July 20, 2005 2:28 PM PDT

Skype embraces video phones

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A correction was made to this story. Read below for details.
PALO ALTO, Calif.--Internet telephony operator Skype has tens of millions of users but envisions attracting billions with the help of video phones, says the man who co-founded the company.

Niklas Zennström, who also serves as the company's CEO, demonstrated a beta video version of Skype during his keynote at the AlwaysOn conference at Stanford University. The application is a plug-in based on Skype's core telecommunications technology and is being tested internally. Speaking from his office in Estonia, the executive did not say when the product would be ready for release.

Flanked by Tim Draper of investment firm Draper Fisher Jurvetson (Skype's largest investor, to the tune of $10 million), Zennström said his goal is to use innovations from developers and outside partners to help build his business to a level that could rival Google and Yahoo.

"We are trying to create an ecosystem and extend our network...and we are focused on developing our products and extending our APIs (application user interfaces) so we can be bigger than we could be by ourselves," Zennström said, declining to respond to speculation that Yahoo is trying to buy his company. Skype's annual revenue has not been disclosed, but analysts suggest the valuation of the company could be in the $6 billion to $10 billion range.

So far, Skype has been successful with an affiliate program that allows companies and small Web site owners to co-brand the Skype service. So far, sites in China, Korea, Japan, Taiwan and some European countries are onboard.

Zennström also noted that his company's partnerships with hardware manufacturers, including Motorola and Siemens, would help increase Skype's user base. So far, Palm OS-based smart phones were not being considered, Zennström said, because the operating system wasn't that great for voice processing.

At one point, Zennström affirmed claims that Skype software uses some of the computing resources and available bandwidth on a connected PC to create super groupings of network identities or nodes without user permission. The executive explained that any such practice helped the software better locate a Skype user on the network.

"If I can share my computer resources and not pay my phone bill, some people think that is a good thing," he said.

Video VoIP still far away
Video telephony has perennially been the "next year" application for leading providers of Internet telephony, meaning they've all said it's coming but have yet to introduce the services. In the U.S., video telephony is available from Packet8, a Silicon Valley-based Net phone operator. Meanwhile, gear makers Cisco Systems, Avaya and others are trying to develop ways to lower the costs of videophones, which are considered too high for most consumers.

Analysts believe businesses will be the first adopters of video telephony, mainly as a way to cut down on travel costs associated with in-person meetings. Consumers are less likely to adopt such a service until the price of phones drops to affordable levels--below $100 each, analysts say.

Considering that Skype's telephony software has been downloaded more than 132 million times, and has up to 3 million simultaneous users at any time of day, Skype's entry into the video phone application game is sure to boost the industry's chances.

But it remains to be seen whether Skype customers are willing to buy video phones or pay for any new videophone software the operator is going to release. That's because Skype's is mostly a free service if the calls are made between Internet-connected PCs, although it does offer premium services such as SkypeOut, which lets users make calls from their PC to traditional phones for about two cents a minute. So far, SkypeOut has about 1.1 million customers, which Skype says allows it to lay claim to the title of largest commercial VoIP operator.

Draper, who helped fund cutting-edge companies such as online e-mail provider Hotmail and Internet advertising software firm Overture, affirmed that he and Zennström would like to keep Skype a private company. The investment banker said that Skype wouldn't even consider being acquired for less than $1 billion.

 
Correction: This story incorrectly stated analyst estimates of Skype earnings. Analysts estimate Skype's overall valuation could be in the $6 billion to $10 billion range.

See more CNET content tagged:
videophone, Skype, telephony, IP telephony, Cisco Systems Inc.

11 comments

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$6 billion to $10 billion?
"...Skype's annual revenue has not been disclosed, but analysts suggest that it could be in the $6 billion to $10 billion range..."

