Executive Summary

The UK videoconferencing market was worth £122m in 2000, growing by 28.4% over 1999. The rapid growth in value spend has been the result of a sharp increase in the penetration of videoconferencing products among UK companies, which has more than offset the rapid fall in unit prices.

Recent market growth has been led by the development of the set-top box product, which has proved attractive to medium and large companies alike, combining as it does low cost and high quality. Sales have also been driven forward by widespread price reductions and the falling cost of installation and telecommunications costs, the rapid growth of corporate networks (i.e. the infrastructure for videoconferencing), and changes to business structure and operations (e.g. knowledge-based businesses, mergers, and growing international operations) which have necessitated the need for videoconferencing in order to control complex, large and multinational companies.

The videoconferencing market essentially splits into three broad segments — endpoints, infrastructure and installation — with further segmentation in the endpoint (personal, set-top and group systems) and the infrastructure (i.e. H320, H323, gateways, gatekeepers) sectors.

Increasingly, videoconferencing is being merged into a broader market, called digital video communications, with major manufacturers now moving to supply video, audio and data communications in integrated packages to companies and to move their offerings away from Intergrated Services Digital Network (ISDN) systems towards Internet Protocol (IP) networks. This is merging the activities of audio-visual, telecoms and computer equipment manufacturers and will lead to mergers and acquisitions in the future. At the same time, as margins of videoconferencing systems fall, services are of growing importance to the market.

The key issues facing the market are:

• The growing convergence of video, data and audio communications, both technically and in terms of the dealership network. This is posing a competitive threat to audio-visual dealers.
• The development of new codec technologies, which are improving quality and allowing for much lower prices in the market.
• The development of web- and IP-based videoconferencing services and products, that are pointing the way to IP conferencing in the future.
• The development of and investment in broadband Internet technologies will make IP-based videoconferencing possible and economical in the near future.

Between 2000 and 2005, Key Note estimates that the videoconferencing market will grow by 172.1%, to reach £332m.

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