“I can see for miles and miles”*

TeleSpan’s 2007 Predictions

Here’s what I think!

I just looked at the calendar and realized that TeleSpan is now over a quarter of a century old
(1981-2007), and this is our 12th year doing predictions. Been making predictions since 1996, and
of my 110 predictions made so far, 83 have come true giving me a batting average of .750 (75%).

I decided this year to re-name myself “The Great Carnak†” vs. “The Crystal Bald.”

As I’ve done in past Predictions issues, let me start out by telling you what my predictions are
for this year, 2007, and then I’ll get to the scorecard for my predictions from last year.

As I’ve explained in past Predictions issues, where I predict that a company will be successful,
I am indeed cheering them on. Where I predict that a company is going to fail, I am wishing it wasn’t true. Like all of us, I want us all to share in a successful growing industry. Fact is, though, some things, some ventures, simply won’t make it. With more than 25 years of watching this industry as closely as I have, I feel that my job is to tell you what is real, and what is not.

Okay, enough. Let’s go!

TeleSpan’s Prediction #1:

Media server companies drive into the Enterprise by offering Unified
Communications, and get voice calls instead.

I spent quite a bit of time last year looking at all of the offerings from the new media server companies, giving you a table in Electronic TeleSpan last October comparing more than a dozen
of them (see Electronic TeleSpan, October 2, 2006, pp. 3-5). What I came away with from those interviews was a consensus from the media server companies that they would seize control of
the conferencing space by offering Unified Communications (UC)—voice, Web, and video—and taking control away from the existing conference service providers (CSPs), putting it in the
hands of the end customer with an enterprise solution.

I totally agree that we’re going to see a big land rush towards the enterprise, but am convinced that while the sales pitches and even the RFPs out there will talk loudly about UC, the majority
of the usage will be plain old voice, as it is today, and will be for many years to come. Yes, we will see Web; yes, we will see video in UC on desktops, available from the new media servers,
but in the beginning, and frankly for some time to come, the applications will come out of
people’s mouths and into their ears.

As you know, we’ll be talking about this at our Second Annual Future of Conferencing
Workshop in Las Vegas, March 26 and 27.

TeleSpan’s Prediction #2:

Podcasts become staple offering from CSPs by ’09.

Do you know anyone who doesn’t have an Apple iPod? According to Wikipedia, Apple Inc.
sold 67.6 million iPods from October 2004 to October 2006. Wikipedia’s estimate is that Apple has 90% of the hard-disk-based player market and 70% of the total player market (hard disk, flash memory, etc). This past week, Apple announced selling an additional 21 million iPods
for the fourth quarter of 2006, driving its total sales up to 88.6 million. Taking the 70% figure, that suggests that there are now over 125 million “pods” out there on belts, jogging wrist
bands, purses, and, like mine, in flight carry-on bags. These iPod users want to hear important conference calls, even when they miss them. They will soon here them on their iPods.

Don’t think people are already listening to podcasts? According to Pew (November 20, 2006),
“...12% of Internet users downloaded a podcast so they could listen to it or view it at a later time... vs. 7% in Q1 06.” I’d guess that equates to the probability that about one in 10 of the people you and I work with are already listening to podcasts.

I think that any CSP that doesn’t add podcasting as a feature by ’09 will be, oh, out of business!

TeleSpan’s Prediction #3:

VoIP ports become at least 40-50% of sales to CSPs by end of 2008.

Actually, this one is “almost famous” already. According to the data I collected from TeleSpan’s panel of audio bridge makers in 2005, VoIP ports already represented 27% of all ports sold to
CSPs and enterprise customers. Then, if you recall, in October last year in Electronic TeleSpan, I wrote, “Two of the largest independent (non-carrier) CSPs will handle between 25% and 35% of their reservationless calls from customers over VoIP, up from 10% to 30% during the first half of
the year.” (Electronic TeleSpan, October 9, 2006, pp. 3-4.)

This one is a slam dunk!

TeleSpan’s Prediction #4:

Compunetix takes back lead in PSTN ports sales to CSPs, taking share away from
Avaya’s MultiLink and Polycom’s Voyant and Octave systems.

To be blunt, Avaya has shifted its focus away from the conference service provider CSP
platforms the company inherited when it bought Spectel (a.k.a. the MultiLink bridges),and
has begun to focus on media server VoIP solutions for the Good Ship Enterprise. Polycom did
this, too, shifting its focus first from its Voyant subsidiary (which sold both the Voyant platform and the Octave bridging platforms to CSPs) to its Accord subsidiary, then to its DSTMedia subsidiary, to capitalize on the enterprise market. Yes, Polycom is still serving the CSP market,
and has some new VoIP ReadiVoice platforms rolling out for that market this year. But last
year, Avaya and Polycom really ticked off some of their largest CSP customers by end-of-lifeing some rock-solid platforms. The net result has been that these CSP customers have told me, “If I were to buy a bridge today, I’d buy Compunetix.”

