Skype CEO Takes on Telcos at CeBIT

The co-founder of the Internet phone company says Skype will knock out any company that still thinks it can make money by charging for phone calls.

HANNOVER, Germany—The biggest threat to the established telecom industry came to the CeBIT show here wearing a pinstriped suit and looking thoroughly corporate.

Niklas Zennström, CEO and co-founder of Skype Technologies SA, stopped cold the chatter at CeBITs Technology Industry Summit by announcing that the company that provides free phone calls over the Internet now has 29 million users and is currently signing up new users at the rate of 155,000 per day. Zennström has not frequently talked about the current state and future of Skype.

"Free is good. Free service is very, very good. We think you cannot charge for phone calls," Zennström said. He might have been wearing pinstripes and a button-down shirt, but he claimed that the current and future strategy of Skype will knock the financial legs off of any company that still thinks it can make money by charging for phone calls. That list, of course, includes just about every major telecom company in the world.

While the telecom infrastructure used to be an asset for the telecom companies, that asset is now a liability, Zennström said.

Zennström, a Swede who rarely raises his voice regardless of how radical the statement, knows a lot about disruptive technologies. He was also developer of Kazaa, the file-sharing system that rocked the recording industry as music became freely shared like so many e-mails. Kazaa has been the target of numerous industry lawsuits regarding the distribution of music. In an interview following his presentation, he said he didnt expect any legal issues surrounding the continued rapid deployment of Skype.

While disruptive technologies can be exciting, Zennström was asked how Skype would change from being an interesting technology to a real, viable company. Skype allows users with audio-equipped computers to make free calls to one another regardless of distance or service provider.

Zennström said that while phone calls are free, the ability to include value-added services would turn Skype from cool to company. Currently, Skype users can sign up for a service to make calls from their computer to phone systems. He said that nearly one million users have signed up for that service. He declined to provide company revenues.

/zimages/2/28571.gifClick here to read more about Skypes PC-to-phone service.

Other potential services include voice mail, voice forwarding and applications built around voice enablement, he said. The company could also co-market Skype phones with handset vendors or form marketing agreements with telecom providers. He said one telecom company in Hong Kong is about to offer Skype to their customers.

The increase of wireless hot spots and edge telecom services providing always connected capabilities will provide services such as Skype with the mobility the system currently lacks.

Zennström pointed to Google Inc. as an example of a company that has been successful creating a free product or service and relying on the Internet for distribution.

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