More Firms Rely on Video Linkups : Rapid Growth Projected for Teleconferencing Services
Last fall, after negotiating a new labor agreement with union employees, General Motors Corp. wanted to explain it to 3,500 senior managers across the country. Getting them all together was impractical, so the company linked up 31 GM training centers and 24 plants by satellite and discussed the new contract with its executives on television.
A few years ago, when Boeing Co. rolled out its new 757 commercial jetliner ahead of schedule, company officers gave part of the credit to a similar decision: Instead of shuttling back and forth between Boeing installations in the Seattle area for meetings, engineers used television hookups to join in crucial decisions without leaving their offices.
And, last January, the American Trucking Assns. spent $110,000 for a two-hour TV hookup in which Transporation Secretary Elizabeth Hanford Dole and key lawmakers were beamed from Washington to 52 sites and 7,000 trucking executives, manufacturers and state highway officials around the country.
Welcome to the world of “video teleconferencing.”
The use of television hookups to bring persons together electronically for seminars, meetings and conferences is a child of the growing era of satellite communications that has become an increasingly popular tool for businesses, trade associations and even the federal government.
Industry specialists say revenues of businesses that provide teleconferencing services have reached more than $370 million and could soar to $3.4 billion by 1992--impressive figures for an industry that did not begin to flourish until 1979, when the Federal Communications Commission gave private individuals the right to use satellites.
Despite growing pains and some developments that its earliest proponents did not envision, video conferencing looks like an idea with a rosy future. More companies are trying it and more people are growing comfortable with the format: Industry experts say there is at least one video conference a day in the United States.
“Video-teleconferencing is one of the brightest services made available by satellites,” said Polly R. Rash, vice president of Services by Satellite Inc., a Washington-based video teleconferencing and consulting company.
Video teleconferencing or video conferencing are broad terms that cover a variety of techniques. They range from “slow-scan” systems, in which black and white pictures are changed every 7 to 90 seconds on a video monitor, to sophisticated operations offering full color and motion. In one popular format, business meetings are transmitted by satellite from one site to hundreds of others with two-way audio hookups but only one-way video.
Patrick S. Portway of Applied Business Telecommunications Inc. in Alameda, Calif., predicts that the number of public and private facilities equipped for sophisticated full-motion video will grow from the present 250 to 500 by the end of this year.
“It’s a great communications tool that is cost-effective,” said Thomas J. Donohue, president of American Trucking Assns. He plans to schedule video conferences three times a year and to use the device in special situations to muster grass-roots support for key trucking issues.
Interactive Video
Today, several hundred hotels across the country have installed equipment--for as little as $5,000 a site--to hold video conferences.
Hilton Hotels in Beverly Hills--in the teleconferencing business since 1981--is now working with American Telephone & Telegraph Co. to equip rooms in selected Hilton hotels across the country with closed circuit television--or interactive video, as it is known in the trade. The company hopes to have 15 rooms in use by October, according to Richard I. Lidz, director of video conferencing.
And Lidz sees many non-business applications for the service, from a family showing a new baby to relatives in another city to multi-city fund-raising campaigns. The cost will be $1,800 for transmission charges and an hour’s use of two rooms.
The pioneer among hotels in the video conferencing business has been Holiday Inns, headquartered in Memphis, which set up a separate subsidiary, Hi-Net Communications, to equip more than 300 hotels and motels for video conferences. In the last few weeks, Holiday Inns signed an agreement with Comsat General, in Washington, D.C., to create what will become the country’s largest video conferencing system.
“Up to now, you have a lot of basically ad hoc networks,” Robert W. Kinzi, president of Comsat General, said. “Our system will be the first coherent system in the industry. We think it will really make the industry surge.”
Comsat already operates a special videoconference room in its Washington headquarters that is used by clients such as the American Law Institute/American Bar Assn. as part of a videoconference network for the legal community.
