“I can see for miles and miles”*

TeleSpan’s 2010 Predictions

Here’s what I think!

Are you sitting down?

This year, 2010, is the 30^th year for TeleSpan.

Amazing!

We’ve been publishing the newsletter since May 1981, making this our 30^th Anniversary. I have to tell you that Shirley and I didn’t think we’d be publishing this long, figured we’d do it for a max of five years. But I have to say, the past 29 years have been nothing but fun, as will this, our 30^th year.

Speaking of fun things, this year represents my 15^th annual predictions edition, predicting things that will come about in our industry this year or certainly in the next few years. For the fourteen years I’ve been doing this, I’ve had a batting average of .720 (72%).

As I said last year, “And that’s no BS (in Math) from MSU either!”

As I always say, though, I just want to be clear: 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. All of us want to share in a successful, growing industry. Fact is, though, some things, some ventures, simply won’t make it. With 29 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.

Ready? Okay, now the wind up, the pitch….

TeleSpan’s Prediction #1:

"All you can eat" Flat Rate Pricing comes from Free and VoIP conference call providers to make a major dent in per-minute model.

The price battle is over, folks!

We’re seeing bids at a penny a minute for voice conference calls, AND seeing sub 3¢–4¢ a minute where Webconferencing is thrown in. Then there are the Skypes of the world, and the free conference call providers, who, due to the FCC Farmers decision in December last year, have to find another way to make money other than through LEC revenue-sharing. I’m convinced it has to be flat rate pricing.

Not that it’s anything new. Jeeze, Raindance came out with the idea of flat rate pricing several years ago, and after being acquired by InterCall, it (InterCall) is now pushing flat rate pricing. This is where a conference call customer can opt to pay a fixed rate each month for as many conference calls as they want for up to N participants, where the price is higher if “N” is 25 participants than if “N” is 10 participants.

Sure, this is going to scare the living dollar-jeezus out of the “paid per” CSPs, but my forecast is that usage will zoom, and while revenues may fall, CSPs will remain profitable.

TeleSpan’s Prediction #2:

Telepresence fails to grow beyond single-digit share of unit sales (factoring out consumer market)

Three percent (3%) is not a big number! That’s the market share telepresence had of group videoconferencing unit shipments at the end of 2009. B F D! (Big Fluffy Deal)!

Tell me—Are you going to pay all that money for a system that delivers high definition video to a flat screen in your conference room, when you can go to Fry’s and get the Logitech HD Webcam and a flat plasma screen and boot it up using Vidyo or other HD video software for a tenth the capital outlay?

I say that because I’m really convinced that the consumer market is the place for “telepresence,” and in fact, I was going to predict that Skype was going to push it there, and lo and behold, Skype, along with Polycom, IBM, and Cisco, announced it at CES before I could predict it in today’s newsletter.

TeleSpan’s Prediction #3:

Presence and calendar scheduled and launched conference calls fastest growing by 2011

Do you do anything anymore without checking your Outlook, or Notes, or Apple Apps calendar first? Further, when’s the last time you had a new meeting scheduled that wasn’t plastered into your Outlook or Notes or Apple Apps calendar?

Been longer than a day? Then you’re a Neanderthal (which I’m proud to be, by the way!).

Two years ago I told you that, based on TeleSpan’s data on conference calls, I had figured out that there was a surge in point-to-point conference calls (think two-way conference calls … um, phone calls), and that the surge had come from the increased use of presence and calendaring software.

And I was right, with virtually 16-17% of all conference calls now point-to-point calls!

Well, with that factoid in the crystal bald (under my turban), I’m now convinced that presence and calendaring software will soon dominate as the way to schedule and even launch conference calls of all size.

With that prediction, can someone out there please tell me what will prevent the Big M (Microsoft) or the Big I (IBM) from taking a gigantic share of our collaboration space?

