Is the Video Telephone Finally Here?

Business 2.0: Telecom & Wireless Report: Cheaper chips and digital cameras mean cheaper phones without the herky-jerky video of the past.

It was at the 1964 World’s Fair in New York that AT&T (T) introduced its Picture Phone — a magical device that was going to become a $5 billion a year business for Ma Bell. Pick up the handset, dial a number, and you can not just talk but also see the person on the other end of the connection. The only problem: What was good for Dick Tracy was not good at all. Fast-forward to 2004, and we just might be seeing the dawn of video telephony — not a wide-scale adoption but a start, which could make video calls routine within five years. “Videophones will happen, and it will take a little time, just like cell phones,” says Bryan R. Martin, chief executive officer at 8X8 Inc., based in Santa Clara, Calif. The company has been making videophones for more than six years — with limited success because they were expensive, used a dial-up network connection, and presented jittery videos.

But with falling prices for chips and digital cameras, easy availability of high-speed Internet services, and the emergence of voice-over-Internet technology, videophones have become cheaper and easier to use. Pictures are crisp, and the sound is crystal-clear most of the time. 8X8 recently introduced a $499 videophone with $30 monthly service, meeting enthusiastic response from early adopters. Other companies, like World Gate Communications and Motorola (MOT), are also working on videophone devices. Right now you need two phones from the same maker to make a video call, but in the future, open standards will ensure that devices of different brands can talk to one another without hassle.

Many of these standards still need to be worked out, and that’s why a tiny St. Louis-based startup, Vibe Solutions Group, has developed what it calls video-mail. Using a Web camera, you can send a video message to your mom as an e-mail. Using the Windows Media Player, she can click and watch your mug. Comcast (CMCSK) loves the idea so much that it has started marketing video-mail to its customers in the San Francisco Bay Area, hoping that if video-mail catches on, video telephony could be next. The logic is that if everyone starts sending big fat video files and making video calls, they’ll need faster Internet connections, and that means a few extra dollars in Comcast’s pocket. I think Comcast’s strategy is a good one, and will get more and more people over the initial anxiety of seeing and talking at the same time. My guess is that in five years, most of us will be as comfortable using a videophone as we are using cell phones in chic restaurants.
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