The Japanese are pulling out all the stops to develop products and create a market for video telephones, but a large Japanese industrial firm that marked its coupon with an X forno publicity, has had to turn to that intriguing little company in Peabody, Massachusetts, PictureTel Corp, for some of the key technology. PictureTel was the company that told its financial backers that it could demonstrate a working video telephone to a tight deadline: the backers were so sceptical that they drew up an unusual agreement that doubled the proportion of the company’s equity that would go to the founders if they met the deadline. They did, and the rest, as they say, is history. Not quite, because we’re still not gazing face-to-face at our loved ones when we telephone them, but the technology to enable us to do so is a whole lot nearer than it was before PictureTel came along. And now the company has announced a proprietary image-compression technology that it said significantly improves efficiency of motion-video transmission on digital networks and will be making it available to current customers next month at no additional charge. Perhaps even more significant, this mystery Japanese company has given PictureTel a $4m contract to help it develop a high performance codec – coder-decoder – for the Japanese market. The product will be marketed in Japan by PictureTel’s exclusive distributor there, Kyocera Corp, which was closely involved in setting up the deal. A further agreement will be negotiated on the terms and conditions under which production units will be sold by PictureTel to Kyocera. PictureTel will have the right to sell the codec to third parties but will pay royalties to the partner on such sales. But what do the Japanese want videophones for? Well Japanese culture demands that the boss turns up and gives a speech at the weddings of all his employees – with a videophone, he could make his speech from home and have it shown on a giant projection screen in the hall. And Japan is something of a gerontocracy, and as elsewhere, the old folks don’t see as much of their offspring as they would like – a videophone could make the distance seem shorter.