Long Distance – No. 9

The Verizon phone bill for last month’s service at the lakehouse was $16.11. It seems like a reasonable amount until you look at the detailed breakdown. The Touchtone Line was $5.68. And then there were the "other" charges. Federal line cost charge – $6.05. Local Number Portability Surcharge – $.21. Federal Universal Service Fund Surcharge – $.56. And then there were charges for "calls not covered by your local calling options" – $1.01. And then there was the Pennsylvania Relay Surcharge – $.07 and the Public Safety Emergency Telephone Act (911) Fee – $1.50. The "Verizon Toll Charges" were $.70 for four minutes. Bottom line, the phone service was less than $6 and the "other" was more than $10. Where does that $10 go? How much of it went to pay the salaries and fees of FCC and Verizon legal staff for the meetings that have with each other? How much went to pay for reams of 8 1/2 x 14 paper and the copying, overnight deliveries, faxing, and handling of it?
All things considered, telephone service in the United States is affordable for most people. Unfortunately, this is not true in many other parts of the world. During my visit to Egypt last month I learned that more than 75% of the population has no telephone service. On the one hand, we should not complain about all the fees and taxes, but, on the other hand it has reached the point where it is non-trivial. If I had made a lot of "long distance" calls, the service bill and accompanying taxes would have been a lot more. A lot more. I don’t use "long distance" service at the lakehouse. Unfortunately, I don’t use the Sony Ericsson P900 there either. AT&T Wireless coverage is great in Cairo, but is extremely poor in Northeastern Pennsylvania.
Although I don’t have good cell coverage, I do have a cable modem for high speed Internet access and so I can use Skype and SkypeOut for "long distance". Skype is like AOL Instant Messaging. To make a call to a fellow Skype member, you look at your Skype list (like an AIM buddy list), and see if your friend or relative is online. If so, their name appears and you double-click it. You hear a ring from the speakers of your ThinkPad. The person at the other end says "hello" and their voice is picked up by the microphone built into every ThinkPad. You say "hi" and you have a conversation. If you have a high-speed Internet connection, the quality of a Skype call is stunning — better than cell phones. Skype works on the PC, the MAC, and with Linux. Although I use Skype with my ThinkPad, it works with any PC (and some handheld PDA’s) which have a microphone. You can get really good quality microphones and headsets in various configurations at Radio Shack.
The cost? Free. Time limits? None. How do they make money? SkypeOut. SkypeOut lets you call any phone anywhere in the world from your computer. Just like Skype, you can add phone numbers to your Skype list. Most phone calls are .017 Euros (about two cents) per minute. You use your credit card to buy ten or twenty Euros on your account and when you get low you can buy some more. The good news is that ten Euros (approximately $12) allows you to make roughly 600 minutes of calls. If you call a mobile phone in some countries the charges run higher. Calling a Kenyan mobile phone is on the order of thirty cents per minute (probably to cover cost of taxes, fees, and surcharges).
Skype was created by Niklas Zennström and Janus Friis, and has received investment capital from Tim Draper, Draper Fisher Jurvetson ePlanet, Index Ventures, Bessemer Venture Partners and Mangrove Capital Partners. I have not seen their business model but I suspect they have a very low-overhead cost structure and no legacy of processes that burden most telecommunications companies. The Skype Group is headquartered in Luxembourg with offices also in London and Tallinn.
We are seeing the beginning of a huge boom in voice over the Internet. The major potential is not just the lower cost, but rather the integration of voice as just another kind of data. The result will be call centers that are integrated with web pages and phone calls that are integrated with our calendars and contact lists. The potential to simplify our lives and save us time is very large. The only possible inhibitor I can see is the regulators and lobbyists who want to keep things the way they are and hold back the new technologies. As of this very moment, there are 887,438 users connected to Skype. The horse is out of the barn and it may be hard to reign her in.