Kazaa Heads Look to Crash VoIP Party

Cable World, Sept 15, 2003

Byline: ANTHONY CRUPI

The first tray of canapes is making the rounds and a bottle of wine or two has been uncorked, but the VoIP party isn't exactly raging. The early arrivals are standing around in loose little clumps, staring into their drinks and waiting for something interesting to happen. Little do they know that their soiree is about to be crashed by the world's most notorious Scandinavian code jockeys.

Niklas Zennstrom and Janus Friis are perhaps best known as the co-founders and developers of Kazaa, the peer-to-peer file sharing software that allows users to trade MP3s over the Internet. Their latest venture, Skype (rhymes with 'hype'), expands on the decentralized P2P network model, enabling IP telephony in a PC environment.

In an e-mail interview, Zennstrom characterizes P2P as a "disruptive technology," something that can help smaller companies challenge and thereby compete with "incumbent monopolies." That's the Swede in him talking, but if Skype is ultimately successful, there is no question that it could put a significant dent in the revenue cable hopes to accrue through VoIP.

The immediacy of the service certainly won't hurt its chances. Downloading Skype takes about a minute or so on a PC with a broadband Internet connection - something you'll also need to run the program. It's a Windows-friendly app, so Mac users, as usual, are out in the cold. But other than that, there seem to be no barriers to adoption. Unlike most VoIP apps, which seldom work behind firewalls and/or NAT, Skype's decentralized approach allows it to skirt these kind of barriers.

Since its beta launch on August 29, Skype has tracked over 110,000 user downloads, Zennstrom says. The service is free now, although subscription fees may be assessed in the future.

Although VoIP seems like a bit of a stretch for the old Kazaa crew, Zennstrom says Skype is simply a matter of taking advantage of everything a P2P network has to offer. "When we decided to go into P2P technology in 2000, we had visions that it could be used to solve multiple problems on the Internet," he writes. "We think telephony is an area where P2P can have a major disruptive impact."

Although cable is a potential target for disruption, the Bells are the primary target of Skype's experiment in VoIP socialism. An eight-year stint at the upstart European telephone company Tele2 led Zennstrom to the conclusion that the business was rigged unfairly against the consumer. "The telephony market is characterised both by what we think is rip-off pricing and reliance on heavily centralised infrastructure," Zennstrom writes. "We couldn't resist the opportunity to help shake this up a bit."

While the adoption of Skype has progressed more rapidly than either Zennstrom or Friis could have imagined - the vast majority of the 50,000 users have been hipped to the service by a viral word-of-mouth campaign - it has yet to appear on cable's radar. Representatives of the top MSOs had never heard of Skype before being contacted for this story; what's more, VoIP providers as disparate as Net2Phone and Vonage were also unfamiliar with the company.

Because anyone who uses Skype is likely a de facto Kazaa adherent, questions about spyware are inevitable. The end user licensing agreement points out that by installing Skype, the user agrees to "allow third parties who are not affiliated with Skype the ability to access your computer."

Although the term "third party" in an EULA suggests a program with more spyware than a Bond film, Zennstrom asserts that Skype is "100% spyware free."

THE NEXT QUESTION:

*Will Skype's geek cachet prevent it from drawing a significant number of clients away from POTS?