Green concenrs and falling prices fuelling demand

Combined revenues at videoconferencing firms rose from $308m in 2005 to $607m in 2006, suggesting that the technology may finally be shaking off its 'non-starter' image.

Videoconferencing is becoming increasingly common as the technology improves and more IP-based solutions become available, according to analysts.

"Around 15 per cent of UK organisations report using some form of videoconferencing, an increase of three per cent in just six months," said John Bosnell, senior analyst at Point Topic.

The rise in annual revenues has been accompanied by a slight increase in monthly average revenue per user from $668 in 2005 to $679 in 2006.

This is against a backdrop of rapidly decreasing unit prices. A two-room system to connect two sites was priced at around $30,000 in 2001, but was likely to cost less than $5,000 in 2007.

Service subscriptions are rapidly growing in popularity as prices fell from over $200 per month for a basic package to less than $100.

Green issues seem to be another key driver, according to a survey by unified communications consultancy ICUGlobal.

Seven out of 10 of the companies surveyed cited 'reducing organisational carbon footprints' by allowing staff to meet without leaving their place of work as a reason for adopting videoconferencing.

The study also highlighted increased productivity (62 per cent of respondents) and the need for better internal communication (58 per cent) as other factors driving investment in videoconferencing.

"Social and consumer sensitivity to carbon footprints has now firmly entered the workplace and this is having a marked impact on working practices," said Stephen McKenzie, chief executive at ICUGlobal.

"These environmental goals seem underpinned by other workplace motivations. For example, the time spent not travelling to meetings is more productive and reduces stress."

Point Topic said that, although the drop in price can help customer demand, suppliers are increasingly looking to value-added services to help maintain average revenue per user.

The cost of a basic videoconference room starts at $2,000, and there are good margins to be made from subscriptions to fully-featured conferencing services with high-definition 'video dial tone' and an operator.

"It is a challenging time when prices drop, but there is plenty of room for the market to grow," concluded Bosnell.