FORTUNE Small Business

Skip that business trip for a mere $299,000

OK, TelePresence will likely be available on a per-hour basis for much less. But can Cisco's impressive new videoconference product find a mainstream audience with such a hefty pricetag?

By Jonathan Blum, FSB contributor

NEW YORK -- Big tech makers such as Cisco (Charts, Fortune 500), Hewlett-Packard (Charts) and others are rolling out spiffy new videoconferencing products. I recently tested Cisco's latest, called TelePresence. And my verdict? It is impressive. Utterly so. But at $299,000 per setup - and a minimum of two setups per conversation - it had better be. And even with this pristine video quality, videoconferencing may still not get over the mainstream hump.

Using video on a symmetrical phone-like network connection as a surrogate for an actual meeting has an ugly past. First tested after the Second World War, AT&T (Charts, Fortune 500) did a demo of a videoconference product at the 1964 World's Fair, but few real-world customers could stand the cost or complexity. Then there was a videoconferencing push in the 1980s. But it was too expensive to really catch on. Who, after all has a spare $1,800 for a conference call?

Cisco's TelePresence videoconferencing system is fabulous, but a bit Big-Brother-ish.

Not even after 9/11, when videoconferencing stocks Polycom (Charts) Inc. and others ran north on speculation that air travel would become unpopular, did videoconferencing make it into mainstream business culture.

But that finally may be changing: Web video and video clips on cellphones are lowering the public's intolerance to video phone calls. And low-cost Internet telephony has forced network operators to invest in other services.

"Video smells like it is finally billable now," says Randy Harrell, director of marketing for the TelePresence at Cisco.

No question, the company has developed a tip-top-of-the-line videoconferencing weapon. TelePresence comes complete with 1,080 lines of progressively scanned vertical resolution in its displays - which is what the best Hollywood studios use in its blockbuster movies.

Cisco has developed a well-mannered video compression scheme and network integration standard that routes the video call cleanly over the Web. There is also very nice use of desk geometry, lighting, setting, sound, projections and lenses to create a perfectly immersive feel.

And best of all, the entire system runs off of existing Internet access. A TelePresence video call is simply treated as another bit of data on your network. There are no monstrous per-conference charges.

Also, don't let the half-million dollar price tag scare you. Cisco has plans to offer the service on a by-hour basis for smaller enterprises, probably through a retail business services player such as The UPS (Charts, Fortune 500) Store, Staples (Charts, Fortune 500) or FedEx (Charts, Fortune 500)/Kinko's. To give an idea of what the pricing for those services might be like (details haven't yet been announced), FedEx/Kinko's currently offers less glitzy videoconferencing in more than 120 sites in North America, starting at $225 per hour.

And it all works. I held a pleasant 40-minute meeting with seven Cisco representatives, two of whom happened to be next to me in an office near New York's Madison Square Garden; the other five were across the country in building 8, on the first floor, at the Cisco campus in San Jose. No nasty plane flight. No crummy hotel. No jet lag. I'm loving it.

So, yes, TelePresence is fabulous. But can I recommend it for a real business? Honestly, I am not so sure.

Using video to replace an actual meeting has its pitfalls. The experience is, frankly, eerie - like posing for a never-ending family photo. Better not bite those nails! And productivity is a major issue. Who, after all, runs the meeting?

And then there's the Big Brother aspect. I found myself thinking many times during the demo, "Gosh, I hope this doesn't wind up on YouTube."

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