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Why VoIP is music to Kazaa's ear

Company co-founder Janus Friis tells CNET News.com why some of the same people who shook up the music industry are now tuning up for the traditional telephone industry.

Kazaa co-founders Janus Friis and Niklas Zennstrom have a new target: the telephone industry.

They've launched Skype, which they claim is the first Internet phone service to use peer-to-peer software. In just its first week of availability, 60,000 people downloaded the free Skype software. Other voice over Internet Protocol (VoIP) services, such as Vonage or Free World Dialup (FWD), needed several months to attract the same level of interest.

Just as they shook up the music industry by creating Kazaa, the pair now wants to rattle the cages of traditional telephone companies. In an interview with CNET News.com, Friis discussed the coming challenges for VoIP, what Skype actually means (nothing, as it turns out) and a possible regulatory backlash against VoIP providers, among other issues.

Q: Why are the creators of Kazaa going into VoIP?
A: After Niklas Zennstrom and I did Kazaa, we looked at other areas where we could use our experience and where P2P technology could have a major disruptive impact. The telephony market is characterized both by what we think is rip-off pricing and a reliance on heavily centralized infrastructure. We just couldn't resist the opportunity to help shake this up a bit.

How long did it take to come up with the Skype software?
Skype has been in active development for about six months. It took less time to develop Kazaa--about four months--but we think we've come up with a better piece of software this time.

What's a "Skype"?
Skype does not mean anything. It just sounds good, and the dot-com domain name was available. We hope people will start saying, "I'll Skype you" instead of "I'll call you," which means "I'll call you without paying any rip-off per-minute charges and with superior better-than-phone quality."

Where does Skype fit into the VoIP landscape? Do you want to be a primary phone service like Vonage or Net2Phone?
Skype is addressing all the problems of legacy VoIP solutions: bad sound quality, difficult to set up and configure, and the need for expensive, centralized infrastructure. No one has seriously addressed these problems before, and this is why VoIP has never really taken off.

Kazaa has a renegade image, whether it's deserved or not. Do you think Skype will have that same kind of reputation?
Kazaa's renegade image is due to the copyright stuff that has defined Kazaa, not to mention Hollywood's multimillion-dollar public

The time is right to take on Internet telephony.
relations campaign against Kazaa in particular and file sharing in general. All Kazaa users we've met--and in the end they're the only ones that matter--love Kazaa. The hundreds of e-mails we've received from Skype Beta users speak clearly. People love Skype as well.

What kind of impact do you think Skype will have?
We hope Skype will be as popular as Kazaa and will have a similar disruptive impact--albeit on a different industry. Very few people can find anything bad about unmetered telephony--except the established telephone companies.

Are you really the first P2P VoIP system?
P2P is a widely used and abused term. Software is not peer-to-peer just because it establishes direct connections between two users; most Internet software does this to some extent. True P2P software creates a network through which all clients join together dynamically to help each other route traffic and store information. The power of the network grows with the number of users.

How does Skype differ from FWD, which is also a free software download and free phone service?
Free World Dialup relies on centralized infrastructure: In other words, lots of servers both to maintain the directory of users and to route calls. That means that their costs scale with their user base. It'll be hard for them to provide top quality as they grow.

What other differences does a P2P telephone system have over others out there?
P2P telephony just works. Our research shows that more than 50 percent of broadband users are behind NAT (network address translation) and firewalls and can therefore not make full use of VoIP solutions that are based on SIP (Session Initiation Protocol). The P2P technology we use makes it possible to connect and receive calls, as long as you can make an outgoing Internet connection. People expect telephony to be simple. You pick up the handset; you get a dial tone; you call. That kind of simplicity is our benchmark.

Do you think VoIP will ever become a primary phone service? Many don't think so, because when the power goes out, so do VoIP phones. And you can't dial 911.

People expect telephony to be simple. You pick up the handset; you get a dial tone, call. That kind of simplicity is our benchmark.
Eventually, someone will pull the plug on the traditional circuit-switched telephony network, but this may take some time. Why should the P2P generation (teenagers growing up with Kazaa, Skype and others), get a normal phone line when they move out? They'll just get broadband and Skype. Issues like 911 and power cuts are fairly trivial and are mainly being used as an argument against VoIP from the entrenched players.

