Transcript

Today video chatting on a phone seems natural, yet for years the public resisted video chat. The device in this photo -- its from 1964 -- shows the Bell System’s PicturePhone. Although you see grandma enjoying a chat with her daughter and granddaughter very few people -- let alone grandparents -- used the device. Bell lost a half billion dollars. Here’s the amazing story of the failure, but more importantly near revolutionary success, of the very first mass-manufactured phone for video chatting.

This device was meant to be the most revolutionary communication medium of the century, but failed miserably as a consumer product. In 1964 the mighty Bell System, the great monopoly that solely owned the telephone system, introduced the PicturePhone. They hoped that everyone would replace their voice-only phone with a PicturePhone, even though Bell charged one-hundred and sixty dollars a month for the phone and its service -- about thousand in today’s dollars.

Technically, it was an amazing achievement: Bell used the existing twisted-pair copper wire of the telephone network -- not broadband lines like today -- to produce black and white video on a screen about five inches square. And, amazingly for the time, it used a CCD-based-camera, which had size and height controls so the image could be adjusted without moving the PicturePhone itself.

To spark interest in the PicturePhone, Bell created “PictureBooths” in New York, Chicago, and Washington DC to introduce the phones to the public -- at cost of about twenty bucks a minute, over one-hundred and fifty in today’s dollars. Bell hoped for a billion dollar business with a million phones set up by 1980, and twelve million subscribers by the year 2000, but in 1964 only seventy-one patrons used the PictureBooths in the first six months, and six years later the number of users fell to zero.

The PictutrePhone itself limped along with a handful of customers until Bell withdrew it in 1978, after investing some five hundred million dollars.

The truly interesting aspect isn’t the failure. The PicturePhone had the problems of any new invention: attracting users and producing enough to lower the cost.More fascinating to me than the failure is how close PicturePhone came to being the internet.

In the 1950s and early 1960s the Bell System engineers who designed the PicturePhone followed the speculations about a new coming media revolution, so they thought of an interconnected world. They knew that as long as customers used telephone lines only for voice calls, they had little reason to pay for broadband lines to the home -- copper would work well enough. But with PicturePhone they could justify the cost of upgrading local lines.

So, they designed the PicturePhone to spark consumer interest, and to generate cash, to build an all-digital switched network to “provide”, in their words, “a wide spectrum of customer services, including Picturephone.”

In fact, PicturePhone did deliver data in a proto-internet way. The phones connected mainframe computers. And an add-on let users share 35 mm slides and a flip-out mirror captured documents placed on a desk. The PicturePhone didn’t quite do its job well-enough: The video, although cutting edge for the time, was still choppy, and sharing documents on a 5 inch by 5 inch screen was less than ideal. The root of the failure lies in Bell’s monopoly powers.

It could not cross subsidize the PicturePhone -- introduce it at low rate to build demand -- because this would leave them open to charges of monopoly abuse.

So, in a way the PicturePhone fit in nowhere: Too expensive for home, too limited for business. But it does remind us when looking at failure to look carefully at the details because in them is often the path to the future.

I’m Bill Hammack, the EngineerGuy.