Internet communications based telephone and components

Aplio got started when four skullcap wearing friends, all formerly employed by French communications products company Kortex, met and pondered how to utilize VOIP (Voice Over Internet Protocol) in order to talk to one another at lower cost. With all due respect to VocalTec and others ushering in zero cost international calls via the Internet, there is still no truly popular technology.

That is how Aplio Phone was born. The product is an IP based telephone that connects up to the Internet service provider via a telephone socket. In its initial form, owners of Aplio/Phone could merely talk among themselves, in a sort of intercom network on the Internet. In its present form, the appliance can also connect up with computers, and in the coming version, with an ordinary telephone.

"Don't react dismissively," says Patrice Uzan, company Vice President, Sales and Business Development. Aplio is not only a company developing smart products that make use of fresh Internet applications (smart Internet appliances) without requiring a computer. Uzan says theirs is an in-depth technology, enabling stand alone VOIP. The software contains smart algorithms for improved voice quality, and the company has a patent on connectivity between an IP appliance unconnected to the Internet, and a similar appliance or network.

How is how it works: The dialer dials an Aplio/Phone owner's regular number, and if they decide to transfer to a cheaper call, they press an Aplio/Phone button, disconnect and thirty seconds later they reconnect the call via the Internet. Aplio/Phone also has a roaming function, that enables people to dial the number on the Aplio box, and trace the number's owner anywhere in the world - as long as he takes the appliance with him. This is on condition that the appliance is connected to an Internet provider.

Uzan says that the appliance currently works with any Internet provider, except America Online. He also says that Aplio is currently in contact with AOL to try to find a solution to the problem. "They are very interested in a solution," says Uzan.

The appliance is currently distributed in thirty countries, through thirty distributors. It is sold in Israel for NIS 1,000 plus VAT in Super Sol, the BUG chain and Internet Gold. This is also the company's overseas sales channel profile: Retail chains and strategic agreements with Internet service providers that promote the appliance in order to increase usage time and subscription fees. A few of them even provide the appliance free of charge, in exchange for long-term subscriptions. Aplio/Phone's price in other parts of the world is lower (due to high taxes on telephone instruments in Israel ): $250 in Europe, and $200 in the US.

"Globes": Will the price drop shortly?

Uzan: "Just like everything in this field worldwide. However, it's too early to discuss it."

What about the wireless technology, which will lead to saving in discounted calls for cellular numbers via the Internet?

"We are now working with a company which is developing a gateway for that, in which case the cellular will be able to connect to the box. It'll be possible to dial to it from anywhere in the world. "

Cellular companies won't like it.

"None of the carriers like us."

How do you solve the problem of not everyone having an IP telephone? One can only talk with a limited group, or via the computer, which complicates matters.

"We have sold almost 100,000 Aplio appliances, and in May, we had five million call minutes, whereas the entire Internet telephony market average is estimated at fifty million call minutes."

Private users account for most of Aplio's market (68% of sales), with the remainder being sold to organizations. 40% of sales are in Europe, 30% in the US, and 30% in Asia, where the appliance is manufactured.

However, Aplio has no intention of stopping at a telephone instrument. The chip the company is developing is designed to penetrate Internet appliances such as radio-tapes that connect up to the telephone and any radio station can thereby be heard on the Internet.

A start-up that manufactures appliances for the Israeli consumer market is most unusual, and can stir all sorts of problems.

"I tell investors that the box is only a showcase of what we are capable of. The company aims to not only sell the boxes, but to assimilate the technology in all sorts of appliances through integration of the technology and the chip we are developing. Just like all Israeli start-ups, we will do chips, and then we will be able to put them in set top boxes, microwaves, fridge pads, etc."

Does that mean a change in business model, following your experience in the Israeli reality?.

"We held talks with Philips. They told me, 'You have five million minutes a month with the Aplio brand name of a nice but rather small company. How many minutes can we have with our name?' You cannot say anyone wants merely to sell boxes. The dream is to succeed, so if a change in strategy is required, that's what we'll do. But our business model is not related to Israel, it's related to the fact that we're a small, young company."

Aplio, set up in September 1996, has raised to date $6 million in two rounds from French funds (Galileo and CDC), Asia-Tech fund (of Hong Kong and California), and Banque Nationale de Paris. It is currently in the throes of another round of fundraising of $6-8 million, this time from Israeli funds as well.

Published by Israel's Business Arena June 14, 1999