The Medium Is The Message
Israeli start-up firm VocalTec is selling its InternetPhone
software via the Internet.
RACHEL NEIMAN SPECIAL TO THE JEWISH NEWS
his might be a story about
two army buddies who in-
vented a technology which
took the world by storm,
turned the buddies into zillion-
aires and revolutionized the com-
munications industry.
Or it could be about two Israeli
guys who invented a nice little
product winch earned them a tidy
sum before the world moved on
without them and their technol-
ogy. Time will tell.
What can be told right now is
that VocalTec, an Israeli start-up
company founded in 1989, has
been using a unique method of
selling its latest product.
InternetPhone software allows
international voice communica-
tion for the price of a local call via
Internet "connectivity."
In taking global village-build-
ing to its logical extreme, the com-
pany has made the medium its
message: InternetPhone is sold
and delivered electronically ... via
the Internet.
For the low introductory price
of $59, potential international
conversationalists possessing
48633Mhz IBM-compatible PCs
equipped with a sound card and
14,400-baud modern have begun
their quest for the ultimate
gabfest.
If the low price isn't incentive
enough, the company willingly
downloads a free sample of the
software. The sample is capable
of making 60-second calls and
whetting appetites for more talk.
When VocalTec began mar-
keting in mid-February, the com-
pany received considerable press
coverage intimating that the
product threatened to shake up
the whole telecommunications
industry.
"Tremble, Ma Bell, tremble"
bellowed The Economist, togeth-
er with the Wall Street Journal,
the Boston Globe and numerous
trade journals.
A month later, the New York
Til7WS and the Jerusalem Post re-
ported a deal between VocalTec
and Motorola by which Internet-
Phone software would be bundled
together with some models of Mo-
torola moderns.
In the meantime, the compa-
ny has been swamped with in-
quiries, not only from potential
partners and competitors, but
from paying customers.
Within one and a half months,
the product was selling "better
than our best expectations," says
VocalTec VP of sales Yahal Zil-
ka. "We are growing exponen-
tially."
Mr. Zilka is sitting in Herzliya
fielding InternetPhone calls from
John in Honolulu, Sentinel in
Minneapolis and Paul in
Rochester. John has some ques-
tions about hooking up the sys-
tem to his stereo speakers.
Sentinel is just learning the
system and, although surprised
to find that she has reached an
office in Israel, she isn't in the
mood for a conversation.
Paul, on the other hand, is up
for a chat.
"I've been enjoying this for
about a week and a half now," he
says happily. "I usually get up at
6 o'clock, but I've been setting the
alarm for 5 o'clock so I can spend
an hour talking to all these nice
people all over the world before I
go to work."
Paul, who is not a tech-head
but an employee at a local su-
permarket, typifies the primary
target market for InternetPhone.
But VocalTec, which does not
promise professional quality
sound transmission, is interest-
ed at this point in addressing the
home market. A wise decision,
considering the time lag between
queries and replies and Inter-
netPhone's one-direction-at-a-
time transmission.
The low introductory
price is $59.
Users must learn to speak in
complete sentences, then wait for
a reply, much like using a walkie-
talkie with override or interrup-
tion capability.
(The reason for the "half-du-
plex" transmission, the company
explains, is that while most
moderns are full duplex, most
computers today are equipped
with sound cards which do not al-
low simultaneous record and
playback).
An on-screen window keeps
track of how many seconds have
elapsed, how much information
is lost and how much is reclaimed
as signals bounce heavenward to
waiting satellites and back down
again.
"Internet is a medium essen-
tially hostile to voice information
because of the amount of routers
(junction boxes)," explains Vo-
calTec cofounder and head of de-
velopment Alon Cohen.
Although there is interest from
telephone companies, about
which Mr. Cohen cannot go into
detail, he states very clearly: "We
are not competitors because our
quality is not that of a telephone."
Initial company press releas-
es suggested potential users
might be "hobbyists, telegame
players who may compete visu-
ally and vocally in games such as
chess, (users) who will be able to
maintain regular contact with ge-
ographically displaced friends
and family, telecommuters and
grandparents."
