Comms: battle heats up

In the beginning there was Skype. Then, just a few weeks ago, Google announced that it intended to join in the PC to PC telephone call market.

Now e-bay is to pay USD2.6 milliard in a mix of cash and shares for Skype.

Of the USA's top four internet businesses (and Amazon's not in the communications business) that leaves Yahoo out in the cold.

Skype is an amazing service: it provides encrypted point-to-point voice communications, instant messaging / chat and file transfer.

Note the "encrypted" part: the security which Skype provides is one of its major attractions: it is widely considered to be more secure than mobile phones where, even "secure" phones are only secure as far as the base station and then travel, unencrypted, across normal telephone lines.

Skype operates from Luxembourg where it was developed by two Estonian programmers - the same two that developed Kazaa. Both Kazaa and Skype were designed and commissioned by Niklas Zennstrom and Janus Friis (Swedish and Danish respectively) and has built a huge user base (more than 50 million users) in a very short time offering completely free point to point calls that are, generally, much higher quality than VOIP.

Of course, 50 million e-mail addresses and the opportunity to use "push" technology to advertise to them while they make phone calls is an extremely attractive proposition: there's just one problem if that is eBay's intention. There are other "free" pc-pc services on the 'net but they push adverts and people have turned against them. Skype's business model depended not on being adware (about which increasing numbers of people are sceptical) but on charges (at very economical rates) for calls to landlines and mobile phones, plus the provision of land-line numbers that interface with Skype making mobile executives contactable on a domestic telephone number and allowing for a virtual office in countries where businesses have no physical representation, in effect providing the opportunity to set up a call centre anywhere in the world, with callers calling a national number in their home country.

eBay's shares have been falling but that's no surprise - the company said in an SEC statement at the end of 2003 that its shares were overvalued yet they continued to rise for another year.

But there's another worry for Skype users: if it's US owned, then the question arises over access to information. And if a US company has the power to decrypt messages, then it opens the issue of US enforcement agencies demanding production of call records, even though the servers are (at least for now) outside the US.

It remains to be seen how those fears will be addressed.