Telepresence is getting so much play these days, it’s hard not to buy into the hype. But I’m a skeptic when it comes to this high-end and high-cost equipment, which does look great, but which also solves a problem most companies don’t actually have. When it comes to video conferencing, users want a basic level of quality—not a negligible point, given how long it’s taken for the technology to deliver on that expectation. But today’s high-definition systems (and even many standard definition ones) address that issue well: They deliver TV-quality audio and video with the touch of a remote-control button. That’s all most end users really want or need.

Certainly, some industries can and will benefit from telepresence systems, which immerse users in the experience, and which are designed to effectively make the technology (cameras, microphones, etc.) disappear. Healthcare, mergers & acquisitions teams, Hollywood, the DoD—those verticals and a handful of others will plunk down hundreds of thousands of dollars to achieve a Disneyesque video conferencing experience. Most others won’t.

Still, we at Frost & Sullivan believe the telepresence market will have an impact. For one thing, even if the number of units sold is relatively small, their price tags will boost revenues for any vendor that sells them. That’s why we forecast that by 2013, the North American telepresence market will reach $610.5 million (in 2006, it reached $27.6). (For more on our newly releases research in this area, please visit our site.) Here’s why it doesn’t take a lot of units to reach those numbers: During 2006, the weighted average price of telepresence was $252,324. (Take that “average” price with a grain of salt—some systems run upwards of half a million dollars.)

We do expect the North American telepresence market to experience price erosion in the low double digits due to the increasing competition among current market participants in addition to the decline in the price of components (display and codec technology, etc.). Additionally, Frost & Sullivan expects prices to decline as independent audio-visual integrators enter the market.

Telepresence—or, at least, the marketing buzz around it—also means good things for video conferencing overall. Companies that take a fresh look at video because of the hype surrounding telepresence may reasonably decide not to buy it, but they will likely see benefit in other, lower cost solutions (especially high-definition room- and executive-systems that are starting to be sold as the “poor man’s” telepresence solution). Indeed, we expect the impact of competing and alternative technologies, in addition to the increasing pressure from independent service providers and systems integrators, to slow the growth of telepresence by the end of the forecast period.

To maximize revenue and sustain long-term growth, vendors will need change the perception of telepresence as a high-end visual collaboration solution for top executives to a grassroots communication tool that offers enhanced productivity and cost saving across the organization. But in doing that, that may end up blurring the line between their solutions and lower-cost alternatives.

Finally, one of the biggest challenges facing this relatively nascent market is the fact that networking and compatibility issues limit the inter-connectivity of telepresence with traditional videoconferencing systems and other telepresence solutions from different vendors. That effectively creates a barrier to enterprise-wide collaboration—exactly the opposite of what video conferencing vendors and their customers want to do.