Soooooooooooo, Compunetix is gaining market share, and I think it will be the market leader in the CSP space this year.

See Electronic TeleSpan, January 30, 2006, pp. 1-3 for a story on the moves by Avaya and Polycom.

TeleSpan’s Prediction #5:

Video calls become 5%-10% of calls on Mother’s Day by 2010.

I remember when phone calls on Mother ’s Day would nearly bring the PSTN to its wireline
knees. Remember “Sorry, all circuits are busy”? Well, it is still one of the busiest days, if not the busiest day, of the year for phone calls.

Increasingly, though, I’ve been hearing from friends that their kids call them at home on many days using a Webcam. In fact, I’m sure you’ve noticed that I’ve been reporting on the increased use of Webcams for family calls in the newsletter, and that each Mother ’s Day I do a feature
on the subject. Well, I stumbled across a set of factoids recently that suggests this is about to become a large portion of holiday “phone” calls and, I think, of Mother ’s Day calls.

First of all, some sources say that, indeed, more phone calls are made on Mother ’s Day in the USA than on any other day in any other country. I tried to get one of the large US-based phone companies to confirm this, but didn’t get a call back … guess I should have used my Webcam.

Then, according to iBasis, Inc., a VoIP company, its phone traffic over the Internet during the Christmas and New Years holidays is growing. The company issued a statement saying, “iBasis terminated 53.6 million minutes of Voice over Internet Protocol (VoIP) traffic during Christmas Day, a 30 percent increase over 2005, and 52.9 million minutes on New Years Day, up 38 percent from 2006.”

Sure, never heard of these guys, and their statistics are for Christmas and New Years, and 53.6 million minutes is the chump change that comes out of payphones. But, with about 100 million Webcams out there in people’s hands, and Skype video for the PC, and for the Mac, and iSight video from Apple, I’m convinced that folks who are making free VoIP calls to relatives today are going to make IP video calls to their moms on Mother ’s Day. Further, I’m convinced those video calls will make up at least 5% to 10% of calls that day by 2010.

Haven’t figured out how I’m going to prove this one, but I guess I’ll just ask Skype about it in a few years.

TeleSpan’s Prediction #6:

Telepresence fails to come ashore, but raises all the boats, driving group video sales up 25% year over year in 2007.

As you know, when Cisco announced its TelePresence systems, I went on record with a
gigantic yawn! That’s because in November, after Cisco had spent months previewing it with many of its largest customers, it had rockin’ sales of 40 systems, and felt it would install as
many as 110 before the first quarter of this year ended (including a chunk of them inside Cisco). HP’s Halo telepresence system has had similar sales.

When I called around to the various videoconferencing vendors who compete with Cisco and
HP, I asked where on the Richter Scale they put the Cisco announcement.

“Elliot, we’re shaking all over!,” they said.

Then, before I could reply, they said, “Our phones are ringing off the hook from customers we’ve been trying to sell high-end video to, who are now saying, we want them!”

“Them” were not telepresence systems, but high-end videoconferencing group systems.

It seems that Cisco got everyone’s attention, but the price tag of $260,000 to $290,000 a site drove buyers to Polycom, Tandberg, LifeSize, and others, and I think will loft those companies’ unit
sales this year by 25%.

You think 25% is low?

Well, group video sales have been relatively flat for the past couple of years, growing less than
9% from 2004 to 2005, and up only 15% for the first nine months of 2006 versus the same nine- month period in 2005. I figure growth will hit 15%–18% for the full year 2006.

So 25% will be a very, very nice reward for the existing group video supplers, thanks to the
Cisco earthquake.

TeleSpan’s Prediction #7:

LifeSize becomes the 4th largest provider of group video by ’09.

Based on data I’m getting from insiders, LifeSize has a run rate of at least 500 units a quarter now. I’d expect that to grow dramatically through 2007, and then grow again in 2008. For
LifeSize to get to #4, it has to beat Aethra and Sony, each of which have sales of north of 3,500 units a quarter. It will be quite a dash, run, and leap for LifeSize, but based on the history of the founders and their sales team (they come from the best in the industry), I think the company
will make it.

TeleSpan’s Prediction #8:

Connex International is bought for its Operator-Handled/Event Business or disappears after a 25-year run!

