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FREE AS A BUSINESS MODEL Skype

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Skype
PATTERNS Skype offers an intriguing example of a free- KP KA VP CR CS
mium pattern that disrupted the telecommuni-
cations sector by enabling free calling services software mass customized
development
via the Internet. Skype developed software by
payment free internet &
the same name that, when installed on comput- providers video calling web users
globally
ers or smartphones, enables users to make calls distribution cheap calls to
partners KR phones CH people who want
from one device to another free of charge. (skypeout) to call phones
telco partners software skype.com
Skype can offer this because its Cost Structure developers
headset
is completely different from that of a telecom software partnerships
carrier. Free calls are fully routed through
the Internet based on so-called peer-to-peer
technology that employs user hardware and C$ software development R$ free
the Internet as communications infrastructure. skypeout pre-paid or subscription
complaint management
Hence, Skype does not have to manage its own hardware sales
network like a telco and incurs only minor costs
to support additional users. Skype requires very Skype claims it has over 400 million reg-
little of its own infrastructure besides backend istered users who have made more than 100 Over 90 percent of Skype
software and the servers hosting user accounts. billion free calls since the company was founded users subscribe to the free
Users pay only for calling landlines and in 2004. Skype reported revenues of U.S. $550 service
mobile phones through a premium service called million in 2008, though the company and its
SkypeOut, which offers very low rates. In fact, owner, eBay, do not release detailed fi nancial Paid SkypeOut calls
users are charged only slightly more than the data including information on profi tability. We account for less than
termination costs that Skype itself incurs for may soon know more as eBay has announced 10 percent of total usage
calls routed through wholesale carriers such as plans to list Skype through an initial public
iBasis and Level 3, which handle the company’s offering (IPO).
network traffi c.

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