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8x8 Sees Video Phones in Its Future

8x8 Inc. (Nasdaq: EGHT) is now a VOIP provider, but the company's shape has changed a lot in its 20 years of life, and it has never put aside its dream of providing a real, consumer video phone.

8x8 came to life in 1987. Since then its been a chip maker, a videoconferencing company, and, most recently, a residential VOIP service provider.

This turnabout is worth noting, if only because 8x8's roots may have something to do with its future. These days, consumer VOIP companies struggle to become something more than just a replacement for traditional phone service. And adding video to the mix is just the sort of thing they're keen to try.

8x8, which sells a "bring-your-own-broadband" VOIP service similar to Vonage Holdings Corp. (NYSE: VG)'s, also sells a video phone -- the DV326 VideoPhone, which lists for $99 after rebate.

8x8 CEO Bryan Martin says his company has sold 10,000 of them so far.

In June, the Packet8 soft client debuted, allowing users to take Packet8 video calls on their PCs. In January, the company launched its Tango "video telephone adapter" (VTA), which turns any old telephone into a video phone, the company says. (See 8x8 Adds Video.)

Back to the Future
Since its early days as a chip vendor, 8x8 has always had some hand in pairing phone calls with live pictures. When AT&T tried to sell its 2500 Videophone in the early 90s, 8x8 made the chips inside. 8x8 CEO Bryan Martin says his company shipped around 35,000 of the chips to AT&T.

AT&T had a hard time convincing people to buy its $1,500 Videophone. "The phone was so expensive they knew no one would buy it, and you had to have two, so they actually tried leasing them for, like, $30 a week, and even that didn't work," Martin says.

In 1996, 8x8 began selling a device called ViaTV, a set-top box with a camera that turned a TV set into a video phone. Martin said 8x8 eventually sold roughly 150,000 of the $400 devices before packing it in.

Following the death of ViaTV, 8x8's next incarnation was as a VOIP service provider, and, once again, the video phone idea carries forward.

This time around, though, some of the problems Martin and company are facing have more to do with people's habits than with cumbersome technology. Martin says many people remain shy about broadcasting their video image along with their voice, especially at work or early in the morning.

But, there are some new circumstances in the video phone's favor this time around. More people are posting personal video to sites like Google (Nasdaq: GOOG)'s YouTube, so video shyness may be going away.

Also, consumer broadband speeds are faster than ever, and high-quality images are possible using very affordable equipment.

But Martin 8x8 can't go it alone. He says there need to be technical standards for video phones, for instance, and some mass-market manufacturers backing the concept. "It will not be 8x8 alone that gets us past the tipping point," he says.

— Mark Sullivan, Reporter, Light Reading

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