'Phone calls will be free by 2015'

Voice over IP will force traditional telephone companies to stop charging for voice calls and ensure emergency services update their use of technology, according to Skype CEO Niklas Zennström.

Speaking at the VON Europe 2005 conference today in Stockholm, Zennström said the fact telephony has morphed from a network to a software application "is a game changer".
One rule of the game it changes is economics. Given that VoIP applications such as Skype have no customer acquisition costs and no real cost for calls, "we cannot charge for phone calls in the future," Zennström said.

This means phone companies will have to change their business models, Zennström said: "If you fast forward 10 years, all [telcos'] revenue will come from internet access and none from voice minutes or line rental." Telcos will need to change their phone lines to broadband lines but they will not go out of business, according to the Skype boss. "They will always be competitive because they are the ones that have the cables," he said.

Zennström cited BT and TeliaSonera as two European phone companies which are already looking to move to all-IP networks.

James Enck, European telecom analyst at Daiwa Securities, agreed the telcos are finally facing the IP telephony threat. "The period of incumbent complacency is over," he said. While two years ago telcos did not appear concerned about VoIP, "there is now a sense of urgency and openness and a sense of crisis that wasn't there before", Enck said.

Zennström also turned the tables on both US and European regulators who aim to require IP telephony providers to give customers access to emergency services and to provide the emergency services suppliers with a location for the caller - something that's essentially impossible on IP networks.

He proposed that along with ensuring VoIP companies offer access to 999, regulators should make sure emergency services can receive communications not only from the phone but also via text messages and email. "Let's make sure we're enabling emergency services on all devices," he said.

Skype is working with emergency services organisations to come up with such a solution, Zennström explained, and emphasised the need to develop a way to map geographical locations over IP networks. "It's important as an industry we take initiative on this so politicians don't force legacy rules onto us," he said.

While Skype now has 150,000 new users a day and 1.4 million paying customers for its SkypeOut service - and hopes to increase those numbers further through its new affiliate programme - many believe it's still a company in search of a realistic business model.
Zennström stressed he's happy with the model they have, though. "We don't need to charge a lot," he said, because they have such low costs. When looking at Skype's average revenue per user, the company doesn't compare itself to Vodafone or BT but to Google and Yahoo!. "We're in the nickel and dime business. A few nickels, a few dimes but a lot of users."
Zennström also confirmed the company is developing Skype for mobile operating systems such as embedded Linux, Symbian and Windows Mobile but said no release dates are available at this time.