Skype: Eying up Eircom

Skype, the free internet ‘phone' service, has crossed the rubicon and interfaced with landline and mobile phone networks. With low-cost calls, Skype will challenge the established players in the communications market By Malachy Browne

The internet communications company Skype is fast growing into one of the largest telephone networks in the world. The promise of free internet phone calls has seduced 276 million subscribers to its network, and this is growing by 100 million each year. It already handles over 7 per cent of total international call traffic, a huge achievement for what began as a humble internet service.

Skype was conceived as a free service that allowed telephone calls to be made over the internet. Anyone with a computer and internet point can use it, but in its basic format, both people are required to be ‘on' the internet to communicate. In time Skype bridged the barrier between internet protocols and standard telephony and calls can now be made to and from landlines and mobile phones – all at very low cost.

These services are complemented by a catalogue of ancilliary services; voicemail, call forwarding, conference calls, sending files and video calls using a web-cam.

Skype's commercial viability stems primarily from these ancilliary paid services, which it expects will be bought by a percentage of its members. The model has worked – it generated $90 million in revenue in the second quarter of 2007, up 103 per cent on 2006.

One of the most popular paid services is SkypeOut, through which members can call regular landlines and mobile phones from anywhere in the world. The cost to an Irish landline is 1.7 cent per minute; 16 cent per minute to a mobile phone – below the lowest 19 cent rate of most mobile networks. SkypeIn works in reverse; it designates users an international Skype number which can be called from landlines and mobile phones at the cost of a local call.

But these services still require at least one party to be connected to the internet, a limit to Skype's pervasiveness. Certain Nokia mobile handsets and Window's mobile handsets allow users to use Skype, but the handset must be within range of a Wifi or wireless internet connection.

But recently, the company teamed up with the mobile phone network 3 Mobile which incorporated Skype into its mobile handsets. Partnering with a mobile operator brings Skype near-ubiquity. As long as a 3 Mobile customer has network coverage, she can press a button on her handset and make free calls to other Skype ‘buddies'.

3 Mobile doesn't include SkypeOut or SkypeIn as part of its Skype service at present – given Skype's competitive rates, no calls would be made over the 3 network.  However, some analysts say the move by 3 Mobile is indicative of a shift in the strategy of mobile operators who now see 3G, file-sharing and data transfer as the main revenue source, not voice calls. But 3 Mobile told Village that it intends to widen its range of Skype services in 2008, as Skype attracts new customers to their network.

Whatever the outcome with mobile networks, Skype is likely to challenge the landline market as broadband take-up increases and more public Wifi areas become available. Homes with wireless broadband installed can already use a cordless ‘Skypephone' that is compatible with traditional landlines – calls to both Skype and Eircom numbers can be received. Skype is now promoting a new package for businesses and call-centres, with SkypeIn numbers, call-forwarding, message banks and all the traditional functionality of business phone services. To promote the business package it offers free landline calls.

However, the technology is not without its problems and paid users should ask for a trial period. Calls can occasionally ‘drop-out', particularly video calls and in August 2007 connectivity was completely lost for 36 hours. The Skype community has become somewhat disillusioned with the product since it was bought by internet retailer Ebay for $2.6 billion in September 2005. SkypeIn private numbers were removed from 8,000 paying customers in London with less than a month's notice last year, and Skype SPAM (a type of email virus) has crept in. Village was unable to reach Technical Support through Skype and other users complain that customer service is practically non-existant.