Cisco vs. Skype: Who Will Capture The Consumer Video Segment?

by Gaurav Kheterpal on October 5, 2010

Barely a month ago, there were speculations that Cisco (and Google) are potentially vying for the acquisition of VoIP giant Skype. As it turns out, those speculations didn’t materialize. Not only did Skype manage to exist as an independent entity, it filed a $100 Million IPO and then forged a breakthrough partnership with Facebook to challenge the likes of mighty Google Inc.

And now, a report from WSJ indicates that Cisco is gearing up to launch TelePresence products for the consumer market in order to challenge the supremacy of free services such as Skype. An official announcement is expected at an October 6 event in San Francisco at which the company plans to discuss “a new consumer product from Cisco.”

While the networking giant is keeping mum on its plans for the consumer segment, the battle between Cisco and Skype promises to be mouthwatering prospect for the residential TelePresence industry.

WSJ further reports that Cisco’s proposed residential TelePresence product will include a video camera and a device that connects users’ high-definition TVs to the Internet. The product is expected to have an upfront cost of $600 and a $30 monthly subscription thereafter. Cisco already offers the TelePresence solution for business users, priced at $300,000. To be honest, Cisco’s TelePresence can at best be regarded as a modest achiever amidst fierce competition from Hewlett-Packard, Polycom, LifeSize Communications, Teliris and Huawei Technologies.

Therefore, it makes perfect business sense from Cisco to leverage its technology expertise to tap the consumer segment. In 2009, Cisco acquired Pure Digital, the maker of the Flip Video camera as part of its growing focus on the consumer video market. In fact, I’m somewhat surprised that it took Cisco so long to get its act together to enter the consumer segment.

From a business perspective, Cisco TelePresence is packed with a lot of useful features including scheduling meetings, In-room controls, integration with collaboration applications like Cisco WebEx Meeting Center and also existing SD or HD videoconferencing systems etc. It will be interesting to see how the company customizes its offering for the consumer segment.

IMO, Cisco will find it challenging to justify the hefty price tag of $500, especially when Skype offers a well-established free video alternative. Though some reports indicate that Cisco could subsidize the price to $200 for carriers such as Comcast and Verizon, it is still on the higher side. Further, the lack of fast Internet service is likely to be a dampener for Cisco’s consumer TelePresence plans.

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Written by: Gaurav Kheterpal. www.digitcom.ca >. Follow TheTelecomBlog.com > by: RSS>, Twitter >, Identi.ca >, or Friendfeed >

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UC Change Agent October 5, 2010 at 5:55 pm

Microsoft’s Video Kinect (part of Xbox 360 + Kinect) launches in the marketplace on November 4th and a demo can be seen on YouTube at: http://www.youtube.com/watch?v=QBsTimrYTIQ

Something to look at and consider but, there likely needs to be better definition of the “Consumer Video Segment” to understand the key players.

Mike Barnes October 6, 2010 at 4:38 pm

I too am surprised it’s taken Cisco so long to make this move. They have a number of consumer strands, but having acquired KISS, Scientific Atlanta and Pure, amongst others, a visible strategy has been a while coming.

I really don’t believe that Cisco see the consumer market as a source of great commercial profit, but I *do* think that they have realised, in fact have known for a long time, the pull-through on business systems profits available to a well-known brand. They’ve been pretty good at getting their IP phones in front of TV cameras, even though it’s taken some time to update them from the original models. I guess they started out looking hi-tech enough. Getting the Cisco brand to be globally recognised outside of the industry can bring home a lot of new business deals.

But also, with the certainty that the world of business is changing and the workforce is much more mobile it is key to have the right environment in the home in order to plug into the corporate world. Being able to take that Webex meeting or Telepresence call from home in HD is pretty appealing. Decent quality consumer/busines crossover technologies could end up being a loss-leader.

It will be interesting to see what other consumer products Cisco decide to invest in in the next year or so.

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