Video Meetings Didn’t Take Off Despite Fear of Flying
In the frantic days after 9/11, Lewis B. Freeman was sure of one thing: His world was about to get a lot smaller.
Freeman, a forensic accountant in South Florida, was in a rental car returning from a San Francisco business trip. With all flights grounded, it was the easiest way to get home.
At that moment, the routine of frequent flying for business appeared outdated. Within days, Freeman had convinced several clients that meeting by videoconference was the way to go in a world where air travel suddenly seemed a life-or-death proposition.
His goal was to cut his business travel 60% to 70%.
It didn’t happen, at least not the way Freeman anticipated.
“I guess it was like a lot of things in life that we thought were going to change, and it did -- from September to January,” he recalled.
After that, it was back to the airport.
“I think in the last five years, I’ve done only two videoconferences,” Freeman said recently. “I’m spending as much time on planes as before 9/11.”
The Sept. 11 terrorist attacks had a potent effect on American business. Tighter security has become a way of life for millions of employees. Redundant supply chains and backup data systems are in wider use. Stock market swings tied to acts of terrorism and security alerts are accepted risks.
In particular, the attacks devastated the travel industry.
Increased security costs and a slide in passenger volume helped drive four of the biggest U.S. airlines into bankruptcy protection. Hotels and tourist attractions that depend on foreign visitors were especially hard hit.
But other predictions didn’t come to pass, or came and went faster than pundits expected -- in part because there were no attacks in the immediate aftermath of the assaults on the World Trade Center and the Pentagon.
For instance, some experts said the attacks would throttle consumer spending and pitch the U.S. economy into recession.
The economy, in fact, was already shrinking and would be back on the path to growth within a few months of the attacks.
“Many analysts totally over-reacted to the events of 9/11 and predicted catastrophe and terrible long-term economic consequences,” said UCLA economics professor Edward Leamer, who predicted on the day of the attacks that the U.S. economy would rebound from the shock.
As it happened, car sales hit a record in November 2001, home sales continued to grow and the stock market rebounded from its post-9/11 plunge.
Forecasts that construction of tall buildings would dry up after the destruction of the 110-story World Trade Center towers were off-base. More tall buildings are being built around the world than ever before, including two 1,000-foot-plus skyscrapers planned for Chicago and one for Nashville. Even ground zero boasts a new 52-story high-rise.
Speculation that a less violent, irony-free zeitgeist would take hold in Hollywood also proved ill-founded.
Movies with terrorism story lines such as “Big Trouble” and “Collateral Damage” were delayed in deference to audience sensibilities and subsequently underperformed in theaters.
But the similarly themed “The Sum of All Fears” grossed more than $100 million less than a year after the attacks, and edgy comedies and dark dramas remain Hollywood staples.
For the videoconferencing industry, the years after Sept. 11, 2001, have been marked by growth but not the dramatic expansion that some anticipated.
“I clearly thought at the time that we were going to do more videoconferencing,” recalled Brian Bruce, head of equity investments at PanAgora Asset Management in Boston. “We did do a few videoconferences. Then everyone wanted to see you in person again and it just totally stopped.”
Bruce said some of his co-workers “just flatly refused to fly” after the Sept. 11 attacks. “But it turned out that terrorists didn’t have the ability to do this on a frequent basis, and within three or four months people were pretty comfortable getting back in the air.”
Executives in the videoconferencing industry say they saw a sales spurt after 9/11, but it quickly tailed off. The reasons went beyond fear of flying.
The terrorist attacks occurred amid meltdowns in the technology industry and the stock market, and tech and financial services firms were leading consumers of videoconferencing services.
“The big boom in videoconferencing didn’t quite emerge like we thought it would,” said analyst Rob Enderle of Enderle Group in San Jose. “It’s hard to change human behavior.”
Elliot Gold, an industry analyst with Altadena-based Tele- Span Publishing, noted at the time that the videoconferencing business jumped sharply -- and temporarily -- during the first Gulf War as well as after the bombing of Pan Am Flight 103 over Lockerbie, Scotland, in 1988.
It experienced a similar surge during the SARS outbreak in 2003 and was in the news again after an alleged plot to bomb airliners was revealed last month in London.
But there are signs that the industry’s growth may be more sustainable.
After experiencing the post9/11 boom and bust, Pleasanton, Calif.-based Polycom Inc. has seen sales of videoconferencing equipment nearly double since the second quarter of 2001 to 29,000 units in the second quarter of this year.
And analyst Roopam Jain of Frost & Sullivan expects sales of videoconferencing systems and services, which reached $1.15 billion last year, to grow 22% annually to $3.1 billion by the end of 2010. That compares with overall growth of only 16% from 2001 to 2005.
Although SARS and other scares have played a role, Polycom Chief Executive Robert Hagerty said businesspeople were gravitating to videoconferencing mainly because the technology has improved markedly in recent years and prices have shrunk.
A good room system that cost $50,000 eight years ago can now be had for about $5,000, he said. Plus the 2006 version is easier to use and less prone to poor picture quality and “latency” -- industry-speak for the annoying lag between audio and video transmissions.
Recent years also have seen advances in both high-end videoconferencing technology and bargain systems.
At the upper end are ultra-high-tech systems such as Polycom’s RPX (for Real Presence Experience), which goes for about $250,000, and Halo, a collaboration between Hewlett-Packard Co. and DreamWorks SKG that sells for about $425,000.
Halo has received substantial media interest since it was introduced in December. The developers say their system gives participants the sense of being in the same room even though they may be thousands of miles apart.
“With Halo, we were able to create an environment where people actually forget they’re in two separate places,” said Ken Crangle, an HP vice president and head of the Halo project.
HP’s network of “Halo rooms” -- unlike most videoconferencing systems, which are compatible across brands, a Halo system can communicate only with other Halo systems -- has helped Crangle cut his own travel time dramatically.
The executive, who used to spend 70% of his time on the road, said he now takes a business trip about once every three months. “For the first time,” he said, “we have a technology that gets people off planes.”
At the lower end are PC-based systems that can provide desk-to-desk Web conferencing for the cost of a webcam and $200 worth of software.
In addition, some office software can be used to conduct one-on-one videoconferences through tools such as instant messaging. Then there are systems using webcams and Internet telephone services such as Skype that are practically free to set up and use.
Analysts say these services don’t yet provide the quality and capabilities that high-end corporate users demand, but they can be viable choices for small businesses on tight budgets. The use of these systems is expected to expand as their technology improves.
So far, videoconferencing options haven’t turned the business traveler into a dinosaur.
After falling in 2001 and 2002 because of safety fears and the weak economy, passenger boardings on U.S. airlines have rebounded strongly, reaching a record 670.4 million last year.
Airlines say business travelers, despite the hassles of increased security and the attractions of “virtual meetings,” have returned to the air in pre-9/11 numbers.
“It’s out there,” Tim Smith, a spokesman for American Airlines, said of videoconferencing. “But it hasn’t replaced us yet.”