Today, video chatting on a phone seems natural, yet for years, the public resisted video chat. The device in this photo, it's from 1964, shows the Bell System's picture phone. Although you see grandma enjoying a chat with her daughter and granddaughter, very few people, let alone grandparents, use the device. Bell lost a half billion dollars. Here's the amazing story of the failure, but more important, 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 picture phone. They hope that everyone would replace their voice-only phone with a picture phone, even though Bell charged $160 a month for the phone in its service, about $1,000 in today's dollars. Technically, it was an amazing achievement. Bell used the existing twisted pair copper wire of the telephone network, not the broadband lines like today, to produce black and white video on a screen about 5 inches square. And amazingly for the time, it used a CC-to-base camera, which had size and height controls, so the image could be adjusted without moving the picture phone itself. To spark interest in the picture phone, Bell created picture booths in New York, Chicago, and Washington, D.C. to introduce the phones to the public, at a cost of about $20 a minute over $150 in today's dollars. Bell hoped for a billion dollar business with a million phones set up by 1980, and 12 million subscribers by the year 2000. But in 1964, only 71 patrons used the picture booths in the first six months, and six years later, the number of users felt zero. The picture phone itself limped along with a handful of customers until Bell withdrew it in 1978, after investing some $500 million. The truly interesting aspect isn't the failure. The picture phone 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 picture phone came to being the internet. In the 1950s and early 1960s, the Bell system engineers who designed the picture phone fowled 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 picture phone, they could justify the cost of upgrading local lines. So they designed the picture phone to spark consumer interest and degenerate cash to build an all digital switch network to provide, in their words, a wide spectrum of consumer services, including picture phone. In fact, picture phone did deliver data in a proto-internet way. The phone's connected mainframe computers. An add-on user shared 35 millimeter slides and a flip-out mirror captured documents placed on a desk. The picture phone didn't 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 picture phone, introduce it at a low rate to build demand. Because this would leave them open to charges of monopoly abuse. So in a way, the picture phone 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 Hammock, the engineer guy.