Like many in the industry, Elizabeth Young, Comsat General’s vice president-marketing, believes that the steady growth in video conferencing will come from business communications. “We think the move will be increasingly for those who don’t have money for their own dedicated systems to be able to go to local places with reliable facilities.”
Joining Comsat General and the hotels are a variety of organizations such as the U.S. Chamber of Commerce, which offers video conferencing services to its members and to the public. And, more frequently, there are announcements like the one last month in which two California companies, Equidon Companies of San Diego and Visual Marketing Associates of Long Beach, said that they planned a network of rentable conference centers across the country.
Agencies of the federal government also have experimented with video conferences. On the largest scale is USIA’s Worldnet, a global satellite system in which U.S. officials are interviewed by journalists in foreign countries.
“This has been a real breakthrough,” said Charles Z. Wick, director of the U.S Information Agency, who thought up the idea for Worldnet and who believes it helps to inform the rest of the world about America.
“It’s a dramatic opportunity for us to tell our story,” Wick said.
A key selling point in the early days of video conferencing was the idea that video meetings would save executives both time and travel expenses. In retrospect, industry experts such as Peter deTagyos, district manager for applications for AT&T; Communications, say that this was the wrong strategy because many executives look forward to getting away from their offices occasionally. “A lot of people don’t travel heavily and really like doing it,” he said.
In previous years, it was believed that the smallest of the facilities--public rooms with two-way audio and video--would be a driving force in the industry’s growth. And, to be sure, there are a number of systems with rentable rooms springing up around the country. But there also are questions about how large this segment of the business will be.
Still in the Business
Recently, AT&T; Information Systems--a new division of AT&T; created by the breakup of the telephone company--reduced from 11 to 6 the number of its Picturephone Meeting Service rooms in cities around the country that could be leased by the public. Initial plans in 1982 had called for rooms in 42 cities. The company said that its decision stemmed from the effects of the divestiture, which curbed its profits by transferring the transmission revenues to AT&T; Communications, a separate company. Another factor that became apparent was that users preferred rooms in hotels with amenities such as food, lodging and parking.
However, a spokesman for the company said that AT&T; “is still very much in the video conferencing business.”
The area of the industry that has grown unexpectedly is the private corporate network, essentially a closed circuit TV system within a company’s facilities. The idea caught on among companies that successfully experimented with video conferences and wanted their own systems.
“It’s definitely the fastest growing area in the business,” said Richard Neustadt, vice president of Private Satellite Network in New York. “It’s an idea that has come to be accepted among a lot of corporate people as a good way to communicate.” His company, established in 1983, has created nine of the 15 private networks now in existence, for companies ranging from General Motors to Merrill Lynch to J. C. Penney.
Howard Anderson of the Yankee Group in Cambridge, Mass., a consulting firm, agrees that development of the private network is the most exciting aspect of the video conferencing business. He estimates this area to be a $12-million business today and predicts that it will grow at a rate of 40% a year.
Separate System
Increasingly, companies use the systems for internal business, including training, marketing and new product introductions. The more they use them, the more uses they find, experts say.
Last May, J. C. Penney Co. Inc., the giant retailer, started using a private closed circuit broadcast system that eventually will link the company’s New York headquarters and its five regional offices, including Buena Park, Calif. The company began experimenting with a separate system last November in which buyers in 15 sites around the country saw the latest clothing line by satellite from New York and could ask questions of New York as well.
Last fall, Ford Motor Co. began a one-year pilot program that includes 54 test sites. In January, the company broadcast from a Hollywood studio to the sites when it was announcing its new Ford Taurus and Mercury Sable mid-size front-wheel-drive cars.
One thing the industry agrees on is that the video conferencing format with a TV camera and screen takes some adjustments. “It’s like any application of modern technology,” said Pam MacIntyre, teleconferencing coordinator for J. C. Penney, “there are those who love it and those it takes some coaxing and wooing.”
The Yankee Group’s Anderson said that the first thing he always tells clients is to “buy a keg of beer and then get everyone together.”
