Free Internet Service Challenges Phone Lines
Now that millions of people can call anywhere in the world for free, how long will pricey international rates survive?
Impossible phone rates meant Monica Ciantia would let months pass between calls to her family in Kampala, Uganda. But her discovery of the free Internet call service Skype unlocked their conversation.
"I tried calling cards, but I'd literally get about a dollar a minute," said Ciantia, who lives in New York. Recently, she's called home three times with Skype. Her mother nearly burst into tears when she saw her daughter's face on the screen.
Paola Montagna, in the United States to study engineering at Columbia University, uses Skype to phone her brother Pietro in Milan. "Getting a phone card every time was such a hassle, I'd just end up not calling," she confessed.
Skype, the three-year old Internet phone calling phenomenon, is letting users everywhere circumvent steep international call rates, and is giving traditional land line services a run for their money.
Some people use Skype domestically, too. Tommaso Canetta, a Boston College student from Madison, Connecticut, finds it more entertaining for keeping in touch than phone or email. "I don't have to type, and the webcam can get pretty funny," he says.
Some 75 million users have downloaded Skype since a pair of telecom entrepreneurs and one-time colleagues, Niklas Zennström and Janus Friis, launched it in Europe. Users download the program from the Skype website (www.skype.com) plug in a microphone and a speaker, and can call other linked friends or business associates around the world for free. Adding a webcam lets you see them, too.
It's not entirely effort-free, though. The users abroad have to actually be sitting at their turned-on computers when you call. And they have to have downloaded Skype, and be ready with their own speakers and mikes.
EBay bought the company for $2.6 billion last fall, even though Skype was only bringing in $7 million in revenue. And all of that was in paid add-on services, such as calling to a phone line instead of a computer (often still just 20 cents per minute or so) and selling special business services and headsets. The website doesn't even feature any ads.
How eBay plans to make Skype profitable anybody's guess.
"This is a very strategic move by the very smart business people at eBay," said Skype spokesperson Syreeta Mussante. She would only say that the eBay business model for Skype would "unfold over time."
Meanwhile, Skype says subscribership is increasing at 150,000 users a day.
So, will we soon be tossing out our telephones? Not so fast, says AT&T spokesman Cliff Lee. Skype won't do absolutely everything a regular phone will: it can't, for example, help in an emergency, or assuage late-night cravings.
"You can't call 911, you can't call your doctor, you can't call the pizza man," he pointed out.
Verizon isn't worried either, according to production manager Gary Elliot. He says the "hype about Skype" is due to "skilful marketing done to cause excitement in media and the press, without making a huge splash in the real world." Those big numbers are only because many people download, but then don't use it, in his view. "They're not a direct replacement of phones," he argued.
Even though Verizon (Voicewing) and AT&T (Callvantage) are developing their own Internet-based telephone services, company reps claim the old fashioned phone still has plenty of fight left in it.
"People said that with the Internet, Barnes & Noble would go out of business," Mussante pointed out.
Added Elliot: "It took a long time for people to move from vinyl to cassettes."