Internet telephony grows sky high

After nipping at the heels of the major telephone providers for years, Internet telephony is finally taking a big bite out of telephone call traffic.



Leading the way is a Luxembourg-based startup, Skype, which has signed up 40 million users for its Internet telephone service and is growing at a remarkable 150,000 users a day. It's managed this feat with a tried and true method for Internet startups - giving away its service for free. But like its predecessors, Skype could fall victim of its own hype as bigger, better-funded competitors are drawn to the market it created. It wouldn't be the first time a high-tech pioneer stumbled after an early success.

For now, Skype's blazing the trail with software that enables free phone calls to any other Skype user around the globe. All it takes is a headset or telephone connected to a computer and a broadband Internet connection, The free service poses a challenge to Vonage, long the leader in low-priced Internet telephony using normal telephones plugged directly into broadband connections.

Internet giants Yahoo and Microsoft's MSN are also rolling out free Internet telephony services that are bundled with their popular instant messenger programs. Skype is turning its fast-growing user base into a clear competitive advantage. A core of do-it-yourself Skype enthusiasts have rushed to create new capabilities for the service, most of which are also free. They've built voice mail, text messaging and call recording capability for the network. That, in turn, has spurred creation of a range of add-ons, from video conferencing to foreign language tutorials.


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