Did Skype Just Pull The Carpet Under Our Feet?
by Aner Ravon

In an effort to accelerate user acquisition, specifically in the US and Canada, Skype has decided to make Skypeout free in those regions (instead of $.02 per minute, the price until today). For those not familiar, “Skypeout” is a term referring to all Skype calls that eventually reach a regular phone – mobile or landline – and not another computer.

This is the first serious attempt at making “real life regular calls” absolutely free of charge. While Skypeout is basically perceived as a “computer to phone” voice call, various features and plugins make it possible for users to squeeze the system for much more. For example, Skype conferencing makes it possible to conference two “regular phone numbers”, including your own, and facilitate a phone to phone conversation, just like a regular call you are used to making, only for free. Remote Skype extensions such as SoonR, Eqo and Iskoot release users of the burden of sitting in front of their computer as well. And these are just two “cheats” I was able to quickly come up with.

Free minutes, everyone. User centric? Maybe. I don’t like it though. Om Malik thinks it’s a good thing. I find it scary. Skype is playing with fire and my hunch is that this is going to burn us all – not just Skype but also at us users. The rational behind Skype killing their own business model is beyond me, I trust they are not stupid. I guess competition with Yahoo, AIM and MSN alongside very modest Skypeout revnues so far drive such decisions. What I fear is rapid collateral collapse of telephony business models in general and Internet Telephony in particular. Skype claims this is a promotional offer valid through 2006, but I don’t buy that. They don’t control the situation. Competitors counter moves are unpredictable and I don’t think they realize how hard it is to pull a free feature back. If this turns out to be the first step in making telephony free 100% free we better duck and cover. Nothing can finance it. Remember what the internet had to go through for being free? And telephony is not TV broadcasting or Internet surfing. Advertising or premium cannot possibly finance voice calls. Maybe they can finance internet content and TV broadcasting, although the Jury is still out on those issues as well.

Imagine an apocalyptic scenario – Skype announces free Skypeout through 2006. AOL, Yahoo and MSN respond quickly and counteroffer free phone calls through 2008 (happily leveraging the PR opportunity to gain user recognition as a Skype alternative). Skype loses control over the situation and announces lifetime free phone calls. AT&T and Verizon get the message and offer free basic packages. Everybody start losing money. The ripple effect reaches critical mass, initiatives move to a halt, investments get pulled back and the whole industry enters a limbo. Far fetched and naive? Maybe. But I’m more comfortable with paying 2 cents a minute.

Aner Ravon
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