News Article: Chicago Tribune, August 8, 2004

"Teleconferencing spurs more excited talk"

By Jon Van
Tribune staff reporter
Published August 8, 2004

The teleconferencing surge that took off after Sept. 11 as an alternative to business travel continues to grow.

At Andrew Corp., for example, spending for conference calls tripled over the last year as the Orland Park company grew through acquisitions. Costs per minute are falling even as Andrew executives pick up the phone more frequently.

"With this economy, we're trying to reduce travel costs," said Edgar Cabrera, Andrew's manager of communications service. "Teleconferencing is an effective alternative."

The communication equipment supplier's employee base has doubled in the past two years, and Andrew now has 9,500 employees spread around the world. Teams from different locations teleconference frequently, Cabrera said.

While Andrew uses teleconferencing more than many, almost every enterprise does more teleconferencing today, making that activity one of the few bright spots in a telecom industry that has slogged through three years of unremitting financial gloom.

In 2003, when most telecom industry indicators pointed downward, teleconferencing was up 10 percent worldwide, said Marc Beattie, a senior partner with Wainhouse Research in Boston.

That has been especially good news for two local firms specializing in phone conferencing because they have grown at a faster clip than the industry in general.

Chicago-based InterCall, a unit of West Corp., and ConferencePlus, the Schaumburg-based unit of Westell Technologies Inc., have both seen market share increase as the teleconferencing pie has grown.

Smaller firms have prospered in part because the long-distance companies that traditionally dominated teleconferencing--AT&T Corp., MCI Inc., Sprint Communications Co. and Global Crossing--have been preoccupied with falling long-distance rates, regulatory problems and shrinking revenues.

"A lot of independent companies have taken advantage of the troubles at MCI and Global Crossing," said Beattie.

"They ask managers, 'Do you really want to risk a critical conference call with a company in trouble?' Many customers split accounts to add ConferencePlus or InterCall as a second provider where before they just used a single provider."

At ConferencePlus, fiscal 2004 revenues are up nearly 9 percent, to $45.4 million, and total conference minutes calling are up 22 percent, said Chief Executive Timothy Reedy.

"We're profitable," he said, "and a handful of other independents are profitable, but a lot of companies aren't."

Even though more business people use teleconferencing, per minute rates are falling, so companies must trim costs to stay profitable, Reedy said.

Most conference calls once used operator assistance, but today the majority are initiated by the callers. Such automated calls typically charge about a dime per minute while operator-assisted calls are billed at about a quarter a minute.

Reedy said about 85 percent of ConferencePlus calls are now the less expensive customer-initiated type but that operator-controlled calls are still significant. "We're always going to have some operator-initiated calls," he said. "Customers may not need that when people within a firm talk to each other, but they almost always want it for investor relations calls or when top executives are involved."

At Andrew, about 80 percent of the conference calls are now employees talking to one another, Cabrera said.

The shift toward more customer control may sow seeds of future trouble for the industry, said Elliott Gold, president of TeleSpan Publishing Corp., which publishes a teleconferencing newsletter.

"What the industry has done is to take the customer down the road, showing him how to do everything himself," said Gold. "This could come back to haunt them."

The hot new phone technology, voice over Internet protocol, or VoIP, integrates phone calls with computers and makes it easy for someone to use a computer to set up a conference without the help of a third party service.

"People in the industry talk about VoIP," said Gold. "They're really frightened by it, what it will absolutely do."

Even without VoIP, the conferencing industry has cause for concern, Gold said, citing FreeConference.com, a California-based operation that enables anyone to use its Web site to set up conferences at no charge beyond the cost of making long-distance calls to its California phone number.

"We're saying the emperor has no clothes," said Warren Jason, president of Integrated Data Concepts, the company that operates FreeConference.com. "Conference calls are easy and they should be cheap. Companies spend thousands of dollars on conferencing when they don't need to."

Jason's conferencing operation runs with just six employees. It makes most of its money selling premium service to large organizations such as General Electric Co. and the U.S. Postal Service. The free service recruits customers by word-of-mouth, so Jason doesn't need a sales force.

IDC also makes hardware used to bridge calls together, so Jason has plenty of equipment and the ability to integrate it with his Web interface.

Executives at traditional conferencing services say they're not worried about FreeConference.com or its business model. "The conference may be free, but participants pay for transport," said Robert Wise, vice president of business development for Chicago-based InterCall. "Our conference calls use toll-free numbers, which most participants prefer."

Wise said that InterCall's staff of 300 salespeople is one reason that its business is expanding. Another reason is integration of the Internet with conference calls so participants can look at a PowerPoint presentation or other visuals as they talk with one another.

"Web conferencing has demonstrated that you can do presentations to small and huge numbers of people without leaving the office," Wise said.

One soft spot in teleconferencing is video conferences. Both ConferencePlus and InterCall offer video conferencing and new technology makes it easier and cheaper.

But videoconferencing remains a tiny niche that shows no signs of growth, executives at both firms said.

"We do video, but it's not significant," said Kenneth Velten, senior vice president of marketing at ConferencePlus. "We did one the other day where a surgeon did knee surgery while others in training watched remotely.

"Cases like that or where a CEO wants to talk to all his employees are great for videoconferencing. But in most cases people just don't see the value."

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