Can Cisco be a video star?

Company execs say push into videoconferencing pivotal to Cisco's future, but analysts are skeptical.

Cisco Systems, the "plumber of the Internet," is taking a bold step into the video market--a move executives believe will define the future of the company.

On Monday, the networking giant unveiled a videoconferencing package called Cisco TelePresence Meeting. It's designed to bring a new level of quality to videoconferencing, so that participants feel like they are actually sitting in the same room with people who may be half way around the world. The product is slated to be available in December.

For executives at the company, best-known for making the equipment that shuttles packets virtually through cyberspace, the launch of the new videoconferencing platform is more than just another product announcement.

They believe that Cisco's high-definition, two-way video technology marks a pivotal juncture in the company's evolution, as it tries to transform itself from a successful, but often overlooked, supplier of infrastructure equipment into a video and communications powerhouse.

"This is the biggest product launch we've done since the introduction of the IP router," said Marthin DeBeer, general manager of Cisco's emerging markets technology group. "We believe telepresence technology can touch all of our customer segments. It's the greatest example so far of our mission, which is to change the way people work, live and play."

While the videoconferencing product today is designed for large companies, Cisco has ambitions to integrate it into consumer set-top boxes. That means grandmas, as well as company chiefs, will be able to stay connected with the people they care about while experiencing live video chats in crisp high-definition. Cisco CEO John Chambers has said that he expects the videoconferencing market to generate $1 billion in annual revenue within the next five years.

Cisco TelePresence

Whether the technology will live up to its hype is still unclear, but many analysts are skeptical.

"I know that John Chambers and everyone else at Cisco is incredibly excited about this technology," said Ellen Daley, an analyst at Forrester Research. "But IP routers changed how everyone communicates. The telepresence solution is cool, but it's expensive. And it won't bring virtual meetings to the masses."

Two versions
Cisco is offering two versions of the product. TelePresence 3000 is meant for meetings of 12 people or more, around a virtual table. The total package requires a dedicated room that comes equipped with three flat-panel, high-definition TVs, each supporting 1080p resolution. (1080 represents 1,080 lines of vertical resolution, while the letter p stands for progressive, or noninterlaced, scan. Today's most popular high-definition TVs are 720p resolution.) It also requires a semicircular table, microphone-speakers and cameras. The idea is that people will virtually sit across from each other and interact as if they are in the same room.

There is also a stripped-down version, Cisco TelePresence 1000, which needs only a single flat-panel screen. It's designed for small group meetings and for one-on-one conversations. DeBeer--who uses this version of the product to allow his assistant to telecommute from Richardson, Texas, to San Jose, Calif.--also sees this version of the product working well in retail stores. For example, an expert for BestBuy could virtually connect with shoppers in stores at a moment's notice, or a doctor in a medical office could call up a specialist for a consultation on a patient.

As Daley pointed out, all this high-definition technology doesn't come cheap. The single-screen version costs about $79,000, and the conference room version costs $299,000. Those prices include all the necessary equipment and installation.

And that's not all. Because the high-definition video requires a super-fast IP connection with a low level of latency, businesses will be required to subscribe to a premium data service from a telecommunications carrier. Verizon Communications and AT&T each announced services on Monday that will support Cisco's TelePresence products. The cost of these data services, which DeBeer said should provide at least 10 gigabits per second of bandwidth, will likely be between $3,000 and $5,000 per month for each telepresence-enabled room.

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