The company's intention is to
create a strong base of surfer-
chatters within the shortest pe-
riod of time, making
InternetPhone the de facto stan-
dard and thus laying a founda-
tion for the company's other, non
software-only chat products.
"The marketing idea was one
part of a total plan to give us min-
imum initial production costs,"
explains Mr. Cohen. "One of the
goals of a start-up is to stay afloat.
Our other products were hard to
sell as software only. This prod-
uct was planned from the outset
to be software only and to suit the
largest common denominator of
sound cards, modems and PCs in
the market."
There also is a certain safety
in selling through Internet,
where no one knows if you're a
large or small company or what
country you're from.
The company, like many oth-
er Israeli firms, has a U.S. office
which is cited as home base by
much of the international press.
Mr. Zilka, however, says Vocal-
Tec has no intention of selling
anonymously and "wants its logo
to be recognized by users."
Mr. Cohen credits Daniel Nis-
san, his 28-year-old marketing
VP, with spearheading the In-
ternet angle, adding "we haven't
yet shown everything we've got
up our sleeves."
As far as the technology is con-
cerned, Mr. Cohen is less inclined
to give individual credit — both
he and partner Lior Ramati con-
sider their products the result of
the development staffs combined
effort and experience.
Mr. Cohen and Mr. Ramati's
MEDIUM page 54
I s RAEL,
ID IGEsr
Specially compiled by Steve Stein
—$1 EQUALS 2.9750 MS (shekels) - Close Price 4/11/95 —
Three Countries On One Ticket
Tower Air and Royal Jordan-
ian Airlines have signed a com-
mercial agreement allowing
passengers to combine the two
companies' flights on trips be-
tween the United States, Jor-
dan and Israel.
The agreement, which took
effect April 1, is intended main-
ly for American travelers. It al-
lows them to travel from New
York to Tel Aviv on Tower, vis-
it Jordan, then fly back from
Amman t6 New York on Royal
Jordanian, all on one ticket.
The opposite also is possible,
with a flight from New York to
Jordan on Royal Jordanian, a
transfer to Israel and flight
from Tel Aviv to New York on
Tower.
News of the agreement was
sent to U.S. travel agents this
month so they could begin mar-
keting the new tickets.
Citibank Is Coming To Israel
Citibank vice chairman
William Rhodes has announced
that the bank will open an of-
fice in Israel.
Mr. Rhodes said his board of
directors decided to make the
move following his meeting
with Bank of Israel Governor
Jacob Frenkel during the
Casablanca regional econom-
ic conference.
He added that the peace
process and prospects in the
Middle East make the opening
of the office a natural addition
to the group's 100 offices world-
wide.
Pharmos Eyes U.S. Okay For Drug
Israeli biotechnology firm Phar- of Lotemax.
mos has presented an applica-
The drug is used in the treat
tion to the U.S. Food and Drug merit of eye infections and al-
Administration for the approval lergic reactions.
Kudos For Israel's Economy
Israel's economy got rave re
views in Washington at the
semi-annual Joint Economic
Development Group meeting.
The meeting, scheduled for
Jerusalem, took place in Wash-
ington at the request of U.S.
Undersecretary of State for
Economic Affairs Joan Spero
because Israel Treasury Direc-
tor-General David Brodet was
already in Washington.
The Americans in the group
praised Israel's economic per-
formance, in particular the re-
cent tax and budget cuts. They
said the Israeli economic fig-
ures are the best they have
seen since the forum was cre
ated 10 years ago.
Inflation Prediction: 10 Percent
Israel Treasury Director-Gen-
eral David Brodet said lie ex-
pects inflation in the country
will drop to 10 percent this
year.
"We are very optimistic
about inflation in 1995," he
said. "We are confident we will
be within the inflation target of
8-11 percent. I believe inflation
will be 10 percent."
Last year's target was 8 per-
cent, but inflation actually
reached 14.5 percent.
Tourists Are Flocking To Israel
Tourist arrivals in Israel
jumped 27.1 percent in March
to 197,000, the Central Bureau
of Statistics reported.
The number of tourists en-
tering the country after visit-
ing Jordan soared 359.2 per-
cent in March to 17,600.
Tourists entering the country
after visiting Egypt rose a more
moderate 19.1 percent to
20,600.