TeleSpan’s Prediction #4:

Social networking sites gain a share of conference calls as large as the "free" providers have by 2012—maybe cut deals with them or Google

Over the holidays, I read an article in The Wall Street Journal, a small hometown newspaper, that the new CEO of LinkedIn was trying to find ways to get the site’s social networking members to do things that would make them stay on LinkedIn longer and possibly then find a way to monetize their visits. It seems, according to the article, that while LinkedIn had nearly 54 million members who were online an average of 13 minutes a month, Facebook had 350 million members who spent an average of 213 minutes online each month.

What’s more “social” and “networking” than a conference call?

Well, as the “free” providers of conference calls are beginning to search for a way to get away from the farm, why not link in with providers of social networks? Seems to me that it’s a match made in heaven, if not in the cloud, or in the Google.

TeleSpan’s Prediction #5:

Prices of videoconferencing units plunge under Cisco and Logitech acquisitions of Tandberg and LifeSize & Skype CES announcements

Ha, ha, ha, ha, ha…sorry I had to laugh after reading this prediction.

Is there anyone out there who doesn’t agree with me on this? If you don’t, you need to check into a “Ha-ha” institution!

Cisco bought Tandberg so it could sell more high speed (really higher speed) Cisco plumbing gear (think routers and switches), and Logitech bought LifeSize to boost falling annual revenues, and to expand its cheap, low-cost Webcam business. How will others compete with Cisco and Logitech in the years to come? Well, they will cut their prices (or get acquired…. as I suggest in the next prediction).

And that doesn’t even factor in the new $1,000 to $2,000 systems coming in Q2 from Panasonic and LG Electronics, through their partnerships with Skype, which they announced at CES last week.

TeleSpan’s Prediction #6:

Polycom is sold after Tandberg and LifeSize acquisitions are completed, Hagerty out, and Andrew Miller…

Rumors are rampant, and while we at TeleSpan thought it was going to be IBM (turns out it’s cut a home-of-the-future deal with Polycom), I’m hearing that there are others looking at Polycom right now. And why not? They’re the only remaining, solid and profitable videoconferencing and audio endpoint company out there now that Tandberg and LifeSize got swallered up.

As for Bob Hagerty, who’s done an incredible job as CEO at Polycom, I’m convinced that he’s going to leave. I mean, on December 23 Polycom even filed with the SEC an updated severance agreement between the company and Bob (http://biz.yahoo.com/e/091223/plcm8-k.html). Yes, Polycom tells me that it was simply complying with revised SEC regs, but give me a break! Why bring in Andrew Miller, give him all that power, invite him to the quarterly earnings calls, have him speak as often as Bob speaks during the call….

And as for Andrew, I’m hearing that he’s cleared out a gazillion managers, ticked off a number of folks (so what else is new), but that some channel partners actually like his vision.

My take?

Andy will be there after Bob is gone, but not long after that, Andy will get the boot, just like he did at Tandberg.

TeleSpan’s Prediction #7:

Apple sells a half-million copies of software “apps” with "collaboration" features by mid-2011

By the end of 2009, Apple was selling between 16 million and 17 million iPhones a year, and had over 100,000 apps out there, with over 1,000,000,000 (one billion) downloads (http://www.wired.com/gadgetlab/2009/11/appstore/). If just 500,000 of those folks bought software that had “collaboration” features, that would be 2.9% of the iPhone annual buyers who would have telephone presence for collaboration, or less than the 3% who buy and have telepresence presence.

I’m betting it’s more than a half-mil, but predicting Apple’s Apps Store sells at least that many or more by mid- 2011.

TeleSpan’s Prediction #8:

China surpasses the United States in conferencing and collaboration traffic by 2014

This is going to be nearly impossible to prove, as right now I don’t have a way to collect data on conference call traffic in China. But, while China is virtually the same size in terms of land mass as the United States, (both around 9.6 million square kilometers), China is four and one-half times the size of the United States in terms of population (United States pop was 280 million last year while China’s pop was 1.284 billion).

