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Michael Logan

This story features in this week's podcast, click here to hear all about it.

Skype Technologies  did not start the internet telephony revolution, but the Luxembourg-based software maker helped to popularise it.
Voice over internet protocol (VoIP) technology has come a long way since 1995, when the first internet telephone products began hitting the shelves.
In the decade since, VoIP has reached the mainstream, thanks to the popularity of broadband - which has meant greater call clarity and reduced time lags.  
Now VoIP is about to enter the hyper-competitive stage.
The quick spread throughout the world of Skype software - it has 38 million users, a figure that is growing by a million a week  - is inviting challengers.
One of the biggest threats comes from instant messaging (IM) software providers such as Yahoo!, Microsoft and AOL. Skype's software works in very much the same way as IM products, with an interface strikingly similar to Microsoft's MSN Messenger.
Now that Yahoo! has updated its messenger product to include VoIP, all three of the majors have voice capability.
What is more, Microsoft reportedly intends to closely integrate VoIP into the next version of its operating system software, Longhorn - a move  that would pit the closely held Skype against the world's biggest software company.
'There are several different competitive threats that we are facing,' Skype chief executive Niklas Zennstr?m  said.
'They range from existing telecoms companies to new start-ups to existing large internet companies or software companies such as Microsoft.' 
And what of the Microsoft threat? 
'They will certainly be a significant player in this field. What we  have to do is to continue to be very focused on users and deliver the best products and services,' Mr Zennstr?m said.
The software from Yahoo!, Microsoft,  AOL and Skype offers similar features. Text chat is a standard feature. Swapping files is standard. So too, now, is voice chat, and next to come  will be video conferencing.
Although Skype does not offer video conferencing,  it is the next logical step for the company. 
'Hopefully we'll come out with video some time this year,' Mr Zennstr?m said.
But Skype enjoys several advantages over the instant messaging providers. Chief among them is the ability to connect Skype users with customers of traditional fixed-line and mobile networks. The company's SkypeOut service has attracted 1.3 million paying users.  
The competition, meanwhile, has relied on advertising for revenue - a model Skype does not intend to duplicate.
'What we've decided to do is to keep our user experience as clean as possible. The reason for that is we have to rely on our users to spread Skype to their friends and colleagues,' Mr Zennstr?m said.
 He declined to reveal any operating data, although the company has  said that it will break even on a cash-flow basis this year.
There are also no plans to raise money in the public markets to supplement the US$19 million provided by venture capitalists Draper Fisher Jurvetson,  Index Ventures,  Bessemer Venture Partners  and Mangrove Capital Partners.  
'The last time  we raised money was in January last year. When we did that we said we didn't need to raise any more money to finance the company, and today we're certain that's still the case,' Mr Zennstr?m said. 
'Right now we're very focused on expanding the business and the user base ... We don't have any immediate plans for a public offering.'
In the meantime, Skype is concentrating on extending the VoIP revolution to new  areas. 
One key  market in the future is expected to be the mobile arena as Wi-fi-enabled handsets grow increasingly popular with consumers.
But here Skype's growth will probably be slower because the number of Wi-fi phones in the market is not as large as the installed base of computers.
'It's going to take some time before it hits critical mass. You're going to start to see some products coming out before the end of this year,' Mr Zennstr?m said.
Another issue  that could slow the company  is regulatory concerns over the ability to dial emergency services. The United States has mandated that VoIP operators such as Vonage  must provide access to emergency services.
Mr Zennstr?m said Skype would not be affected, for now, because its software was not intended to replace traditional fixed lines. When a fire  broke out most users  did not turn to their computers for help. 
'I would expect them to pick up their mobile phones or fixed telephones rather than going to the computer to make an emergency call,' he said.

Get skyped


www.skypejournal.com is a weblog of news and support for Skype users and developers.

http://skype.tom.com/
is a Chinese-language portal run by Tom Online. Find Chinese-speaking Skype users.

www.skypechat.com is a forum for those interested in online dating via Skype.

www.summitcircle.com/ is for Skype hardware, software, news and communities.

www.skype-es.com is for Spanish communities of Skype users.

www.skype-forum.com/ offers support for German users.




This week's podcast tells you about the rise of Skype, the new iPaq from HP, this week's ESC sequences and how HK start-up Fotobay challenges the giants of photo sharing. You can also hear Message Labs' Asia-Pacific chief chatting on Digital Discourse..



Skype's the limit for Net telephony