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Consumers Embrace Video Calling, if It's Free

More consumers are doing video chatting, in part because of Facebook 's integration into Skype Ltd. and the launch of Google (Nasdaq: GOOG)'s Hangout multiparty video chat. But the growing popularity of these services may actually be bad news for broadband service providers that might have hoped to sell a higher-quality video experience to consumers and home office dwellers.

Irene Berlinsky of IDC projects a rise in video calls to 46 percent of U.S. households in 2015 from 25 percent in 2011, based in part on expanded use by older consumers and the variety of options now available. But she labels video calling a feature, "not a revenue generator."

Ben Piper, director of Multiplay Market Dynamics for the Digital Consumer Practice at Strategy Analytics Inc. , says his research shows consumers aren't very interested in any videoconference service for which they have to pay, and aren't really wild about high-quality videoconferencing on their TV sets. His firm's survey of 2,000 U.S. households found only 36 percent were interested in a service that enables high-definition videoconferencing on the TV, and half of those lost interest if the service cost more than $5 a month.

"What we have found on the consumer side is, Skype is good enough, and the price is certainly right," Piper says.

Piper was one of those who predicted the failure of Cisco Systems Inc. (Nasdaq: CSCO)'s ūmi home videoconferencing service, which cost $599 for the equipment and $25 a month for the service, and he doesn't see videoconferencing in general becoming a revenue generator in the long term. (See CES 2011: Sitting Down With Cisco's Umi and Cisco Flips on Consumer Business.)

On that point, he and Matt Davis, director of consumer and SMB telecom services at IDC, disagree. Davis agrees that consumers are loathe to start paying for a service they now get at no cost, but says that it's a matter of time before some of those using lower-quality services start to look for something a little bit better. He admits he doesn't know now much time that could take.

"The way I think the market is going to develop is that we will see a great adoption and comfort level come from the consumer 'free' end of the market, and we'll see the enterprise telepresence stuff start to creep down," Davis says.

He expects a middle ground to develop that is better than today's best-effort services but not as expensive as telepresence. Ultimately, that middle ground may look a lot like what ūmi was offering, Davis says.

Verizon Communications Inc. (NYSE: VZ) had hopped on the ūmi bandwagon early, but of late, Comcast Corp. (Nasdaq: CMCSA, CMCSK) is the broadband service provider waving the videoconferencing flag, with its plans to integrate Skype HD videoconferencing into TV sets. (See Comcast's Self-Serve Skype Scheme.)

IDC analyst Berlinsky says Comcast could provide the "critical push" to get consumers videoconferencing on their TV screens -- if the service meets their expectations.

"How this integration succeeds will depend on many factors such as the price of the service and HD receiver and the quality of the connection," she comments, in a recent research note. "Latency and service issues that consumers put up with on the computer may be less tolerable when magnified on a larger screen."

— Carol Wilson, Chief Editor, Events, Light Reading

sam masud 12/5/2012 | 4:54:38 PM
re: Consumers Embrace Video Calling, if It's Free

I've Skype, so why should I pay since I can Skype with just about everybody I know?

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