Free Voice

Why is it so shocking for eBay CEO Meg Whitman to say that users will expect voice phone calls to be free in five years? Does anyone today expect to pay for email messages or instant messages? One can quibble over the timing, but not the ultimate outcome.

So the question for the telecom sector becomes, how to make money when you can’t charge for a wired phone call? (Mobile phones are an important exception, at least until WiFi and WiMax do the same thing to them, but that’s a few years off.) This seems to be the source of much confusion about eBay’s Skype acquisition. Analysts find it strange to pay billions of dollars for a “phone company” if you think “phone companies” can’t make money. In reality, the free voice future is a great justification for the deal. Who better to understand how to generate profits in this new world than Skype? They understand how to leverage a huge community and develop ancillary services that commmunity will pay for. The company has never charged a penny for in-network phone calls, and revenue is going through the roof.

“Our belief is that the winner in this space will be those that have the largest ecosystem,” said Whitman. Reminds me of my early meetings with Larry Page and Sergey Brin of Google. They always focused on capturing the biggest share of Internet searches, figuring if they could dominate that ubiquitous activity, they would find a way to monetize it. Looks like they were right.