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Skype's New Packages Shows VOIP Becoming Commodity

By Mikael Ricknäs

April 21, 2008 — IDG News Service —

Skype has announced a flat rate for international calls, further showing how difficult it is to make money from telephony, according to analysts.

Skype has announced a number of different packages for unlimited fixed international calls -- which if you read the fine print means 10,000 minutes per month -- at a flat monthly fee. In the U.S. users will, for example, pay $9.95 (¬6.95) for calls to 34 countries.

"It goes to show that there's not really a market here," said Gartner analyst Steve Blood. "Every few months they have to continue to reduce prices to compete -- where's the revenue to pay back the $2.6 billion?," asks Blood.

The $2.6 billion is a reference to eBay's acquisition of Skype in 2005, putting more pressure on Skype to make money.

"Skype is using the spray gun approach, offering different consumer and enterprise packages to see what works," said Bernt Ostergaard, research director at Current Analysis.

Flat monthly fees for international calls are nothing new. Other Internet providers, especially in Europe, have been offering this for some time.

"Skype was having difficulty competing in France, where the market really is at rock-bottom prices. Nine dollars and ninety-five cents is good for the U.S. market, though," Blood said.

Cheap telephony isn't Skype's only problem. Both Blood and Ostergaard view Skype's proprietary environment as a problem. It runs the risk of being overtaken by more open networks, according to Ostergaard.

If Skype wants to survive it needs to adapt and open up, according to Blood.

"Accept you won't make any money from telephony, open up the environment and create a value proposition that your subscribers can connect to anyone through instant messaging, voice, video, e-mail across wired and wireless networks," Blood said.

But Skype is still upbeat about its future. It has been making a profit for five quarters, according to Wilhelm Lundborg, product manager, Skype for Business.

"This announcement is a natural progression for us, and flat rate is where it's at today. It's something our customers have been asking for," Lundborg said.

Cheaper telephony just makes Skype happy, according to Lundborg.

"We are leading the push, but there is still a willingness to pay for telephony", he said.

Opening up Skype is not on the agenda, but it wants to be on as many platforms as possible, according to Lundborg.

Skype offers a range of different packages.

 

 

 

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