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Internet Phone Firm Calls Out to Small Businesses

Skype, a provider of free and low-cost calling, today is expected to launch a host of services.

March 09, 2006|James S. Granelli | Times Staff Writer

With regular calls nationwide and to China, England and Hungary, Ben Boxall's phone bill was running $900 a month -- not an insignificant expense for his small Van Nuys import company.

After switching to Skype, the Internet program that popularized free and low-cost phone service, Boxall cut his bill to about $150 -- a year.

"If Skype ever stopped operating, we'd be in big trouble," said Boxall, who runs Luna Imports Inc.

So would a lot of the other small-business operators who constitute as much as 30% of Skype's 75 million users worldwide. Recognizing that, Skype Technologies today is expected to roll out an upgraded and re-branded service for small businesses, targeting them both for free and fee-based services.

The Skype for Business brand is aimed at giving small companies access to some of the telecommunications services historically reserved for big corporations.

"When we launched Skype, we really had no idea it would become so popular among businesses," said Saul Klein, vice president of global marketing of the Luxembourg company, which was bought last September by online auctioneer EBay Inc.

Skype created a sensation in August 2003 when it started offering a simple, easy-to-use computer-based program for people to make calls -- and bypass long-distance and international rates charged by phone companies.

But small companies, and even small groups in large companies, also needed to cut their phone bills.

As part of its push into the business market, Skype also is unveiling today third-party products such as speaker phones, cordless Internet phones and electronic switching gear, as well as software programs to share documents and presentations over the computer during calls, to make conference calls with as many as 500 people and to translate calls in English into French, Spanish, Cantonese or Mandarin.

"My Cantonese is awful," Boxall said. "I hope that program works."The new services could help Skype tap deeper into that market and recoup some of the $4.1 billion that EBay paid for it.

Although its free program lets users make free calls from their computers, Skype generated an estimated $60 million last year from fee-based services, such as those allowing users to call people on regular phones and use voice mail.

Founded by Niklas Zennstrom and Janus Friis, the two technologists who created the Kazaa file-sharing program, Skype began taking a bite out of the conventional telephone business, which already was reeling from falling long-distance prices and rising competition.

Skype now has become nearly synonymous with Internet telephony and is used as a verb among devotees. But phone giants such as AT&T Inc. also have adopted Internet telephony to lower their costs and to offer expanded services to customers, particularly in the lucrative corporate market.

Internet telephony experts gave Skype's business package mixed reviews.

"This helps make companies more cost efficient and more competitive," said Jim Kohlenberger, executive director of the VON Coalition, which promotes Internet voice services. "We are just at the very first nanosecond of the big bang explosion in Internet phone service."

But Skype for Business is not a complete package -- nor is it right for many companies, especially larger ones, said Irwin Lazar, an analyst at Burton Group in Midvale, Utah. For most, he said, it could complement conventional phone service.

"If you're extremely security conscious and have to track employee use of the phone, you can't go with Skype," Lazar said.

He pointed out that Skype was facing more competition from Internet giants such as Google Inc. and Yahoo Inc., which are embedding voice calling programs into their instant messaging and e-mail programs.

Jeff Pulver, a pioneer in the Internet telephony industry, said the new services sounded "more gimmicky than useful" and seemed to make the company more like any other Internet phone service.

"The old Skype was truly innovative," Pulver said. "It's great that they're doing these things, but I don't see any home runs here."

Skype's online document-sharing feature may compete with a system that recently was introduced by Tello Corp. in San Mateo, Calif., a company whose directors include Pulver and such high-tech heavyweights as cellular pioneer Craig McCaw and former Apple Chief Executive John Sculley.

But for small companies such as Luna, Skype's simplicity and ease of use have been gratifying.

"I've trained most of my suppliers and customers to use Skype, too," Boxall said. "It's just become so important to us."

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