webcam lifecam 3000?

I just purchased a new microsoft lifecam vx 3000, installed the software and hooked up the camera per the manufacturers instructions. I can see and hear myself loud and clear when I am offline. However, when I connect to my friends computer he can hear me typing but cant see me or hear me. Is it possible that the webcam is defective or could the problem be that I have internet service via dial up modem and is too slow to transmit?