Ah, Connex International. Talk about a bedrock of the conferencing industry, founded by the late Susan Pereyra first as The Darome Connection, then renamed and re-launched in 1982
as Connex. Susan’s vision can’t be matched. She figured out how an independent company could compete with AT&T for the conference call market, way before anyone coined the term conference service provider (CSP).

Connex’s forte? Operator-handled calls. Therein is the problem, and the opportunity, all on the same menu. Since op-handled calls are only about 4% of calls today, it’s not a real attractive market to go after. The large CSPs don’t want to pay operators to manage these calls or invest their capex budget into operator equipment. Yet, they want to cash in on such calls, so they go
to Connex…well, they used to. Raindance, for example, before it got sold to West/InterCall, outsourced its op calls to Connex.

Is Connex in trouble?

I doubt it.

The company doesn’t share its data with me anymore, so even I don’t know, but I suspect that business is okay, but less than it used to be.

Is Connex a great find?

Heck, yes!

I’d think that a smart CSP will snap the company up to manage its op-handled calls. If such
an offer isn’t made in the next few years, I suspect that Connex will not make it to its 30th anniversary.

TeleSpan’s Prediction #9:

Tandberg or Cisco buy LifeSize by end of 2008.

Didn’t I just mention LifeSize? Didn’t I say that it would grow and grow and … if it does, then as
EyeGore said in Young Frankenstein, “He’s going to be very popular!”

All you longtime readers of TeleSpan know the folks at LifeSize as the same ones who were at VTEL, then split off to become ViaVideo, positioned themselves to be “very popular” and got bought by Brian Hinman when he was running Polycom.

Hey, the way I see it, this is simply their second act … build it, grow it, sell it. I don’t see
Polycom buying LifeSize, but I do see Tandberg or possibly Cisco buying the company by 2008.
Act III? I have no idea, and I doubt the founders of LifeSize do either. But, they’ll figure that out
after 2008.

TeleSpan’s Prediction #10:

AmigoLatino becomes dominant video carrier to Latin America by ’09.

Some of you are saying “AmigoWho?” Well, let me fill you in. AmigoLatino is the brainchild of
Gabriel Biguria, who immigrated to the US over a decade ago, got his bachelor ’s degree, capped
off by an MBA, and ended up at Compaq/HP in charge of sales of the Presario home computer
for Latin America. While others at HP floundered around the Presario, Gabriel saw that the way
to make a profit was to more closely manage inventory. Most of us know now that the shelf
life of PCs is short, and therefore if you make too many of any particular model, and they get passed by faster PCs, the slower PCs die in inventory of writedown disease.

One day, Gabriel began thinking of home…actually, I’m sure he did that every day, every hour.
He felt that if he missed his relatives and friends in Latin America, so did hundreds, thousands, actually millions of others, who now lived in the United States, either legally or illegally. That’s when he came up with the idea of AmigoLatino, a videoconferencing service that now allows
Latin Americans living in the United States to see (more accurately, visit with) relatives living in Latin America, using videoconferencing. He came up with the business plan for the service, but more importantly, I think he really came up with the network solution. Today, he has a thriving service that offers 30-minute videoconferences for $40, delivers cheers and tears among distant relatives, and delivers a profit to his company. TeleSpan, and its readers, gave AmigoLatino 3rd place in our Wild and Unexpected Teleconferencing contest last year. It’s that good.

Don’t think it’s much of a market? Think again.

According to Associated Press, Latino immigrants to the United States sent $45 billion home in
2006, up 12% over 2005.

Don’t think there’s money down there already to build more business? Latin America has a population of 548.5 million, and has a GDP of $2.26 trillion (based on current exchange rates). The purchasing power of this population is put at $4.5 trillion.

I sat down with Gabriel over lunch a couple of months ago, and he served up a business plan so delicious that I had to stop eating what was already on my plate. I can’t reveal what he told me,
but folks, this guy is on to something—something big!

I say that by 2009, he will manage more video and other data traffic to and from Latin America than any carrier-based videoconferencing service will.

Stay tuned.

Predictions from 2006: How’d we do?

Okay, let’s find out how the Great Carnak (a.k.a. “The Crystal Bald”) did last year in his predictions.

TeleSpan’s Prediction #1

Forgent loses “‘672” Motion JPEG suit in ’07.

Spot on!