And China’s business and industry sector is growing faster than the United States’.

Well, while the United States is currently the largest single user of conference calls on the globe, I’m betting it won’t be by 2014. China will be.

TeleSpan’s Prediction #9:

HD voice reaches tipping point by 2011

Last year I predicted that HD videoconferencing would exceed 80% of sales revenue, and as you’ll see below, I was correct! Well, you and I have as many ears as we have eyes, right? If we want to see in HD, don’t we want to hear in HD?

With wireline telephony going VoIP, and mobile going 3G, why would anyone settle for 3 kHz audio, when we can easily transmit (and hear) 7 kHz to 11 kHz audio?

I say, HD audio (conferencing) will reach a “tipping point” next year, and finally (thank loud), will replace narrowband audio for conferencing.

TeleSpan’s Prediction #10:

Craig Malloy leaves Logitech before 2012, and after non-compete expires, launches new company in conferencing and collaboration field

Come on, this one is so darn easy.

Craig was one of the early folks at VideoTelecom, later called VTEL. When he and his team of engineers saw the future of videoconferencing, they left and in 1996 founded what became ViaVideo, where they built prototypes of the next revolution of videoconferencing, small integrated systems that fit on top of television sets. Brian Hinman, at Polycom, saw this, and snapped up ViaVideo in 1998 and, with the product, grew Polycom to be the leader in business videoconferencing. Craig, as all will remember, left Polycom, and when his non-compete lapsed, founded LifeSize in 2003, the company that paved the way toward HD, really telepresence videoconferencing. And, again, when it was obvious that Craig and his partners were right, Logitech bought LifeSize at the end of last year.

Think Craig will sit with his feet up and retire? Think that TV sets still have rabbit ears?

Figure Craig will leave before 2012, wait for his non-compete to run out, and will then found, build, and launch a company that will pave the way to the next videoconferencing/collaboration frontier.

Box this

Just before I finalized my annual 2010 predictions, I had to pull three predictions, as one was predicted by another group (I lead, I don’t copy), and the two others came true last week before I could get my prediction out to you

The first one was about Sony. After seeing that Sony was pulling out of Europe (announced in the Fall of 2009), and watching cut after cut after cut at Sony corporate, I was going to predict: “Sony withdraws from videoconferencing market.”

But someone beat me to the punch and predicted it in late December, so I pulled it off my list. I still think I’m right, though, even though someone else has already predicted it.

Then I had to pull my prediction that “Skype introduces home videoconferencing on large screen HD systems.” Well, as you know from my CES edition last week, Skype did just that before I could print my prediction.

Finally, I was going to predict that Cisco would enter the consumer market this year (2010) with a home telepresence system in the $1,000 price range, and as you saw in last week’s CES edition of Electronic TeleSpan, Cisco announced that indeed, it will enter this space with an inexpensive device.

Well, I was right and wrote these predictions in December last year before I knew they were true. But since they’re out there now, I pulled them from my list.

2009 PREDICTIONS

Okay, let’s see how the Crystal Bald did last year.

TeleSpan’s Prediction #1

HD Video contributes over 80% of revenues by 2010.

Just looking at Polycom’s numbers, and then adding in LifeSize’s HD sales, we’re already at a point where over 80% of revenues from group video sales come from HD.

TeleSpan’s Prediction #2:

Telepresence sales flat, except those lower than $35,000.

As I said above, telepresence sales represented about 3% of group video unit sales during 2009. And, if we exclude the Cisco give-aways, and self-used systems (Cisco is one of Cisco’s largest telepresence customers), there weren’t a lot of $299,000 telepresence systems sold last year. At the same time, if you look at Tandberg’s announced “immersive” sales for the second and third quarter last year, my BS in Math tells me that the systems sold for an average of $20,000 to $25,000 each, or less than 1/10 the price of the high-end Cisco TelePresence systems.

