Anatomy of a failure: picturephone revisited

A. Michael Noll

Telecommunications Policy, vol. 16, issue 4, 307-316

Abstract: Picturephone service -- a two-way, switched, video telephone system -- was developed and marketed by AT&T in the late 1960s and early 1970s. The market did not respond to the service offering, and the service was withdrawn -- in other words, picturephone service was a market failure, although the technology was an impressive success. This article reviews the history of the Bell System's effort to market picturephone service and presents the reasons for its market failure. The results of market research are interweaved with the author's personal experience with visual communications to support the inescapable conclusion that most business customers and residential consumers simply had little need for two-way, face-to-face visual telecommunication. The reasons for the picturephone's market failure had little to do with either technology or cost. Picturephone service simply had little incremental value compared to a telephone call -- and perhaps even negative value for some users.

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