The Internet is famous -- and infamous -- for disrupting traditional businesses with unexpected innovations. Hardly a season goes by without some new Internet-based technology upending people's expectations of how things are supposed to be.
The latest breakthrough is a piece of software called Skype. It promises to do to the telephone business what file sharing did to the music business: turn it upside down.
Skype lets you "call" other Skype users free, over the Internet. Unlike previous programs that let you do this kind of thing, Skype is the first one to connect you directly to the PC of the person you are calling, without having to first send the call through a centralized system of computers. By cutting out the electronic middleman, it costs Skype virtually nothing to route your call.
Since it was first made available on Aug. 29, Skype has been downloaded 1.8 million times. Those are big numbers, and they reflect the pent-up enthusiasm that people have to try new things and, especially, to save money on phone calls. The company's goal is to have 200 million registered users within a year, with the capacity to accommodate 10 million users at a time.
It was reported recently that Daiwa Securities called Skype "something to be scared of," and said it was "probably set to become the biggest story of the year" in the telecom sector. "We think the Skype offering is akin to a giant meteor hurtling on a collision course toward Earth," said the report.
Considering the track record of the company's executives -- Skype is run by the two Swedes who invented Kazaa, the file-sharing program that's swept the world and allegedly cost the music industry $7 billion in lost music sales worldwide -- they're likely to have a big effect. This time around, though, unlike with Kazaa, no one can charge that using Skype is tantamount to stealing.
Skype merely unlocks the Internet's capability to route phone calls at an extraordinarily low cost, passing on those savings to the consumer. The core service -- letting Skype users call other Skype users -- will stay free. Skype plans to make money by charging for extra features, like voicemail and conference calling.
Although for now you can call only other people who have Skype installed on their computers, the company claims that by this winter the service will let you call people who have Skype on their regular phones. Calling them won't be free, but it should be very cheap -- so cheap that it poses the very real threat of a radical price war in the telephone business.
