Conferencing Market Gets Lift from Net

It’s a throwback to the days when you could safely predict that any Internet-related technology would see explosive revenue growth within a few years, but Web conferencing could give telecom service providers a reason to smile in the not-too-distant future.

According to research from Frost & Sullivan, the U.S. Web conferencing services market generated $62 million in 2000 is projected to reach $800 million by 2007.

“This growth can be attributed to increasing awareness, product offerings and critical demand shifts,” said Frost & Sullivan Research Analyst David Alexander. “While many technology providers enjoyed phenomenal growth in 2000, continued market expansion will rely greatly on the development of the reseller market.”

Frost & Sullivan found that leading resellers are offering Web conferencing services as a complement to their existing services, and this is proving to be a highly reliable method of marketing. Their reach in the audio conferencing market is quite extensive, creating a prime position to market Web conferencing services to current users.

“Marketed as a complement to existing services and not as a new service, resellers are able to tap into the resources of their existing audio clients and further the potential of their Web conferencing services,” Alexander said.

Marketing Web conferencing with existing services also benefits technology providers as they are able to take advantage of the highly marketable customer base supplied by resellers through revenue sharing agreements.

“Major resellers include telecommunications service providers such as Worldcom, AT&T, Sprint and Global Crossing,” Alexander said. “These companies have not generated significant revenues thus far. However, future mergers and acquisitions with technologies providers will further enable participants to leverage their marketing power and huge audio-conferencing customer base-resulting in industry dominance.”

Conferencing providers must also introduce the technology to more markets, and using the Internet to transport video conferencing may help. Most buyers of video-conferencing equipment have been from Fortune 1000 companies. The healthcare, education, legal, financial and government entities have also been the niche markets for video conferencing, according to the Yankee Group. But high costs, difficulty of use and reliability have kept this market limited to $780 million for worldwide revenues.

“Because of the success and value proposition of IP PBXs, many companies are now taking the proper steps to ensure that their networks have the proper quality of service and sufficient bandwidth to allow for multiple applications on their LAN. Because of the costs and time involved in upgrading networks, it will be a gradual process that will take a few years to make a major impact on the video-conferencing industry,” said Joe Gagan, senior analyst for the Yankee Group’s E-Networks & Broadband Access research and consulting practice. “We also believe that the wider popularity of networked systems with video conferencing coming to the desktop will lead to wider adoption over the next few years.”

Conferencing costs are also expected to fall. Component costs are expected to come down, and efficiencies associated with video delivery over IP instead of ISDNs will bring price points down, the Yankee Group predicts. This must happen for adoption to spread beyond large enterprises. Though video conferencing will probably never make sense for small businesses because of its economies of scale, we believe adoption will spread to mid-sized businesses.

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