I started with 10 euros. After my wife talked to her sister in Italy for a half-hour and I made one quick call to the Philippines and five more within the US, we still had 9.10 euros left.
Another time, I spoke from Washington simultaneously with my son in San Francisco and his business partner who was visiting Bangalore, India. (Up to five parties can participate in a Skype conference call.) All of us were at computers running Skype, so the conversation was free. The sound quality was sharp; it was about like speaking in person, and the connection had none of the satellite-bounce delay of normal transoceanic phone calls. Skype also allows file transfers and instant text messages during these computer-to-computer sessions.
Not so mobile
There is one huge drawback: Skype works best from a fully connected computer, which runs counter to the whole trend of ever more mobile communication. At the end of Skype's first year in business, I spoke with its co-founder, Niklas Zennstrom -- via SkypeOut, on his cell phone in London -- about his ambitions for the second year. High on his list were partnerships with manufacturers of cell phones and personal digital assistants, to build in compatibility with Skype. The company will also sustain its push to sign up new users. Skype says it has about 10 million users in 212 countries, with an average of more than 600,000 logged on at once.
Skype illustrates network economics in the purest form: free connections within the network become more valuable to each user as more users sign up. Because of the system's peer-to-peer design, loosely related to the Kazaa file-sharing program that Zennstrom and Skype's other co-founder, Janus Friis, invented four years ago, the system scales well -- that is, it doesn't bog down as more users join.
Risky future
Skype's own economics, including its promise that it will never impose a charge for Skype-to-Skype connections, depend on maintaining its rock-bottom cost structure and slowly adding revenue, through services like SkypeOut and future voice-mail and video-call services.
The risks make it hard to predict the company's future. The world's existing telecom companies, battered for more than a decade by technical, regulatory and marketing changes, will presumably want to answer this latest challenge.
From the individual user's point of view, there are also questions about whether this new form of instant access could become as oppressively intrusive as e-mail often seems. But at this moment, it's hard to resist.
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