No one else is willing to break out their revenues from “immersive” or telepresence unit sales, but based on what I was able to collect from Tandberg, methinks I get a thumbs up for this prediction.

TeleSpan’s Prediction #3:

IBM makes major inroads in conferencing and collaboration market.

Well, well, well, I was going to take a thumbs-down on this until I got to the Consumer Electronics Show (CES) and saw firsthand what IBM was doing with Polycom, plotting to bring collaboration right into the home. I’d call THAT a major inroad, wouldn’t you?

Soooooooo, I’ll take a thumbs-up on this one!

TeleSpan’s Prediction #4:

Microsoft settles with Avistar, maybe buys it to win back accounts lost to Lotus/IBM.

I really thought this would happen, but it didn’t. And in fact, Avistar announced (http://biz.yahoo.com/e/091224/avsr.pk8-k.html) on December 24 last year that it had “entered into a patent purchase agreement to sell all right, title and interest in and to substantially all of Avistar's U.S patents and patent applications, and related foreign patents and patent applications…” to Intellectual Ventures Fund 61 LLC (http://www.intellectualventures.com/) for $11 million.

I guess that means that Microsoft no longer has any reason to buy Avistar then, so I’ll take a thumbs-down on this one.

TeleSpan’s Prediction #5:

Polycom, Avaya totally withdraw from CSP market.

Well, within a few weeks of making this prediction, it came true. Polycom pulled the plug on Voyant in Colorado and all new development work for CSPs, choosing instead to work with enterprise customers. Avaya has basically done the same thing, so I’ll take two (well one) thumbs-up.

TeleSpan’s Prediction #6:

Skype video used by a growing number of corporate users from home for business calls.

Yup, I was spot on with this one. When Jonathan Christensen, da’ video guy at Skype, spoke at our last Future of Conferencing Workshop, he confirmed this one. In fact, Jonathan told the audience that fully 29% of Skype users were using Skype for business purposes by March 2009, and that video usage had grown from 27% of Skype calls to 34% of Skype calls by mid 2009.

Next!

TeleSpan’s Prediction #7:

Big Six dive/grow due to recession.

Gee, was I right on this one. TeleSpan’s Big Six reported a 10.7% sequential drop in sales in the first quarter, recovering during the next two quarters with sequential growth of 3.3% for the second quarter followed by sequential growth of 6.1% for the third quarter.

Phew!

Now, if I could get my 401Ks to do that….

TeleSpan’s Prediction #8:

Event conferencing grows.

Indeed, event and operator-handled calls grew during the first half of 2009. It’s amazing, but it’s clear to us that such operator-handled calls are simply not going away. And, based on the data we are collecting for the Future of Conferencing Workshop in Las Vegas, March 18 and 19, we expect to report that such calls are still growing!

TeleSpan’s Prediction #9:

AT&T regains #1 position in CSP markets.

Well, AT&T indeed did grow its position, but remained behind InterCall, which has soundly kept its first place position for all of 2009. With that, I’m forced to take a thumbs-down on this one.

TeleSpan’s Prediction #10:

Premiere wins back all of IBM's business—it already won the “event” business back.

RFP in hand, Premiere has won back virtually all of its lost IBM business. Well, turns out Premiere won the RFP for customer-handled calls, but I was mistaken when I said it had “already won the ‘event’ business back.” That was not the case, even last year.

But, since the customer-handled business is one heck of a lot bigger (minutes and revenues), I’ll take thumbs-up on this one.

And, congrats to Premiere!

BOX THIS

You can hear a replay of the Predictions at www.telespan.com

Want to listen to a recording of my annual predictions radio show? By Monday or Tuesday, you should be able to go to our Web site (http://www.telespan.com), enter, and click on a link to hear and see what JD and I said about these predictions during our show recorded Friday, January 16. You can as well go directly to ConferencePlus’s site to log on.