University of California Analysis Demonstrates Failure to Adopt Open Standards Will Hinder Market Potential, Economic Growth
BRUSSELS, BELGIUM -- (Marketwire) -- 11/07/12 -- Cisco (NASDAQ: CSCO) -- A significant new analysis of the economic potential of combined, video, data and voice systems that work together over the Internet -- known as unified communications (UC) -- shows great opportunity when these collaboration technologies working together and clear evidence that market growth as well as economic and consumer benefits will be inhibited if they do not.
The paper, written by Dr. Michael Katz, a professor at the University of California, Berkeley, and a former economic official in both the Bill Clinton and George W. Bush Administrations, and Dr. Bryan Keating, a Stanford-educated economist based in Washington, DC, studies the current unified communications market. The Katz/Keating study outlines the potential negative outcomes for the market of some UC vendors refuse to adopt industry standards that would enable video-to-video calls between different commercial and consumer systems.
"The economic effects of incompatibility are not an abstract academic theory," Katz said. "There are real, everyday consequences to economic growth, consumer well-being and business productivity when one company has a proprietary Internet video system that does not work with others. This means less jobs will be created and people and businesses will not be able to communicate as freely, thus negatively affecting global economic potential. Our strong view is that government should monitor this market carefully to ensure that the implementation of standards is not blocked by dominant players seeking to gain competitive advantage."
UC technologies -- especially video calling -- have been found to improve collaboration, boost productivity, reduce travel costs and enable remote training and services in health care and education. However, according to the research by Katz and Keating, industry standards are critical to the future growth of the UC market. The study reports that analysts at both Gartner and Frost and Sullivan find that interoperability is an important consideration for enterprise customers and that standards will increase flexibility for users as well as help lower costs.
"UC has the potential to be a huge growth industry at a time when many sectors are stalling," Keating said. "As with the Internet, we can't afford to have a 'go-it-alone' mentality in this area. We must do everything we can to ensure that companies adhere to the common global standard for video calling so that businesses and consumers reap the full benefits of these compelling communications platforms."
The study, commissioned by Cisco, included several key findings:
UC technologies have significant potential to increase business productivity but the lack of interoperability is an impediment to widespread adoption.
UC is particularly susceptible to market failures that could impede standards-based interoperability: (a) there are powerful network effects, meaning that the technologies become more valuable as more users are connected; (b) there are significant costs associated with using multiple vendors or switching from one to another; and, (c) certain vendors have large installed bases and important complementary products.
Under prevalent market conditions, those vendors who would gain a competitive advantage when networks are proprietary can have incentives to thwart interoperability by undermining industry standards or refusing to adopt them.
For these reasons, Katz/Keating conclude, the UC market should be monitored closely for signs of specific anti-competitive conduct. When there is evidence of conduct that could or has adversely affected competition through effects on interoperability, government should address that conduct and impose appropriate remedies that would ensure adherence to agreed-upon industry standards.
The economic study follows two recent surveys in the U.S. and in Europe which showed strong support for video technologies working together. Nearly four in five likely U.S. voters surveyed believe it is important for technologies such as video calling to work together to help create jobs, promote innovation and deliver critical benefits in remote health care, education, business and other services. And 84 percent of European consumers surveyed believe that video calling should be as easy as making a phone call.
The use of video by consumers, government and business is growing at a staggering rate. According to the Cisco Visual Networking Index, in just three years, one million video minutes (the equivalent of 674 days) will traverse the Internet every second. Use of video calling services is also increasing. For instance, on February 27th of this year, Skype reported that 34 million people were using the service at one time.
"As video collaboration becomes increasingly mainstream, multiple vendors will have to work together to enable global scale and broad customer choice similar to what consumers have today with phone, Internet and email," said Marthin De Beer, senior vice president, Cisco Video & Collaboration Group. "Only with a truly open video community will we fully reap the economic and social benefits of this transformational technology."
Today not all video calling technologies work together. Cisco's TelePresence® solutions and many other video communications products connect using the same standards-based "language." However, Microsoft's Skype, relies on proprietary standards, which hinders Skype's more than 600 million users from calling non-Skype users, and prevents businesses from reaching them via systems that offer services such as healthcare and job training by remote video.
Cisco is a strong advocate of video communications t based on open standards that are agreed upon by credible standards bodies open to all interested industry participants. This framework that has been used successfully to create the standards that underlie the Internet, email and voice calling. With this approach, anyone who adopts an open standard is assured of basic interoperability that is not controlled by any single commercial vendor.
Supporting Resources:
Watch a video on why interoperability is important
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