Microsoft Ups Pressure on Skype

Microsoft Corp. (Nasdaq: MSFT) ratcheted up the pressure on eBay Inc. (Nasdaq: EBAY)'s Skype Ltd. business by giving its instant messaging service the ability to call regular landline and wireless phones, in addition to other IM clients. (See Microsoft Offers VOIP.)

The product, Microsoft Windows Live Messenger, uses Verizon Communications Inc. (NYSE: VZ) to connect calls to wireless or land-line phones via the PSTN. The outbound calling component of the service, called Windows Live Call, works in tandem with the Verizon Web Calling service, and users have to sign up for that separately. Messenger does not yet assign users a phone number for inbound calling, as does Skype's popular SkypeIn service.

The new Messenger client also supports video calling, as does Skype.

Skype isn't flattered by all the imitation. "We feel like our offering is going in the direction our customers want us to go in, so it's not surprising that people want to follow that,” a Skype spokeswoman said Thursday. She declined to comment on Microsoft specifically. (See Analysts: Skype Freebie Is Defensive.)

The free-standing VOIP companies like Vonage Holdings Corp. (NYSE: VG) and SunRocket Inc. insist that they don't compete directly with the IM-based VOIP services. "These services are not designed to serve as replacement home phone service," writes SunRocket spokesman Brian Lustig in an email to Light Reading Thursday.

"There are no phone numbers, voice mail, caller ID, nor do they provide the mobility to make calls using traditional home cordless phones," Lustig writes of the IM-based VOIP services. "In the case of Skype there is no customer support if users have issues."

Meanwhile, Microsoft's IM-VOIP enabler, Verizon, is taking standalone VOIP to task by suing Vonage for patent infringement. The patents Verizon is complaining about relate to call termination, billing, etc.

For Microsoft, Verizon is provding -- surprise! -- call termination, customer registration, account management, support, and billing for the software provider's PC-to-phone service.

Verizon says Messenger users can place calls to more than 220 countries with rates of less than 2 cents per minute to landline phones in the U.S., Canada, the U.K., France, and other Western European countries.

Microsoft also reiterated its agreement with Yahoo Inc. (Nasdaq: YHOO), which allows the two companies' customers to talk for free using either companies' IM client. Skype users aren't invited, and Skype has been hesitant to form similar alliances with other VOIP user groups. (See Skype's Still Talking to Itself.)

As is usually the case with Microsoft, the bundle's the thing. Skype integrates with eBay's auction service, enabling click-to-call among buyers and sellers at its auction sites.

Microsoft's service, on the other hand, integrates with its popular Outlook client. Messenger VOIP users can use their existing Outlook contact management tool to store phone numbers and other data.

Microsoft says it has 240 million active Messenger accounts in 60 countries, but there's no available data on how many active users Messenger has. Skype, meanwhile, says it recently passed the 100 million downloads threshold.

— Mark Sullivan, Reporter, Light Reading

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