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Skype shakes up the way

  • 2005-11-09
  • By Kairi Kurm
TALLINN - Every 100th person in the world uses Skype to make free calls over the Internet, but few people know that several young Estonian men are behind the innovative technology that has radically shaken up the communications world.
Ahti Heinla, Priit Kasesalu, Jaan Tallinn and Toivo Annus, who developed the program under the vision of Swede Niklas Zennstrom and Dane Janus Friis in 2002, will soon head the list of Estonian millionaires after the sale of Skype to eBay has been completed.


The American Internet auction site eBay announced the acquisition of Skype in mid-September. The price of the deal was approximately $2.6 billion. According to some estimates, that is 10 times more than the combined annual turnover of all Estonian IT companies. The Estonian programmers had a five percent share in the company.

But what exactly is Skype? Sixty three million people in 225 countries could answer this question, since that is how many people have registered to use the global Internet-based voice call service.

Some use it daily to make free local calls from Internet connection to Internet connection; others use it as an opportunity to save money on long distance calls from Internet to a traditional phone line or mobile. Calls from Skype to Skype are free, while the fee charge for calling a traditional phone line or mobile is about the price of a local phone call, sometimes more. The rates can be seen on the Web site skype.com under SkypeOut information.

Calling to a fixed line or cell phone in the U.S. costs 0.02 euros per minute, for example, while making a call to a cell phone in France is 0.189 euros, which is quite expensive, but still three times cheaper than the alternative offered by telecom companies. About three million Skype customers out of the 63 million registered users take advantage of the low-cost call services that began last year.

Francois Fortin, a French student at the Estonian Business School, frequently uses the service to call his family and friends at home.

"I just exchanged letters, e-mails and held online discussions until I heard of Skype. Hearing the voice of others is much better, much more expressive," he says.

Since its launch in August 2003, Skype has been downloaded about 200 million times and there are more than four million people using it simultaneously at any one time. The global telephony company gets some 170,000 new customers every day.

Skype is simple to install regardless of your PC and can be set up without a server or workstation configuration. The program works behind most firewalls and gateways without providing new security risks.

"Even though Skype has advanced technological applications, the operating format is extremely simple to follow. Symbols and a simple guidance quiz are all you need, while exchanging information in a liberal matter," says American Hamilton Smith, a new user to the Skype program.

Anyone can hook up and start talking with an up-to-date computer, a microphone and speakers. The quality is better with a headset though as you can avoid any echo.

The slight time-delay is one of the main points of complaint among people. When talking on the phone you receive the other person's voice in real time but with Skype there is a slight discrepancy, similar to that you see on TV when news anchors talk to correspondents abroad via a satellite link.

The quality varies depending on the countries you call. Pascal Lobry, an export manager in France, said that the quality was fine when talking to neighboring countries or even Australia and the U.S. but worse when calling East European countries. "No problem when calling friends, but a bit shameful when it is business related," he explains.

Allan Martinson, a well-known pan-Baltic IT leader who manages IT investments in East Europe, uses Skype every day when making calls to and from Moscow.

Long distance cell phone tariffs in Moscow are very high: a call from Moscow to Tallinn costs three euros per minute, while receiving calls costs between 0.4 - 3 euros per minute. When Martinson is in Russia he uses SkypeIn, a regular phone number in Estonia. So if people who aren't using Skype want to call him by dialing a regular number, he can still receive the call via Skype no matter where he is. That means they only pay whatever their phone company charges them for making a phone call to Tallinn.

"I am satisfied in general. The quality could be better sometimes though. When making important business calls I prefer the phone," he said.

The Estonian Tax and Customs Board gave Estonians living abroad the opportunity to contact the organization through Skype to pose any questions while they were submitting their income declarations. This enabled customers to save money on calls, while board officials could even hold conference conversations with their colleagues and customers.

The army, Tartu council, the foreign representatives of Enterprise Estonia and the state chancellery also make use of the innovative program. The Ministry of Economics and Communications has announced that the program will not be used due to security reasons.

''Skype has boosted Estonia's reputation more than any other company or person from this country,'' Martinson wrote in his opinion article in the business daily Aripaev. When you type "Estonia" and "Skype" into Google, you get 326,000 hits. Combining Estonia with former President Lennart Meri gets 79,000, Hansabank 27,000, rally driver Markko Martin 17,000, soccer goalie Mart Poom 11,000, supermodel Carmen Kass 1,000, and flat tax just 648 search results.

The acquisition of Skype Technologies SA by eBay for about $2.6 billion may be more significant to the Estonian economy than Swedbank's recent takeover of Hansabank, valued at $5.6 billion at the time of the acquisition, Martinson wrote. No other company worth $4 billion dollars holds regular board meetings in Tallinn, with the sole exception of Hansabank. The financial headquarters of Skype Technologies SA is in Luxemburg; its business meetings are held in London, while development and maintenance meetings take place in Tallinn.

Skype has about 225 employees, with 130 employees dealing with software and service development and customer services in Estonia.

But right now the sky seems the limit for Skype, and there are a lot of people all around the world deeply thankful to it for making the cost of staying touch a whole lot cheaper than it was.