Although, I'm sure that would make Niklas and Tim VERY happy, I think "billion" should be "million". ;-)
Posted by (1 comment )
Reply Link Flag
ACN is the world's largest provider ...
ACN is currently the world's largest provider of video phones.
Posted by telecomrep (1 comment )
Reply Link Flag
ACN's IRIS3000 is not only the most advanced video phone(it allows you to not only see who youre talking to for less than $30 a month, it lets you use other wireless phones and allows you to view online content), its free!
Posted by ACNrepLAG (1 comment )
Reply Link Flag
your wrong i have acn its around 38 $ per month and the the worst company i ever saw it ,every time i call my family the phone have error ,now i am using skype and i call us and canada for free and all that for 3 dollars per month,see the diffrence and i downloaded skype to my mobile and any place in the university of coffe shops that have free wirless internet ,also i can use it and call ,so i leave the choice to you.And i can pay 30 dollars for one year and i can get skype number such us number and people can call me ,and i forget to mention that skype can call conference with more than 5 people and acn not yet
Posted by ramez1990 (1 comment )
Reply Link Flag
Hi,

I have recently been approached by a acn rep. Apparently Donald Trump is endorsing ACN on The Apprentice show tonight on NBC. I would like to learn more about the differences between skype and ACN. Is skype simple to hook up and use? I am not the computer literate...but, can used it for email and surfing, etc.

Thanks,
Sharon
Posted by sharonpage (2 comments )
Reply Link Flag
Go to http://dreamswithwings@acnrep.com and check out the ACN video phone.
Posted by astephen1055 (1 comment )
Link Flag
I would like to know more about using skype. Is it simple to use?

Sharon
Posted by sharonpage (2 comments )
Reply Link Flag
ACN vs. Skype?
Some of you may be wondering why give the ACN video phone a try when there is Skype already available. First and foremost, the quality of the ACN video phone trumps the "quality" of Skype. The realiability of the ACN Video Phone is also far ahead of Skype. People who have used Skype and then switched to the ACN Video Phone wonder why they ever used Skype at all. Although they both do require a high speed internet connection, with Skype you need to be right in front of your computer for it to work. With the ACN Video Phone you just need an ethernet connection. The ACN video phone also has outgoing phone jacks, so that you can plug a regular phone into it. For example, most of us have cordless phones that we use to walk around the house and talk to people, with the available jacks you don't lose the ability to do that.

Gabriel Lullo
GabeLullo.com
Posted by gabelullocom (1 comment )
Reply Link Flag
An additional comment about ACN vs. Skype - I'm a serious tech geek & I can tell you the ACN video phone is far superior to most other video phones (and definitely skype) when it comes to quality, ease of use & being user friendly. Not to mention their support is excellent - try getting 24 hour support for Skype, good luck. It's like anything else in life - you get what you pay for & for the price the ACN video phone is probably one of the best on the market. It's sort of like the MS of video phones - yeah, you could use Skype or something else but why woudld you when it's so easy to use & the price isn't bad. Yep - Linux is free........try getting support for it.

John P.
Posted by cnetpanz (1 comment )
Reply Link Flag
The best company that almost invented Videophones is 8x8 , the difference is that ACN is just like those company that recruit people to work on residual and comissions , they just want to get poeple to sell videophones . 8x8 had videophones for more than 10 years . Just check it out ww.8x8.com
Posted by elextronika (1 comment )
Reply Link Flag
GLobalinx has a really great videophone. Its the GLOBALINX® CU-3000 VideoPhone

CU-3000 Features
The CU-3000 is cutting-edge VideoPhone technology only available from GLOBALINX®!

"Plug-n-play broadband IP VideoPhone with H.264 video codec technologies
"7-inch WVGA high resolution LCD screen
"Touch screen capability
"Built-in high quality low-lighting CMOS camera
"Wireless Wi-Fi 802.11g capability
"Internal rechargeable Li-Ion battery
"Visual ringer with strobe lighting
"Photo frame and web browsing functionality
"Speakerphone
"Docking station and remote control included
"Standard RJ-11 phone jack for connecting to a standard analog telephone
"3-way video conferencing
The CU-3000 can be used with any of our Home Video Plans and costs only $249.95. For more information or to order, please contact your 5LINX® representative today:
my5linx2011@yahoo.com or visit the website @ http://www.5linx.net/L437226.
Posted by Trainer2et (1 comment )
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