Free Net Phone Service to Expand
The programming duo who created Kazaa, the world’s largest network for free music and movie downloading, is ratcheting up plans to expand their latest venture: bringing free phone service to the masses.
Niklas Zennstrom and Janus Friis have signed up 5.5 million users since introducing a preliminary version of their Skype software nine months ago. And soon, users of what has become the world’s largest free computer-to-computer telephone community will be able to make calls to -- and get calls from -- people using the conventional phone network.
These enhancements, due out this summer from Skype Technologies, not only will help the Luxembourg-based company offer more flexible phone service, but they could also give Skype its first recurring stream of revenue.
People who have used Skype have raved about it, saying calls generally come in clearer than on regular land lines.
“Skype is not about cheap, discounted prices,” Zennstrom told attendees at the Voice on the Internet conference here Tuesday.
“It’s about enhanced features, superior voice quality and putting power in the hands of consumers.”
Traditional telecommunications companies are paying close attention to Skype -- and not just because they’ve watched the music industry struggle against Kazaa and other popular peer-to-peer networks. Routing calls through technology known as voice over Internet protocol, or VOIP, is being embraced even by old-line phone companies as a way to cut costs.
But VOIP also portends a day when customers no longer pay for the calls they make. Instead of relying on the phone companies’ lines and switches, VOIP calls travel like e-mail over the Internet. Telecom companies might one day find themselves able to charge only for extras such as voicemail or call forwarding.
“It’s a disruptive technology,” said Zennstrom, who, like Friis, avoids travel to the United States for legal reasons related to the recording industry’s lawsuit against Kazaa.
Zennstrom, of Sweden, and Friis, of Denmark, sold the operations of Kazaa to Vanuatu-based Sharman Networks Ltd. but retained the fundamental technology.
Like that of Kazaa, Skype’s rapid growth has been fueled by word of mouth.
Since Zennstrom told 10 friends in August that the preliminary version of Skype was available, the list of active users has grown to include people from 170 countries.
In the U.S., more than 2 million people use the software. Even Federal Communications Commission Chairman Michael K. Powell has used the program.
The company, bankrolled by $20 million in venture capital, has never advertised.
Zennstrom and Friis insist that computer-to-computer phone calls among Skype users always will be free. When the fully featured Version 1.0 debuts this summer, though, it will offer two paid options.
One, called Skype Plus, will give customers voicemail and any area code they want. The other, Skype Out, will provide the ability to connect with the public phone network. Zennstrom and Friis haven’t determined what they’ll charge for the two services.
The company also hopes to make money from cordless-phone makers that add Skype to their equipment, giving consumers the same convenience with Skype as they have now to walk around the house while talking. Today’s Skype users typically plug headsets into their personal computers.
Skype already has signed up more users than have any other VOIP providers, including long-distance giant AT&T; Corp. and pioneer Vonage Holdings Inc.
But the field is growing more crowded. On Tuesday, Cisco Systems Inc. and IBM Corp. said they would develop a VOIP package for corporate customers. Cisco will provide the Internet protocol technology and phones, and IBM will provide servers and software.
“The telecom industry is in the middle of a 20-to-30-year transformation” away from distinct voice and data networks, said independent telecom analyst Jeff Kagan.
Despite Skype’s initial success, Kagan predicted, big companies eventually will figure out how to fill those new networks with services that smaller competitors cannot match.
“The real competition,” he said, “will be among companies that can provide a wide variety of services to customers in a bundle, like telephony, Internet, wireless, television, pay per view, video on demand, games, information and so on.”
