Cisco Announces Umi Home Telepresence Service

Cisco Umi

Cisco launched Wednesday a package of video-conferencing equipment and services that take the company into the consumer market where it will battle long-time video-calling leader Skype.

Cisco's new product, called Umi (pronounced You-me), marks the network-equipment maker's debut into the consumer space with video-calling, which Cisco calls telepresence. The company has offered high quality and expensive video-conferencing gear for businesses for some time.

Umi comprises a video camera and device that sit between a broadband connection and a flat-panel TV. Cisco claims the set-up is easy.

Umi, which is scheduled to be available Nov. 14, is expected to cost $599 for the equipment, plus a monthly service charge of $24.99 for unlimited video calling. The relatively high price and service fee are likely to be among Cisco's biggest challenges in selling Umi.

The leader in low-cost video calling is Skype, which offers video-conferencing from a home computer or laptop at no charge. Skype also offers a low-rate premium service. As the largest provider of international calls, Skype has 560 million users, with about 40% using the network for video chats, according to the company.

However, Cisco does not need to sell a lot of Umis to be successful. The company's core business is selling network switches and routers, necessary infrastructure for moving video across the Internet. Cisco has been moving aggressively into supporting online video and so as long as video-calling increases over the Internet, Cisco wins, whether or not it becomes a leader in selling equipment to the end user, analysts say.

Nevertheless, Cisco's consumer play appears to be serious. The company said Wednesday it is working closely with Best Buy, the world's largest consumer electronics retailer, in selling Umi. Best Buy will feature the new product in its U.S. stores beginning Nov. 14, in time for the holiday shopping season, and will start taking preorders through its website Oct. 18. Cisco is taking preorders as of Wednesday.

In addition, Best Buy will offer home installation and servicing of Umi through its Geek Squad unit.

Another major partner announced by Cisco is Verizon. The two companies are working together to carry Umi video calling on the carrier's high-speed, fiber-optic network, called FiOS. The service is expected to be available early next year.

Cisco Umi

Cisco is also spending big on marketing. The company has lined up "The Oprah Winfrey Show," which will take calls from viewers via Umi. Actor Ellen Page, who starred in the popular movies "Juno" and "Inception," will be featured as part of a national marketing campaign. Cisco also plans to take Umi to more than 20 major U.S. malls beginning Nov. 10 to try to entice holiday shoppers.

Nevertheless, Cisco will need more than marketing and partnerships to take Umi to mainstream consumers, the majority of whom do not place video-calling as a high priority. A recent survey by Gartner showed that roughly 20% of people from ages 13 to 74 do video calling today, which amounts to about 24 million U.S households.

Gartner analyst Amanda Sabia predicts Umi will capture only a sliver of the market, at least in the short term. Besides price, Umi's biggest drawback is the small number of people it will be able to reach. Umi can only reach other Umi users or people who use Google's video chat on their computer.

"Why would I spend 25 bucks (a month) for that?" Sabia told InformationWeek. "God bless them, I'm not saying how successful they're going to be, but it does seem like there isn't a whole lot of need for this."

However, Cisco could find customers among people who would have a need for high-definition video calling offered by Umi. For example, it could be used by the sick or elderly in video-conferencing with doctors, or by wealthy people who need to talk regularly with a financial adviser. There's also the possibility that Umi could someday find a place in online education.

From a technical standpoint, the consumer market is more ready than ever for video conferencing. The majority of U.S. households today have broadband connections and high-definition flat-panel TVs are ubiquitous. However, not all broadband connections are at speeds high enough for high-definition video.

Cisco has been building out its telepresence technology through acquisitions. The company recently bought business conferencing specialist Tandberg ASA for $3.3 billion. On the consumer side, Cisco in March 2009 paid $590 million for Pure Digital Technologies, maker of the easy-to-use and inexpensive Flip video recorder. Cisco claims its business telepresence line has become one of the fastest-growing internally developed products in the company's history. Cisco counts 600 telepresence customers worldwide, including 50 of the Fortune 500. Overall, the companies encompass 3,000 installed systems, with the hottest verticals being telecom, banking, healthcare and government.

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