It looks like U.S. states are going to regulate VoIP providers. What's the situation in other countries?
Skype provides a piece of software that connects users directly and is not subject to regulation in the European Union. We've obviously checked this with our lawyers. When Skype or one of our partners rolls out additional services such as the ability to call normal phones, these features may fall under the regulatory framework, and Skype will comply with applicable laws and regulations.

Does that mean that Europe will be a breeding ground for VoIP--more so than the United States?
The telecommunications environment in the European Union is highly deregulated. It's designed to encourage competition and new technologies, and typically, it's fairly nonbureaucratic. For example, all you have to do in Sweden to get your own telephone numbers to dispense is to send a letter to the regulatory authorities and pay a fee of 1,000 Swedish kronor (about $100.) When you have done this, the established telecoms are required to provide you with interconnect agreements on market terms.

You seemed to suffer from a very good problem: In your first few hours of operation, there were too many downloads. What happened?
Skype went from almost zero to 60,000 downloads in just one week. It took more than three months for Kazaa and Free World Dialup to reach those totals. This created a very high load on our download and registration servers. At the same time, we suffered from some outages at our hosting provider. Everything is running smoothly now, although we do expect occasional hiccups during the beta period.

One thing most people say about Skype is the tremendous following it's likely to have, given its pedigree and the 250 million downloads of Kazaa. Will Skype leverage Kazaa's popularity? If so, how do you do that?
The growth since we launched has been purely viral. There's been a lot of media coverage, but this does not seem to have much impact. Before we launched, we thought that Skype would be even more viral than Kazaa. When you've got it, you want your friends to get it as well, so you can talk for free. With Kazaa, you don't really need your friends on it, but people think its cool and recommend it to their friends.

Kazaa, Lindows' Michael Robertson--who's next to get into VoIP? Napster creator Shawn Fanning? It seems as if the same people who shook up the music industry are now focusing on the traditional telephone industry. Why is that?
The time is right to take on Internet telephony. Broadband penetration is high enough, and people are ready for it; it's been an unfulfilled promise for years. P2P technology is really very well suited for Internet telephony, so it is a natural next phase.

Why did you give Skype in an instant messaging (IM) user interface and combine it with a text-based form of communication?
Skype is telephony software, but we feel that instant messaging is a good supplemental feature. If you're talking to someone, you can chat with someone else at the same time. When we designed Skype's user interface, we tried to combine the ease of use of cell phones. Everyone knows how to use them. With instant messaging, it also gives you the ability to see when your friends are online.

The telephony market is characterized both by what we think is rip-off pricing and reliance on heavily centralized infrastructure. We just couldn't resist the opportunity to help shake this up a bit.

So you are also taking on some real heavyweights--all the major IM makers?
Again, Skype is telephony software, and the instant messaging capabilities are just supportive. People are getting Skype because it's the best telephony software available. That being said, we do think that many people are tired of bloated IM clients from large companies such as Microsoft and would be eager to replace it with something simple that just works.

Jeff Pulver of FWD is trying to make it possible for all SIP-based, computer-to-computer VoIP services to be able to dial one another. Is Skype participating in this effort?
Skype is using a proprietary protocol simply because SIP, which is the protocol most other companies are using, could not do what we wanted it to do. We believe that if you want to make something happen, you should not use whatever standards the telecom industry has defined. You need to innovate something that truly solves real-world problems. Having said that, we're very much for interoperability and will be happy to work with Jeff to make FWD and SIP interoperate with Skype.

Do you worry about backlash from traditional phone and cable companies? Couldn't these companies, for instance, invoke the "no multiple connections" clauses in their customers' contracts to thwart your efforts?
When you buy a broadband connection, you expect to be able to use it the way you choose. If an Internet service provider were to start blocking Skype, this would undoubtedly lead to disastrous public relations, a mass exodus of users to more friendly providers and the very real possibility of anticompetitive lawsuits. Besides, Skype only threatens those ISPs that also provide telephony services. Lots of ISPs only provide Internet access, and they will welcome anything that drives up demand for their broadband services.