The market for teleconferencing products will benefit from social and environmental factors which are making it more attractive and more acceptable to work at home, to telecommute part time, or to work in a remote corporate office or telecommuting center. These factors are not prime driving factors for videoconferencing, but videoconferening will benefit from the computer and communications infrastructure which telecommuting will cause to be built.

Overriding all of the technology advances detailed in this report, however, is the fact that videoconferencing will not become a widespread application unless it meets a widely perceived need. There is indeed a danger that videoconf

During the forecast period, cable TV will become a serious access method for the Internet, and that videoconferencing products will successfully ride this wave of low-cost, high performance networking. Rollout will depend not so much on electronics and computer capabilities as much as on the ability of the service providers to improve their infrastructure. In this sense, cable TV will mirror the experiences of ISDN. Forward Concepts believes that if the cable companies are aggressive in this area, they can dominate both home and business Internet access. The price/performance possible could bring this pipeline into the videoconferencing mainstream.

It is worth noting that while the expected market figures reflect explosive unit growth, the driving factors are also creating havoc, and the results are not necessarily attractive to all vendors. Proof in point: while the actual 1995 DVC market is 3-4x that of 1994 in terms of units shipped, several casualties already litter the field. The largest supplier of data conferencing software (WorldLinx Vis-a-Vis) and one of the largest suppliers of DVC boards (AT&T GIS Vistium) have abruptly exited the business. And one of the leading DVC applications packages (IBM's Person-to-Person) has been "functionally stabilizedaE? as IBM has shifted its support to products from Intel and PictureTel. One source described the position of being an independent DVC vendor as having one foot in the grave, and the other on a banana peel.

One point of uncertainty continues to be the wide area network (WAN) vs. local area network (LAN) situation. Most videoconferencing products still run on WANs, but packet-switched LANs are widely installed in the corporate world. Today, there are no established standards for video over the LAN, unlike the H.320 standard for switched- circuit networks, though this is expected to change soon. Hence, LAN-based videoconferencing today provides no level of interoperability among vendors. Furthermore, with today's installed base of Novell and TCP/IP networks, video traffic quickly brings the network to its knees. LAN-based videoconferencing was not a particularly high concern for the respondents in the Forward Concepts survey, despite the fact that most of the respondents worked in large companies. In contrast, the quality of audio was consistently rated a high concern.

· Technology changes are happening fast, and show no sign of slowing. Last year's codecs are this month's dinosaurs. Companies must be able to adapt rapidly, and to introduce products to the market quickly. Voice and video codecs are moving to a software-based status, especially for the lower end of the performance range and could become "give-awaysaE? with desktop systems, with the OS, or with other teleconferencing peripherals.

Performance for videoconferencing systems is expected to increase steadily, although we believe that today's performance levels are largely acceptable to customers. This is not to say that everyone wouldn't like higher quality video, but that the resolution and frame rates today are acceptable, with the exception of POTS-based products. Performance will increase due to improvements in silicon, advances in algorithm design, better pre-and post filtering, and the availability of pipelines with higher throughput (switched Ethernet instead of shared Ethernet, ATM instead of Ethernet, and V.34 instead of V.32bis.)

The price of the add-on functions needed to bring a desktop system up to a conferencing workstation have plummeted over the past two years, but all industry participants expect this trend to continue. Real and perceived price drops are occurring because the costs of certain components (like cameras and speakers) are coming down, because higher levels of silicon integration are reducing the number of components needed (codec chips), and because some of the basic functionality is becoming standard on many desktop systems (audio codecs, speakers, microphones, modems).

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