Back in January 1992, when AT&T Co announced the first colour videophone to work on existing analogue telephone networks, its hype machine went into overdrive. Speaking of the VideoPhone 2500, group executive AT&T Communications Products Robert Kavner said the company was bringing together human sight and sound at last. Kavner continued that the time, price and technology were right, and that AT&T was ready to deliver. But was the public ready to buy? Early indications indicated that yes they were. After the Consumer Electronics Show, held in Las Vegas that February, AT&T said that it had been an enormous hit, reporting several hundred enquiries a week from the public – and this for a product not due for release until May (in fact it didn’t hit shelves until August). Meantime, GEC-Marconi Ltd was working on its own analogue videophone technology – one that was incompatible with AT&T’s offering due to the different video compression techniques employed. One of its first customers was MCI Communications Corp, which announced that its version, the MCI VideoPhone, would be available from early 1993. MCI was as voluble as AT&T about the videophone’s appeal to the mass-market. MCI expects likely first users to be families separated by long distances, grandparents staying in touch with their children and telecommuters, said the president of MCI Consumer Markets.
A complete flop
But, nearly two years down the line, some commentators are writing off the analogue videophone. I don’t see either one advertised – AT&T’s or MCI’s, Yankee Group consumer telephone analyst Peter Hampton told Reuters. Roger Redmond, an analyst at Piper Jaffray securities who specialises in the videoconferencing market, said that the videophone is a complete flop… a non-product. Both AT&T and MCI unsurprisingly deny that their offerings have been failures. AT&T says that its videophone has sold in tens of thousands while MCI says it has been selling its product in the thousands since its launch. However, both companies admitted that videophones haven’t demonstrated wide appeal. An AT&T spokesman commented that early mass-market take-up had not been sustained and said that its strategy had changed to targeting niche markets – specifically high-end consumers and small to medium-sized companies. For its part, MCI denied ever having gone for a broad base of users, claiming that it opted for target marketing from the start; it too claims that the small business arena is important, saying that the product was always focussed in this direction. Ingeniously, MCI says that this didn’t come out in early publicity, because the videophone was initially handled by the company’s Consumer Markets division. As to lack of visibility in the market, both companies have similar stories; major television and print media campaigns are out and direct mail is in. This, naturally, is part of the niche marketing drive and not because most people don’t want them. Regarding what might be deterring potential users from signing up, both organisations felt that picture quality was a major factor: due to limitations in current video compression technology, both units have a maximum 10 frame-per-second refresh rate, and screens little bigger than cigarette packs. Cost is also a factor: the AT&T phone sells for $1,000, with MCI’s set costing $750. However, AT&T notes that when it dropped its price from $1,500 to $1,000 in January 1993 the upshoot in sales was not large. The British Telecommunications Plc offering for the UK market, the Marconi-derived Relate 2000, is selling around 10,000 units a year, said a spokesman, and is still aimed at the mass market; business applications were dismissed as impractical because of poor picture quality and inherent voice delays in current sets. The Relate videophone costs 400 per phone, or 750 a pair.
