Cable Operators, Tech Vendors Prepare for Service Trials and Limited Rollouts in 2004

Cable Datacom News - Video Telephony Getting Ready for Prime Time

FEBRUARY 01, 2004

By Alan Breznick, Editor, Cable Datacom News

The bells may finally be ringing for video telephony. Four decades after the first picture phone was unveiled at the 1964 World´s Fair in New York and two decades after AT&T first hyped the idea, cable operators, the Baby Bells, independent phone providers, equipment manufacturers and other tech vendors are gearing up to introduce broadband video phone services to consumers this year.

With the technology for offering video telephony much improved, the available bandwidth for two-way video transmission greatly expanded and the prices of equipment falling, many major cable operators and phone companies are quietly running lab or field trials and planning more. In fact, at least nine of the top MSOs are reportedly tinkering with video phones, in the hope of launching commercial service on their cable systems as soon as late this year or early next year.

"We´re seeing a lot of interest," said Ted Griggs, chairman and founder of Syndeo Corp., which designs software supporting cable telephony. "The top five MSOs are very interested." Indeed, a couple of MSO chieftains gushed about video telephony´s possibilities at the Western Show in Anaheim two months ago, especially Advance/Newhouse Communications Chairman/CEO Bob Miron.

In the most prominent MSO trial to date, Comcast and its various cable telephony vendors are testing video phones in the MSO´s new media lab in Philadelphia. Excited by the technology´s potential, Comcast executives are hopeful of using video telephony to differentiate their new Voice-over-Internet-Protocol (VoIP) service from rival IP telephony offerings. "It looks pretty compelling," said Mark Francisco, director of home services engineering for Comcast, whose team is developing the messaging architecture to combine video with voice.

Technically, cable operators, DSL providers and other high-speed data players can offer video telephony without ever setting up for VoIP. Video phone boosters say the only things necessary for the marriage of voice and video are a broadband connection, enough upstream bandwidth and the right kind of phone. The new generation of broadband phones -- which come equipped with six-inch to seven-inch screens, LCD displays, tiny cameras and phone pads -- plug right into cable modems and home networking routers.

"You don´t need to do IP telephony to do this," said Hal Krisbergh, founder, chairman and CEO of WorldGate Communications, which dumped its interactive TV business last year to focus just on making and selling video telephones. "This has nothing to do with IP telephony. It´s a standalone product. The phone has all the technology to do voice-over-IP."

Nevertheless, most MSOs are exploring video telephony largely in tandem with their initial rollouts of VoIP services based on PacketCable technology. Like Comcast, they view the video service as both a promising application on its own and a way to make their VoIP offerings stand out from what the phone companies already provide.

"It´s clear that cable operators see VoIP as their way to leapfrog the local exchange carriers," said Viseon Corp. CEO John Harris. "It´s an opportunity to offer all those services (like video telephony) that don´t cost a lot to implement." Viseon, a video phone manufacturer and distributor that´s been wooing cable operators for more than two years, is conducting trials with Comcast, Charter Communications and several other, undisclosed MSOs.

At the same time, such fledgling video phone suppliers as Viseon, WorldGate, Innomedia and D-Link are pushing video telephony as a service whose time has finally come. They argue that the successful early trials, falling video phone prices, emergence of Session Initiation Protocol (SIP) as a broadband telephony standard, development of CableLabs´ PacketCable Multimedia specification, industry-wide launch of VoIP service and fiercer competition between the cable and phone industries all augur well for the new service.

"Right now people are very excited about this," said David Spear, executive vice president for strategy and market development at Cedar Point Communications, another VoIP vendor with a stake in video telephony. "It´s starting to become very real to a lot of people."

In particular, video telephony boosters insist that the technology for carrying video calls over broadband lines is now firmly established. Although poor video quality, heavy bandwidth consumption and high costs have plagued previous technology development efforts, backers say these problems have finally been licked.

For example, they say, the new broadband phones deliver 30 frames per second of video to their LCD screens, eliminating the jittery, herky-jerky pictures of the older phones. That´s much faster than the rate of earlier generations of video phones and similar to the rate for broadcast TV transmissions.

"It (the technology) works," Krisbergh said. "We´ve done it." He cited WorldGate´s demonstrations of its new Ojo video phones at the Consumer Electronics Show in Las Vegas last month, noting that the phones carried hundreds of transcontinental calls from the show with few video glitches. "The bottom line is we demonstrated that technology is not the issue," he said.

Other hurdles, however, still loom big. The major remaining obstacles include the still limited penetration of broadband, continued restrictions on cable network upstream bandwidth capacity, quality-of-service issues, slow rollout of VoIP and still-lofty equipment prices.

Take the bandwidth issue. While the latest versions of video phones don´t require as much bandwidth as earlier generations did because of digital video compression, video processing and other technological advances, the experts say, the broadband phones do need at least 128 kilobits per second (kbps) of upstream bandwidth to operate smoothly. That amounts to three to five times the bandwidth needed for a non-video IP telephony call. And it taps the upper limit of the speeds that some cable operators and DSL providers offer to broadband subscribers.

"Most people have only that," noted Louis Holder, executive vice president of product development for Vonage Holdings Corp., the leading independent VoIP player with a strong interest in video telephony. "You need to boost bandwidth."

Or take the retail cost of the broadband video phones. Although they have plunged in price recently, the phones still cost a hefty sum. For example, Viseon is now promoting its VisiFone for $599, well above the $200 to $300 sweet spot for most consumer electronics devices.

Industry players, however, expect video phone prices to plunge further over the next year or two. They see the average price tag dropping to $299 or less once consumers start buying the phones in number and manufacturers start churning them out in volume.

"It´ll come down in price to $200 to $300 in a year," predicts Krisbergh, who aims to start shipping WorldGate´s Ojo phones in limited quantities this summer. "That´s our target."

Of course, the economics could improve significantly for video phones that are integrated with digital cable set-top boxes, leveraging video processing power already in the device and using the TV as a viewing screen.

Even so, a huge unknown is how consumers will take to video phones. Will they embrace them as the next great personal convenience or reject them as an unnecessary intrusion on their privacy?

Even industry players aren´t all that sure. Some VoIP vendors, for example, see video phones as just a niche product, not a mass market item. They believe that the audience may be confined to early adopters, telecommuters and home and small business owners.

"I think it´ll really blow up in that (small business and work-at-home) space rather than in the consumer space," Holder said. "People want that sense of privacy."

But video phone makers insist that the phones will become another mass market hit. At Viseon, Harris predicts that 2005 will be "the year that the video telephone becomes the I-have-to-own gadget in the home." He figures that even if just 10% of the estimated 27 million broadband homes in the U.S. buy phones at $299 a pop, video telephony will already be a nearly $1 billion industry.

Krisbergh goes even further. "The era of video telephony is here," he declared. "It is the next big thing. I think our problem will be keeping up with the demand."