TELECOM Digest OnLine - Sorted: SBC Sees Little Threat From Skype, Net Calling Generally

SBC Sees Little Threat From Skype, Net Calling Generally

Justin Hyde (
Thu, 20 Oct 2005 22:49:09 -0500

By Justin Hyde

SBC Communications Inc. sees little challenge to its traditional
telephone business from services such as Skype that offer free phone
calls over the Internet, SBC's chief financial officer said on

"I don't see it as a significant threat," SBC CFO Rick Lindner said in
an interview with Reuters. "The fears of what may happen there are

In recent weeks several tech giants, notably Google Inc. and Yahoo!
Inc , have either launched or bolstered services offering free voice
calls between computers.

Skype, which also allows users to place relatively cheap calls to
regular telephone numbers worldwide, agreed last month to be bought by
Internet auction site eBay Inc. for up to $4.1 billion.

That deal raised the specter of a well-funded Internet calling service
taking on the U.S. "Baby Bells," such as SBC and Verizon
Communications Inc.. Several analysts have contended that while eBay
bought Skype to increase Web-based commerce, it would eventually look
to expand Skype further into telecommunications.

EBay estimates Skype will produce revenues of $60 million in 2005 and
more than $200 million in 2006. EBay Chairman and Chief Executive Meg
Whitman told analysts on Wednesday that Skype would make its money
from add-on services, not phone calls.

"It is very clear that voice communications is moving on to the
Internet," Whitman said. "In the end, the price that anyone can
provide for voice transmission on the Net will trend toward zero."

Skype had 57 million registered users worldwide as of September, not
all of whom frequent the service regularly. According to
Nielsen/NetRatings, 1.85 million U.S. users either went to Skype's
home page or used the software last month.

But Lindner said while some "techies" might want to "scour the
Internet and buy applications and services from a number of different
providers," the mass market of customers will prefer to buy voice,
video and data services from one company on one bill.

"Why has WalMart been successful in areas like groceries? It's because
its convenient for people to go to one location and buy everything,"
he said.

Lindner also said consumers will prefer to send calls over reliable
networks. Most U.S. telephone network equipment is designed to go
offline for no more than a few minutes per year.

"That's a big difference from simply relying on the public Internet to
handle your communication needs," Lindner said.

SBC said on Thursday that it ended the quarter with 50.2 million
traditional telephone lines, a 5.1 percent decrease from a year
earlier, driven by a loss of 643,000 wholesale lines.

Copyright 2005 Reuters Limited.

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