By Matt Richtel
The New York Times
12/14/06 7:48 AM PT
Skype began charging $30 a year for unlimited calls to landline and mobile phones within the United States and Canada beginning Jan. 1,2007. As a promotion, Skype began allowing its users to place free domestic "SkypeOut" calls from their computers to traditional and mobile phones last May. At the time, the company said the promotion would extend only through year's end.
Skype , the Internet calling service owned by eBay (Nasdaq: EBAY) , has announced that as of Jan. 1 it will begin charging US$30 a year for unlimited calls to landline and mobile phones within the United States and Canada. Those calls had been free since last spring.
The new annual fee for unlimited calling announced Tuesday, while still nominal compared with other Internet calling plans, is part of a broader strategy by eBay to expand Skype's product offerings and revenue.
eBay, the online auction giant, paid $2.5 billion for Skype in October 2005, prompting criticism from some analysts that it had overpaid for a start-up company focused on a different market and technology.
eBay executives assert that Skype can help it by allowing low-cost voice and video communication between its buyers and sellers. In addition, eBay wants to capitalize on Skype's base of 136 million registered users.
As a promotion, Skype began allowing its users to place free domestic "SkypeOut" calls from their computers to traditional and mobile phones last May. At the time, the company said the promotion would extend only through year's end. The company is offering a half-price subscription to those who sign up before Jan. 31. Calls from one computer to another have been and will continue to be free.
"We see a willingness by consumers to make SkypeOut calls that are well priced," said Don Albert, Skype's general manager for North America. He noted that the cost was still a fraction of the typical $25 monthly fee that other Internet phone providers charge for unlimited calls. Albert declined to predict the adoption rate for the plan or the revenue it could bring in.
Despite the relatively low cost of the service, industry analysts said Skype was not considered to be serious competition in the telecommunications business. Skype, unlike Vonage, the cable companies and other competitors, generally requires people to download software and to make calls from the device on which it is installed.
"Skype requires a behavioral change. Consumers have grown quite comfortable using their telephones," said Jeffrey Halpern, a telecommunications services industry analyst with Sanford C. Bernstein & Co. "I don't view Skype as a real threat to the telephone companies or even Vonage or the cable companies."
Overall, the Internet calling business is booming. Halpern said that by the end of the third quarter, there were around 8 million subscribers to Internet calling plans in the United States, up from 6.5 million in the previous quarter. That figure did not include users of Skype.
The company has been developing and deploying technology that allows Skype to be used on other devices, including wireless phones and pocket computers.
Partnering With Search Giants
But potentially more significant innovations are planned for next year, when Skype will introduce services with Yahoo (Nasdaq: YHOO) and Google (Nasdaq: GOOG) that will allow Web surfers to click a button and call a business they have found during a search.
Albert said the concept, known as "click to call," was an important example of combining eBay's expertise in online sales with Skype's capacity to allow people to make inexpensive calls.
Industry analysts have mixed opinions about how successful such a program can be and whether it can help justify the hefty price eBay paid for Skype.
Tim Boyd, an analyst with Caris & Co., said he saw click-to-call as a "tremendous opportunity" for eBay to generate revenue by charging businesses for the calls.
Brown said eBay had yet to demonstrate how it could integrate Skype into its business in a way that would justify the acquisition costs. In the third quarter, Brown noted, Skype generated $50 million in revenue, a mere 3 percent of eBay's $1.45 billion in total revenue.