A World Of Talking Heads?

Lower costs and more compatibility bring videoconferencing within everyone's reach

For a peek at how videoconferencing can change the way a business deals with its customers, check out OnLine Capital. To reel in borrowers, the Campbell (Calif.) mortgage lender has wired 25 independent real estate offices with videoconferencing gear. OnLine Capital and the Bay Area offices it works with have installed ProShare, a videoconferencing system from Intel Corp. that comes with a color camera, circuit boards, headset microphone, and software that transforms an ordinary personal computer into a picture phone. Equally important, ProShare lets users on both sides of the connection share live copies of documents on their PCs. The result: Home buyers get a chance at an instant mortgage.

When a prospective borrower expresses interest in a home, the realtor can push the dial button on ProShare to call a loan officer at OnLine Capital. The lender can eyeball the client and display an onscreen loan application. Customers state their name, address, income, credit history, how much of a down payment they have, and other particulars. They might also be shown the numbers on a 15-year vs. a 30-year mortgage. The borrower, in fact, can select among 200 different mortgage products. After about 45 minutes, borrowers can get a formal approval. "I put a decision maker in the real estate office," says John Hogan, the president of OnLine Capital. Hogan admits that the ProShare picture stutters a bit but says it is not distracting after a few seconds.

Once restricted to boardrooms in major corporations, videoconferencing is quickly becoming an accessible technology useful to more modest-size enterprises. Headhunters can screen candidates from afar. Lawyers can conduct long-distance depositions. And a number of small businesses are letting workers telecommute.

Videoconferencing can also give employees, customers, and suppliers in distant outposts the sense that they are in the loop. It used to be that when top executives at DTM Corp., a small Austin (Tex.) maker of machinery to help companies produce a variety of prototype products, gathered for the monthly staff meeting, they would be joined via speakerphone by a manager at DTM's sister company in Dusseldorf, Germany. But the sound quality on the squawk box just didn't cut it, and worse, the overseas colleague couldn't see the visual aids staffers brought to the meeting.

WHY FLY? DTM bought a couple of ProShare units, and now the executive in Germany feels like part of the team. ProShare runs over high-speed telephone lines known as integrated services digital network (ISDN). "To buy both systems and put in an ISDN line ended up being cheaper than flying him over here business class," says Tom Lee, DTM's vice-president for marketing. "If we can save one trip a year, it has paid for itself."

Indeed, videoconferencing is getting less expensive even as the technology is slowly becoming easier to use and more reliable. Group or custom room-to-room systems that connect lots of people, and (depending on price) offer near-TV image quality, are produced by the likes of PictureTel, Compression Laboratories, Sony, and VTEL. They typically cost $20,000 to $60,000, though custom installations can lift the price as high as $150,000 or so. But these systems are giving way to improved desktop setups from some of the above companies plus others such as Intel and Vivo. The systems work on ordinary PCs and cost as little as $1,000. According to Dickinson & Associates in Cambridge, Mass., PC-based desktop videoconferencing via ISDN accounted for 47,100 units shipped during 1995, up from about 17,500 the year before. By contrast, group-conferencing systems amounted to just 15,145 units shipped in 1995, compared with 12,500 the year before.

Until the early 1990s, videoconferencing brands were incapable of communicating with competing systems. But thanks to standards devised by the International Telecommunications Union in Switzerland (ITU), systems have learned to "talk" to one another. The H.320 standard covers audio, video, and compression features and lets different brands communicate over ISDN lines. That's something of a double-edged sword. Depending on your company's location, ISDN is expensive and difficult to install (BW-Jan. 29).

Meanwhile, coming soon will be a slew of products that adhere to an emerging standard known as H.324, which enables videoconferencing systems that run over POTS lines (jargon for "plain old telephone service") to mesh. Creative Labs Inc., for instance, sells a $999 product known as ShareVision PC3000 that works over regular analog phone lines but is compatible only with other ShareVision setups. That will change when Creative comes out with an H.324 upgrade early this summer. Before long, analysts expect such products to carry lower price tags as well, perhaps in the $500 range.