Well, things ground to a halt for Forgent Networks last July, when United States District Judge
Jeremy Fogel ruled that Forgent’s (really CLI’s) 672 patent didn’t apply to still video, as in
JPEG, which was the basis for Forgent’s law suits against some three- to four-dozen companies. Soooooooooo, while Forgent had already collected over $114 million in previous settlements
(from companies who caved in before the court ruling), netting Forgent just shy of $60 million, Forgent was forced to withdraw its suits. Berlitz Translation: Forgent lost the “672” Motion
JPEG suit in ’07.

Poor Forgent.

When the judge announced his ruling, Forgent then settled with the three or four dozen defendants for some pocket change ($8.134 million). That means that since April 2002, Forgent collected $122.4 million, and netted $59.3 million of it. So while Forgent “lost,” its bank account didn’t.

See Electronic TeleSpan, July 26, 2004 for a story on the countersuit over the 672 patent. See ET,
April 25, 2005 for a story on Forgent filing against 50 companies. For a story on how Forgent has
“contacted” a total of 1,100 companies on the patent, see ET, June 6, 2005, pp. 5-6. For Forgent’s suit against Microsoft (ha, ha, ha … sorry, I had to laugh), see ET, September 26, 2005, pp. 5-6.
See ET, July 3, 2006, p. 1 for a story on Judge Fogel’s ruling.

TeleSpan’s Prediction #2:

InterCall loses AT&T contract, but not necessarily to ACT.

My inside information is that indeed InterCall has lost the majority of the AT&T contract, but
it’s not clear who got it. ACT got some of it, but, for now, I’ll take a “sideways” on it, not sure yet if I deserve a “thumbs up” or a “thumbs down.”

For an explanation of the AT&T contract with InterCall, I suggest re-reading Electronic TeleSpan,
January 16, 2006, p. 2.

TeleSpan’s Prediction #3:

Hosted and in-house conferencing slows growth of CSPs, grows to 25% of market by 2007.

This one wasn’t easy to prove.

A lot of the hosted and in-house conferencing growth came from Latitude MeetingPlace servers, which are now sold by Cisco. When Latitude was public, it put its numbers out, and at the
end of 2003, it had grown to about 1.7 billion minutes a year in hosted and in-house solutions
(where companies bought the MeetingPlace and managed it themselves). Using Latitude’s annual growth rate in 2003 (which I confirmed was still valid), I estimate that Cisco’s (really Latitude’s) customers generated around 2.7 billion minutes for 2006, or around 680 million
minutes a quarter by the third quarter of 2006. TeleSpan’s panel of CSPs was generating around
6.9 billion minutes a quarter then, putting Cisco at about 10% of the market (actually around 9%
if Cisco was part of the panel).

Then you look at IBM, which last year pulled its minutes away from Premiere and put them on
an enterprise system. IBM, while it was with Premiere, was using conference calls for between
120 million and 150 million minutes a quarter. I’d bet that grew to around 200 million minutes a quarter by the third quarter of last year, or about 3% of the CSP market (about the same if it was part of the panel).

Nine percent (9%) plus three percent (3%) is 12% of the global market.

That 12% doesn’t include Oracle (it has about a third of a percent of the market) or Boeing,
which went to a hosted model with Verizon last year, or the dozens of other enterprise systems that exist today. Yet, without Cisco/Latitude, about 20%–30% of conference ports were sold into
the enterprise for the past two years. So I’m convinced that those ports, as well as legacy user
ports, generated another 10% of the market. That gets me easily to 22% of the market, but I’ll bet it’s closer to 25%.

I’ll take thumbs up on this one, folks!

Disagree with me? Come to TeleSpan’s Future of Conferencing Workshop March 26 and 27 in
Las Vegas and tell me. For now, I’m saying I’m right.

TeleSpan’s Prediction #4:

Polycom slashes US and Israel-based development, choosing instead DSTMedia developers in China, or at least allows US and Israel headcount to be passed by headcount in China.

During the Predictions broadcast I said that I was right, after using reliable sources. After the broadcast, Polycom called me and read me the company’s HR data, telling me exactly how
many employees Polycom had in China at DSTMedia, both in R&D and other roles, and those working in R&D and other roles for Polycom in Israel or stateside in Georgia or Colorado. The data Polycom provided after the call contradict what I was told earlier by others.

For now, I’ll take a thumbs down on this one, but I have to say, I believe I am still correct. Maybe not for 2006, but certainly soon.

For my story on the DSTMedia acquisition, see ET, August 29, 2005, pp. 3-4.

TeleSpan’s Prediction #5:

Microsoft partners with media server folks to introduce own multipoint VoIP conference calls.

Well, when Microsoft brings out its full Vista later this year, you will be able to launch
conference calls from your Wintel PC, without an outside service provider. It will require server software, but it’s not clear to me whether Microsoft is or isn’t working with the media server
folks on this.

