TELECOM Digest OnLine - Sorted: Yahoo to Offer Cheap PC-to-Phone Calls

Yahoo to Offer Cheap PC-to-Phone Calls

Eric Auchard (
Thu, 8 Dec 2005 13:41:41 -0600

By Eric Auchard

Yahoo Inc. said the company plans to allow computer users to make and
receive calls from phones at rates that undercut eBay-owned rival
Skype and are significantly below traditional phone companies.

Yahoo said on Wednesday a new version of its Yahoo Messenger text,
voice and video communications software to be introduced in the next
few days will include "Phone Out," with low per-minute charges for
calls from computers to phones, and "Phone In," a low-cost
subscription service for phone callers to call computer users.

The world's largest Internet media company said it plans to charge one
cent per minute to Yahoo Messenger users calling the United States
from, say, Russia, or anywhere else in the world and 2 cents a minute
to call 30 other countries including Australia, China, France,
Germany, Italy, Japan and Korea.

In all the Yahoo Messenger phone-calling service will be available in
180 countries, according to Terrell Karlsten, a spokeswoman for the
Sunnyvale, California-based company. Details were due to be available
shortly at

Blair Levin, an analyst with Stifel Nicolaus and a former staff member
of the Federal Communications Commission, said in a report to
investors that Yahoo's move is part of a broad and growing challenge
to traditional telecommunications carriers.

While unlikely to lead consumers to replace traditional phone services
on a broad scale, he said, computer-based phone services will put
further pressure on phone company revenues, even as they raise
regulatory issues about whether to begin requiring Internet services
to meet costly phone regulations.

"We believe pricing is dropping to a level where price itself is
likely to be less of a factor driving a consumer's choice," Levin
wrote. Instead convenience, ease-of-use, and how well voice-calling
can be integrated with other computer services will be what
differentiates Time Warner-owned America Online's AIM, Yahoo,
Microsoft's MSN and Skype.


Yahoo, which has offered some voice calling features via instant
messaging software for five years is seeking to recapture momentum
from Skype, which has in two years built up a base of 68 million users
worldwide, including several million of Skype Out computer-to-phone,
low-cost calling services.

Yahoo Messenger calls to the United States are half the price of
Skype's 2.1 cents per minute. But the Skype rate applies to nearly 30
countries, making it comparable with Yahoo rates.
(see )

"In a basic sense, Skype is functionally identical to AIM, MSN or
Yahoo," said Nick Shelness, an instant messaging analyst with Ferris
Research based Perthshire, Scotland who was formerly a chief
technology officer at IBM's Lotus division.

"All three -- AIM, MSN and Yahoo -- have had audio capabilities for
quite some time. They just didn't stress those features," he noted.

Yahoo Messenger also offers e-mail links, text messaging to mobile
phones, photo sharing and video calling services. The new low-cost
calling services rely on deals struck with a variety of traditional
long-distance carriers which Yahoo inherited through its acquisition
of Dialpad in June 2005.

"Historically communications have been stuck in a bunch of different
silos," said Brad Garlinghouse, Yahoo vice president of communications
products, and a former executive at Dialpad.

"The home phone is one silo, the work phone is a silo, the mobile
phone is a silo, instant messaging is another silo and mobile phone
text-messaging is another silo," he said of how Yahoo plans eventually
to tie together communication services.

Phone In, the phone-to-PC service, costs $2.99 a month or $29.90 a
year, allowing people to select a personal phone number, and receive
incoming calls at no additional charge.

As an example, San Francisco residents using the service who have
friends or family in London will be able to choose a local
London-based phone number. UK callers to the number would be charged
for making a local call.

Travelers can have multiple numbers that allow them to have local
numbers in each country they visit, starting first in France, the
United Kingdom, and the United States with other countries to follow,
Yahoo said.

The new version of Yahoo Messenger allows users to search for contacts
they have entered the system by name, by Yahoo nickname, by phone
number or other contact details. Users can then choose to communicate
via text, voice or e-mail.

To encourage use of its phone calling services, Yahoo said that, for a
limited time, it would offer a free headset to users who sign up for
its Phone Out service. Localized versions in various national markets
will be available, Yahoo said.

Copyright 2005 Reuters Limited. All rights reserved.

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