BUNDLE UP. Indeed, Boca Research Inc. in Boca Raton, Fla., plans to come out with an H.324-compliant videoconferencing kit in July for under $500 list. In designing the product, which will initially include a PC add-on board and software but not a camera or microphone, Boca teamed up with Lucent Technologies, the new company created as part of the AT&T restructuring, and Dallas-based MultiMedia Access Corp. Vivitar is also working on a low-priced H.324 product. Elliot Gold, head of TeleSpan Publishing Corp., a market analyst in Altadena, Calif., believes that by early next year, if not sooner, videoconferencing will be bundled inside new PC or fax-modem offerings.

These new standards can help put diminutive companies on an equal footing with the big guys. The beauty is that a desktop system can talk to a group system, says Gold. That means small businesses that want to forge relationships with large companies can use videoconferencing to help them do it. Case in point: Jim Williams, CEO of Paramount Industries, a Langhorne (Pa.) product-development company, uses ProShare to communicate with executives at toy giant Hasbro Inc. through their PictureTel system. "This gives me an edge up over someone who doesn't have this kind of communications ability," says Williams.

BUSINESS WEEK uses a $4,300 PictureTel desktop system to connect over ISDN to the magazine's Washington bureau and other offices of The McGraw-Hill Companies. In general, the speakerphone sound seems far better than the audio on regular phone calls. (You can pick up a telephone receiver to talk in private.) Meanwhile, the picture, while not of TV quality, is usually sharp enough to display all the visual cues people in the same room would normally catch. The lip movement is in sync with the sound. But like most desktop setups, the system is probably better suited for a one-on-one or one-on-two conversation than for interaction between groups in conference rooms.

Not surprisingly, PictureTel's caliber is still worlds ahead of the kind of low-cost videoconferencing that is now possible over the Internet. People can download Cornell University's free CU-SeeMe software from the Net or try out an enhanced version being marketed by White Pine Software Inc. ($69 via download or $99 off the shelf). Creative Labs, Connectix, and VDOnet are among the other companies developing Internet videoconferencing products. In March, Intel and Microsoft Corp.--with the backing of more than 100 high-tech companies--announced an "open platform that builds on industry standards to make video, voice, and data communications over the Internet as commonplace as a simple telephone call."

PORT-DEPRIVED. However intriguing Internet videoconferencing is, the quality has a long way to go, especially for companies that hope to conduct commerce over the World Wide Web. With the help of an executive at VDOnet, I downloaded and installed the company's prerelease "beta" software on a Pentium machine. We attached a $100 Connectix black-and-white camera to the parallel port on the back of the PC--which meant pulling out the cable for a printer and scanner--and used a simple, late-1960s tape-recorder microphone. The Creative Labs mike that the VDOnet rep brought proved to be incompatible with the PC's sound card.

Before long, I was part of a "gee whiz" video call with a VDOnet staffer in Palo Alto, Calif., whose color image appeared in a small box on the screen. Due to the Connectix camera, he could only see us in black and white. The connection was made over the Microsoft Network with a 28.8 kilobits-per-second modem. But the limitations of bandwidth translated into video that often crawled along at the paltry rate of two frames per second. (TV-quality runs at 30 frames per second.) The sound also often broke up. Presumably, we'd have done better with an ISDN line. VDOnet says that with a good connection, its VDOPhone can work in real time at up to 15 frames per second. "My view of Internet video is that it's one step above ham radio," says Tom Pincince, a senior analyst at Forrester Research Inc. That's fine for "showing mom a brand-new baby, but for securing business? Not right now."

For all its potential productivity and cost savings, videoconferencing is no substitute for meaningful face-to-face interaction. Nevertheless, if analysts' predictions come true and videoconferencing capabilities become as common on PCs as fax modems, it will one day be routine to dial up business associates and look them in the eye.

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