But, as predicted, Microsoft will be offering conference calls via VoIP, so I’ll take a thumbs up on this one too.

TeleSpan’s Prediction #6:

Tandberg growth flat for first six months of ’06 but carves away market share from others by Q4 06.

Indeed!

Tandberg saw its market share of TeleSpan’s Big Six Group Videoconferencing systems fall from
27.3% in Q3-05 to 24.4% in Q4-05, and down to 22.7% in Q1-06, but then it came up to 25.5% by
the end of Q2-06 and 25.6% for Q3-06. Tandberg actually carved away market share earlier than
I predicted it would.

Should be interesting to see what its share is for Q4-06. For now, my thumb is up!

TeleSpan’s Prediction #7:

Two more large CSPs take Breeze, and boot out Microsoft … or leave Microsoft due to annual fee, but come back when Microsoft settles for lower commissions.

Well, Premiere Global, one of the largest CSPs on the planet, signed a contract with Adobe for
Breeze (see ET, June 26, 2006, p. 2). I don’t think Premiere is real friendly with Microsoft!

I have been told by a number of other CSPs that they have been “negotiating” with Microsoft, since Microsoft snuck in that 94% price cut and went around the CSPs. While no one is willing
to tell me what prices they’re getting from Microsoft, I know they’re lower than they were a year ago.

Then, as I pointed out last year, both Cisco and Avaya have contracts with Adobe for Breeze
(see ET, September 26, 2005, pp. 6-7 and September 25, 2006, pp. 3-4). Yeah, yeah, yeah, Cisco
isn’t a “CSP” but as I discussed above under TeleSpan’s Prediction #3 for 2006, Cisco has about
9% of the whole market, CSP or not! And Avaya owns Spectel and now owns the IBM Good
Ship Enterprise contract.

Those three are certainly not friendly with Microsoft!

In addition to Premiere Global, Avaya and Cisco, Adobe announced that it has won over MeetingOne, which is a not-so-quiet conferencing startup by France Telecom/Orange, which of course is a major CSP in Europe.

With France Telecom’s subsidiary joining Premiere Global Conferencing, I’d say I got two major
CSPs, and will take a thumbs up on this one.

TeleSpan’s Prediction #8:

LifeSize makes a dent in Polycom, with Polycom replying in court.

Well, LifeSize did attain sales of about 500 units a quarter, but failed to make a dent in Polycom’s sales. As I said above when I wrote about my predictions for 2007, I think that LifeSize will grow quickly, but it didn’t grow fast enough to meet my prediction.

So, thumbs down on this one.

TeleSpan’s Prediction #9:

Skype becomes a major threat to 3-way international business conference calls by 2008.

Well, let’s see: Skype is offering SkypeOut for calls within North America for $29.95 a year
($14.95 till January 31), vs. Vonage, which is $24.99 a month. And Skype is offering sub-10-way conference calls for free, is working with Intel to go to 10-way using Intel’s Core Duo chip.
Then, Skype reported last year that 30% of its then 61 million registered users rely on Skype for business purposes, and that 52% are also using Skype across regional offices, and that 46% of
its business subscribers are using Skype to conduct conference calls, and Skype has introduced
a service called “SkypeCast” for broadcasting calls to others …. I’d say it’s going to be a major threat to 3-way international business calls by 2008!

TeleSpan’s Prediction #10:

Global Crossing returns to top 5 in conference call market.

They did it! Global Crossing Conferencing returned to the number-five spot in the global conference call market! This after its parent took a nosedive and declared bankruptcy. Well, in
the words of the Governor of the State of California, Global said, “I’ll be back!” and it is.

Global is now number five in TeleSpan’s Top Eight Leading Global Conference Call Services.

Kudos!

Special thanks to ACT

I want to thank ACT Teleconferencing for all their help and their excellent support on the broadcast of the Predictions event. It went on, as always, without a hitch. Thanks to Gene Warren, CEO, who is making things really work there, as well as to his superb team, including
JR Ormsby, Rebeka McLeod, Liza Kaiser, and Emily Magrish.

And last but not least, J D Vaughn, who co-hosted the event with me, co-moderated it, and added incredible color and intellectual property. You are the sparkle in the Great Carnak’s all- seeing eye.

* ”I Can See for Miles,” a #9 hit for The Who, on October 14, 1967, according to Joel Whitburn’s Top
Pop Singles 1955–1996. Words and music by Peter Townshend; copyright 1996 Fabulous Music Ltd.

† With apologies to the great Johnny Carson, wherever he may be.