TELECOM Digest OnLine - Sorted: Yahoo Instant Phone Service

Yahoo Instant Phone Service

Robert MacMillan (
Wed, 22 Mar 2006 13:46:38 -0600

By Robert MacMillan

Yahoo Inc. on Tuesday said it is launching a service in the United
States that lets people make phone calls through the company's instant
messaging software.

Available in several other countries since December, the service
allows people to make calls from their computers for 2 cents a minute
or less to the top 30 national phone markets, including the United

The "Phone Out" service also allows calls from computers to regular
phones at varying rates to a total of 180 countries.

Using instant messaging for phone calls is one of the latest ways that
technology companies are finding cheaper ways to allow people to talk
all over the world without relying on traditional phone networks.

"Right now the competition is just about cheap voice calls," Forrester
Research analyst Maribel Lopez said.

The move also attempts to undercut rates offered by Skype, a similar
service offered by eBay Inc..

Yahoo Messenger with Voice rates average between 20 percent and 30
percent lower than Skype to many major markets outside the United
States, according to a comparison furnished by Yahoo.

Tests in the initial five countries where the service launched proved
more successful than anticipated, especially in France, said Yahoo
Vice President of Communications Brad Garlinghouse, where strong
demand for both Yahoo Phone In and Phone Out services occurred.

Phone In allows customers to receive calls on their computers from
regular and mobile phones for $2.99 a month, or $29.90 a year.

Yahoo's service is one among a growing list of competitors, including
Time Warner Inc.'s America Online as well as Microsoft Corp..

While initially the focus is on offering cheap phone calling for
computer users, the battleground should quickly shift onto mobile and
cordless phones, analysts said.

Toward that end, Garlinghouse said Yahoo has struck phone partnerships
with headset maker Plantronics, VTech, a maker of USB handsets, and
Siemens AG, a big maker of cordless phones.

Attracting and retaining mobile phone customers also is something
Yahoo, with its ties to major U.S. and U.K. carriers, could use to
distinguish itself from Skype.

"Realistically, most of the IM services all look the same right now,"
Lopez said. "A lot of it has to do with who do you have the
relationship with, whatever IM you may have."

But Garlinghouse stopped short of saying when Yahoo Messenger might
feature on mobile phones: "We have not yet announced any relationships
to Yahoo Messenger with Voice onto a mobile (phone)," he said.

In response to consumer complaints, Yahoo has dropped X10, the
previous provider of software used to control sound quality and has
signed up Global IP Sound as a supplier instead. The move brings
Yahoo's audio quality exactly in line with rivals AOL, Google and
Skype who rely on Global IP Sound themselves.

Yahoo has also added an unobtrusive advertisement at the bottom of the
Yahoo Messenger window. By contrast, America Online often features a
blinking ad at the top of its AIM service.

(With additional reporting by Eric Auchard in San Francisco)

Copyright 2006 Reuters Limited.

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