The bandwidth problem
Meanwhile, questions remain whether AT&T, the exclusive carrier of the iPhone in the U.S., can support a network to handle video chat. But AT&T's announcement on Wednesday to cap data use and lower monthly fees in time for Monday's Apple announcement seems to be a hedge against too much iPhone next-generation data use for whatever application, including video chat.
Burden said that a single video chat will take longer than a typical instant message text conversation and will consume many times more bandwidth. "AT&T had to get this data cap before the LTE handsets start hitting," Burden said, referring to the next generation of LTE (Long Term Evolution) technology that will make wireless networks faster. "Video chat on LTE would be an absolute mess" for networks without data caps, he said.
Gottheil added that "bandwidth must be an issue" with video chat, and that AT&T's data cap pricing plan was a result of that reality. "AT&T's been pining for usage-based pricing for a while, so the imminence of video chat seems to have brought the issue to a head, leading to [Wednesday's] announcement."
Mixed views abroad
Video chat is used in other countries, especially in Asian nations and mostly by younger consumers, but that's not a clear indication of how it might catch on in the U.S. For one, face-to-face communication is traditionally more important in China than in the U.S., Gold said. And since Chinese and Japanese characters are nearly impossible to use easily in text chat via a mobile device, video chat becomes more useful by comparison, Burden noted.
Burden added that some video chat applications on mobile devices seem to have fallen flat, citing some Nokia phones built for years with both front and rear-facing cameras, including the recently announced N900. Going back to 2007, with a video chat application based on Symbian software running on early versions of N-series Nokia phones, Burden recalled, "the experience was painful as hell ... the image was low resolution, the video was choppy and overall just hokey." Even more recently, Burden said that Nokia still adds a forward-facing camera to models despite the additional cost of US$3 to $5 to the average $170 materials cost of an average smartphone.
"Video chat has been unsuccessful for [Nokia], and I don't think they've increased any device sales because of the added second camera or that any buyers have gone to buy a new phone to upgrade for video chat capabilities," Burden noted.
A Nokia spokesman conceded via e-mail that video chat is not viewed as one of the major uses for its smartphones and mobile computers, although video chat is popular with users of some phones, including the N95, N70 and Nokia 6680. The newer N900 supports video chat through popular software applications allowing video calls over the Internet, he noted.
Adding a popular Skype-type video chat software, now commonly available on desktop computers, to a next-generation iPhone with two cameras wouldn't be hard for users to do, if the cost is reasonable and if Apple and AT&T allow it, Gold said.
But Apple could be up to something much bigger involving video chat and video streaming or related applications, Gottheil and others have said, with the use of Apple's giant data center under construction in Maiden, N.C.
Using the data center to support a future online services business, Apple could design a video platform for both iPhone and iPad applications with the data center as a kind of switching center to route music and video data traffic to users for a fee, Gottheil postulated in April.
This week, Gottheil said Apple will "almost certainly" use its acquisition of music-streaming service company LaLa to also provide streaming video. Atop that, Apple could add video chat as a service in some fashion.
"Face-to-face video ... is an opportunity we think Apple will not miss," Gotteil said. "It must provide video chat to make the front-facing iPhone camera useful, but the opportunity to build videoconferencing, video social networking and video games is too [good] to pass up. By providing a subscription-based infrastructure for video communications and an API enabling its developer community, Apple gets a recurrent revenue stream with a lot of stickiness."
Burden said everyone agrees that if Apple installs a forward-facing camera in the next iPhone, it will be primarily for video chat, but also, possibly, for an augmented reality application. Under that scenario, a user could launch a multi-player gaming application, then use the front-facing camera to project his or her face or body onto the avatar used in the game that would be shared with others wirelessly in real time.
Even if Apple's iPhone video chat concept initially is more modest than such visions, Gottheil said consumers will want video chat for the iPhone as they have wanted it for Facebook, which has a video application to help old friends reunite and for new friends to meet and flirt. Families will love it, much as they have favored desktop video chats over Skype using a laptop or desktop computer. "My first grandchild was born about a month ago, and he has singlehandedly introduced video chat to at least half a dozen homes," Gottheil said.
Dulaney said despite some workforce reservations, he is certain that Apple will make iPhone video chat viable, given its marketing prowess and understanding of consumer needs. "And Apple has a good working relationship with Cisco who talks about videoconferencing anytime they can, so I expect something to happen on this [Apple-Cisco] front," he said.
In summary, analysts admit there will be some, if not great, value in video chat for a wide range of consumers, but far less for business users. And they don't foresee huge networking problems that would lead to video chat's early demise, although they believe wide area cellular networks commonly called 3G will certainly pose bandwidth constraints that Wi-Fi will not.
The most lingering worry, especially for workers, could ultimately come down to a personal one, Burden said. "With video chat, you really do expose yourself for who you are at any given time," he explained. "Technology is not the barrier. It's how we look physically at any given time."
Burden recalled how characters in "The Jetsons," a 1960s TV cartoon series set far in the future, adjusted to having a video phone at home, doing things that wouldn't be practical with mobile video chat.
"Jane Jetson would wake up one morning with her hair all over the place," Burden recalled, "and when she had a video call, she'd put on a kind of mask with her hair perfectly in place to take care of the call," he said.