Yahoo Sees Larger Opportunity in Voice Services

By Justin Hyde

Internet services company Yahoo Inc. is looking to boost its business in the Internet's next big growth area -- voice communications.

The largest U.S. provider of Web e-mail services, Yahoo already has deals with several landline and wireless telephone companies, including SBC Communications , Verizon Communications Inc. and Sprint Corp. , for a variety of Web-based services.

In addition to voice services, Yahoo is also expanding the reach of its e-mail service, saying earlier this week it would allow Sprint wireless customers to manage their e-mail accounts through their cell phones. Last month, Yahoo announced an upgrade of its messenger service, boosting the ability to make free voice calls between computers.

For what the future could hold, Yahoo points to its deal with Britain's BT Group Plc , which sells the BT Communicator -- a version of Yahoo's Messenger that can not only handle voice calls between computers but make and receive telephone calls.

"We view voice as a fundamental aspect of the instant messaging experience," said Brad Garlinghouse, vice president of communications products for Yahoo, in an interview Thursday with Reuters. "We will continue to enhance and expand the voice functionality within Messenger."

The market for the intersection of computer messaging and telephone service has been dominated by Skype, a European software company. The free Skype software allows users to call to any other Skype user globally for free and to make and receive calls at low cost. With little advertising, Skype typically has up to 3 million users online.

Garlinghouse declined to offer specifics of Yahoo's future plans for voice services. But officials at SBC say they were considering a Skype-like service that could be sold with Yahoo.

"We could put one together real quickly," said Scott Helbing, senior vice president for consumer marketing, in a recent interview with Reuters. "We don't have that service right now, but we're interested in it and we're investigating time to market and the services that are out there."

Garlinghouse said Yahoo preferred to work with telephone companies like BT and SBC instead of pursuing customers independently.

"By working with the carriers, we've found there's a very nice symbiotic relationship," Garlinghouse said. With voice messenger services, "one of the nice things with working with BT is it allows us to deliver a much higher call quality."

Garlinghouse said Yahoo saw an opportunity to simplify the growing sprawl of customers' e-mail accounts and voice mail boxes. As part of the SBC deals, SBC customers will be able to access voice mails through Yahoo's e-mail service.

"You're seeing these huge collisions occur, and over time we won't think about ... voice mail, e-mail, or IM," he said. "I think we'll increasingly think about it as 'I have an inbox."'

Copyright 2005 Reuters Limited.

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