing team pitched the product at business customers, who would theoretically have more money than general consumers; but still, the product was way beyond the financial reach of the masses.
PictureTel Corp launched a video conferencing system in the 1980s, when ISDN made digital telephony possible. Then, in 1992 AT&T produced the VideoPhone2500, the world’s first colour videophone capable of using home phone lines. Costing the small matter of $1,500, the product was pulled within three years, due to lack of sales.
Today, the video conferencing industry is one of the world’s fastest-growing information and communications technology markets. There are estimated to be more than one million telepresence and video conferencing end-points installed around the world – and growing – covering everything from financial institutions to hospitals.
Businesses are increasingly seeking richer ways to communicate with colleagues, customers, and partners and the global economic problems of recent years have only increased interest in and use of video conferencing, as a solution for saving money on business travel and enhancing the work–life balance for workers. It has also created the possibility of virtual businesses, with fellow directors geographically dispersed and interacting through a variety of communications technologies.
Today, the video conferencing industry is one of the world’s fastest-growing information and communications technology markets.
And then there are the purported environmental benefits of video conferencing over carbon-emitting travel. ‘SMART 2020: Enabling the Low Carbon Economy in the Information Age’, a 2008 report from the independent, not-for-profit organisation The Climate Group on behalf of the Global eSustainability Initiative (GeSI), estimated that by 2020 ICT would reduce global carbon emissions by 15%.
Such business benefits have had an enormous impact on the size and value of the market. Global revenues from video conferencing and telepresence systems reached $2.2bn in 2010, growing from $1.86bn in 2009, according to market research company Infonetics. Furthermore, the company predicted in March 2011 that revenues would more than double by 2015, to $5bn. Fellow research firm Gartner went a step further, predicting a market worth $8.6bn by 2015.
Cisco, following the $3bn acquisition of Norwegian video communications company Tandberg, and Polycom are the clear market leaders in the enterprise video conferencing market. Polycom’s market strength is at least partly derived from its 2001 acquisition of PictureTel Corp for $362m in stock and cash. At the time, PictureTel’s revenues from video conferencing already exceeded $400m. More recently, Polycom bought Hewlett Packard’s video conferencing unit within Visual Collaboration business for $89m.
Between them, Cisco and Polycom are reputed to account for approximately 80% of the market. Microsoft, following its $8.5bn acquisition of Skype in May 2011, may well make inroads quickly. Other significant players currently competing for market share in the fast-growing space include Aastra, Avaya, Huawei, Logitech, Sony, and Vidyo, among others.
Perhaps the biggest single reason for the take-off of video conferencing is the falling cost of equipment. The advent of VoIP technology has brought dramatic cost reductions, and many businesses now access video calls via the computer, at a fraction of the price of the old stand-alone systems.
Another key factor is the globalisation of the world’s economy. It is now commonplace for a business to have customers all around the world; video conferencing facilitates quick communication with these far-flung business associates, with the personal touch of face-to-face contact.
Many governments are now brokering deals for large-scale adoption of video conferencing; for example, the Spanish government recently finalised a multi-million pound deal with Cisco. And as the market becomes more saturated and the major providers jostle for position, each company is developing bespoke offers, tailoring its packages for small as well as large companies.
Video conferencing facilitates quick communication with … far-flung business associates, with the personal touch of face-to-face contact.
All these factors have created a communications landscape totally unrecognisable from the one AT&T tried to penetrate back in the 1960s. It would be totally untrue to say that the old Picturephone led seamlessly to today’s video conferencing solutions. But, in opening up the traditional telephone call to visual imagery, the Picturephone opened a window onto the future, and gave the world a glimpse of what was possible. We wouldn’t have today’s billion-dollar video conferencing industry without it.