Tech & Work

Skype creeps under phone giants' radar

You don't always need a billion dollars to be a global telephone empire. Rather, Skype's using software--now for Macs and Linux.

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By Ben Charny
Staff Writer, CNET News.com

At a time when major U.S. telephone operators are spending billions of dollars to expand, telephone software maker Skype on Tuesday says it's building a global phone network virtually for free.

New renditions of Skype software for Linux and Macintosh operating systems are expected to become available on Tuesday. The new releases are a significant expansion for 17-month-old Skype. Since its debut, Skype's free software only worked on Microsoft devices, though test versions of the Linux and Macintosh software have been available since last year.

Skype's latest software arrives at a time when many elite U.S. phone companies are consolidating with others in multibillion dollar deals that let the communications giants expand into new markets and territories. Using the merger-mania as a backdrop, Skype's new software releases should put even more fright into traditional telecom executives.

The number of new Skype users is increasing at rates not seen since the early days of instant messaging, and at no cost to Skype other than hosting a Web site to make the software available, and "making software tweaks," Skype CEO Niklas Zennstrom said in a recent interview. More than 140,000 new users register each day.

It would cost phone companies still using traditional means untold billions in construction, marketing or merger costs to come close to matching Skype's growth rate. And they are running out of companies to buy. Recently, SBC said it plans to spend $16 billion to buy AT&T; while Sprint finds $31 billion to pay for Nextel Communications. Cingular Wireless vaulted to the top of the U.S. carrier heap last year when it bought AT&T Wireless.

Much of Skype's explosive growth has to do with voice over Internet Protocol (VoIP), the software that lets a broadband line double as a phone line. By virtue of its mechanics, VoIP software doesn't anchor a provider like Skype to certain geographic areas, as traditional telephony does. Rather, VoIP is tied to wherever broadband is available.

Once downloaded, Skype users can talk for free with any of the 22 million other Skypers located on every continent. An Internet connection is required and calls to the traditional phone network costs extra.

A recent report by Evalueserve said traditional local phone operators could lose up to 30 percent of their revenues from people who are replacing them with Skype software.

"We are a software provider," Zennstrom said. "So it's very easy to grow a user base."

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