Wednesday, May 17, 2006

Skype Frees Calls to Regular Phones

Skype announced Monday that people based in the U.S. and Canada will be able to make free calls to traditional landlines and mobile phones in those countries, through the company's SkypeOut service.

Prior to this new promotion, which will extend until the end of 2006, Skype users had to pay 2 cents per minute to call landlines and mobiles. Previously, only PC-to-PC calls were free through Skype.

Calls to landline and mobile phones to and within other countries will continue to require a fee.

Market Reach

The move is an effort by the Luxembourg-based company to extend its market reach in North America.

Some observers see the promotion as a response to the increased competition now underway among providers of Voice over Internet Protocol (VoIP) services, both free and paid.

Free VoIP services are now being offered by Microsoft, Yahoo, and AOL, with AOL recently expanding its TotalTalk service to allow free incoming calls from regular phones.

'A Real Cost'

"This is a good way of attracting attention and getting more subscribers," said Will Stofega, an analyst at IDC, a technology research firm. Stofega pointed out there will be a real cost to Skype in delivering calls to regular phones, which means the promotion probably will not be sustainable.

Some observers have speculated that Skype might be trying to build its user base so that, in addition to levying fees for some add-on services, it could sell advertising on its Web site or even at the beginning of phone calls.

"I think there's a limit in terms of what people will put up with" in terms of ads in the call itself, Stofega said.

Purchased last year by eBay for $2.6 billion, Skype announced earlier this month that it had acquired 100 million registered users worldwide.



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