Skype-Joltid Dispute Presents an Opportunity for Google Voice

By Clint Boulton  |  Posted 2009-07-31

Skype-Joltid Dispute Presents an Opportunity for Google Voice

Skype continues to be one of the biggest headaches for a parent company.

In a legal dispute that may delay eBay's plans to spin off its Skype Web calling service and is certainly forcing eBay to write its own software, Skype and startup Joltid are suing each over a dispute about software source code Joltid licenses to Skype.

Some analysts say the dispute may present an opportunity for Web communications upstarts such as Google Voice.

According to a 10-Q form eBay filed with the Securities and Exchange Commission July 30, Skype licenses peer-to-peer VOIP (voice over IP) software from Joltid, which is owned by Skype co-founders Niklas Zennstrom and Janus Friis. But Skype and Joltid are in a dispute over the license.

In March, Skype Technologies filed a lawsuit against Joltid in the English High Court. Joltid then tried to terminate the license agreement and brought a counterclaim alleging that Skype infringed on Joltid's copyright by using certain Joltid software code.

Skype asked the English High Court for declaratory relief to protect the code it uses to support its 443 million users' PC calls, and trial is scheduled for June 2010. While Skype said in the 10-Q filing it is confident it can win the case, it has begun writing "alternative software to that licensed through Joltid."

Here's where the situation gets dicey; eBay candidly outlined the dangers to Skype. For one, the substitute software will be expensive and could fail. For another, Skype could lose the case versus Joltid and be forced to shut down, leaving millions of people worldwide without the ability to place free calls from their computers. Either way, Skype will be in trouble, as eBay wrote:

"However, such software development may not be successful, may result in loss of functionality or customers even if successful, and will in any event be expensive. If Skype was to lose the right to use the Joltid software as the result of the litigation, and if alternative software was not available, Skype would be severely and adversely affected and the continued operation of Skype's business as currently conducted would likely not be possible."   

This could be a problem as eBay CEO John Donahoe prepares to spin Skype out as a public company in the first half of 2010, or within the same time frame of the suit versus Joltid. Skype doesn't really play well alongside eBay's e-commerce market or PayPal.

Analyst Says Google Voice Could Fill Skype Void

While common sense dictates Skype would have to settle the dispute before the spin-out, eBay has told Reuters and Bloomberg the spin-out plans remain intact.

Still, this is the latest in a line of headaches Skype has brought to eBay since it purchased it for $2.6 billion in 2005. In October 2007, eBay took a nearly $1 billion write-down on Skype, which was cheap international calling rates, Skype's revenue grew 25 percent to $170 million in the second quarter, eBay said.

While the legal morasses threaten to break down Skype, or at the least put a big hitch in eBay's plans, it may present Google Voice with an opportunity to gain traction. Google Voice funnels calls to users' mobile, home and work phone numbers through one number and is in the process of rolling out to thousands of users.

While Google Voice doesn't yet offer video calling like Skype, it will likely add it easily, similar to the way Google added video chat to Gmail.

Google Voice does offer cheap international calling and could pose a threat to Skype once it begins to assimilate more of the communications features Skype and others offer, Gartner analyst Elroy Jopling told eWEEK July 31.

"I think it's an opportunity, but it is a restricted opportunity in that today Google Voice is only in the U.S. and only to a limited number of people that applied," Jopling said.

"They're not endeavoring to actively go out and get business at this time. But at the same time, without question if Google Voice begins to roll out and begins to take on a global perspective, it will impact Skype."

Still, Google isn't without its own grief with Google Voice. Seemingly fearing Google's service, which duplicates certain iPhone features, Apple has frozen Voice and any instantiation of it out of its iPhone App Store.


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