SBC Sees Little Threat From Skype, Net Calling Generally

By Justin Hyde

SBC Communications Inc. sees little challenge to its traditional telephone business from services such as Skype that offer free phone calls over the Internet, SBC's chief financial officer said on Thursday.

"I don't see it as a significant threat," SBC CFO Rick Lindner said in an interview with Reuters. "The fears of what may happen there are overblown."

In recent weeks several tech giants, notably Google Inc. and Yahoo! Inc , have either launched or bolstered services offering free voice calls between computers.

Skype, which also allows users to place relatively cheap calls to regular telephone numbers worldwide, agreed last month to be bought by Internet auction site eBay Inc. for up to $4.1 billion.

That deal raised the specter of a well-funded Internet calling service taking on the U.S. "Baby Bells," such as SBC and Verizon Communications Inc.. Several analysts have contended that while eBay bought Skype to increase Web-based commerce, it would eventually look to expand Skype further into telecommunications.

EBay estimates Skype will produce revenues of $60 million in 2005 and more than $200 million in 2006. EBay Chairman and Chief Executive Meg Whitman told analysts on Wednesday that Skype would make its money from add-on services, not phone calls.

"It is very clear that voice communications is moving on to the Internet," Whitman said. "In the end, the price that anyone can provide for voice transmission on the Net will trend toward zero."

Skype had 57 million registered users worldwide as of September, not all of whom frequent the service regularly. According to Nielsen/NetRatings, 1.85 million U.S. users either went to Skype's home page or used the software last month.

But Lindner said while some "techies" might want to "scour the Internet and buy applications and services from a number of different providers," the mass market of customers will prefer to buy voice, video and data services from one company on one bill.

"Why has WalMart been successful in areas like groceries? It's because its convenient for people to go to one location and buy everything," he said.

Lindner also said consumers will prefer to send calls over reliable networks. Most U.S. telephone network equipment is designed to go offline for no more than a few minutes per year.

"That's a big difference from simply relying on the public Internet to handle your communication needs," Lindner said.

SBC said on Thursday that it ended the quarter with 50.2 million traditional telephone lines, a 5.1 percent decrease from a year earlier, driven by a loss of 643,000 wholesale lines.

Copyright 2005 Reuters Limited.

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