Don't Believe the Skype

With Federal Communications Commission (FCC) Chairman Michael Powell still wrestling with how the U.S. government should or should not regulate Internet telephony, provider companies haven't skipped a beat in pushing ahead toward the age of voice over Internet protocol (VOIP).

Major carriers and equipment suppliers such as Verizon Communications (NYSE:VZ) and Nortel Networks (NYSE:NT) have been hustling to deploy new VOIP capable equipment and services. Smaller start-ups, such as deltathree (NASDAQ:DDDC) and privately held Vonage, have also been aggressive in trying to carve out a profitable niche in the future of data telephony.

Recently, another popular private player leading users into the convergence age -- a company called Skype -- announced software that enables mobile calling over data networks. With the software, voice calls can use broadband access points (Wi-Fi hotspots) and the Internet to complete calls between users. Because the calls need to originate and terminate on devices using Skype's software, it's referred to as peer-to-peer (P2P) telephony (it can't call traditional phones -- yet).

The company announced the slimmed-down version of its desktop software, called PocketSkype, for use on Pocket PC devices using Microsoft's (NASDAQ:MSFT) Windows Mobile operating system. Of course, the Pocket PC must have a Wi-Fi card and be in range of a hotspot to make the call.

Skype CEO Niklas Zennstrom touted the new offering in an interview: "Say that you're traveling. You just fire it up in your hotel, in Starbucks or wherever, and you can start making and receiving Skype calls completely free of charge."

Cool. The only problem is -- it's not completely free. Heck, it's not even partially free.

Who told Mr. Zennstrom that Wi-Fi in Starbucks (NASDAQ:SBUX) is free? Much to the chagrin of many wireless geeks (myself included), most venues offering Wi-Fi services charge for access -- and it's anything but cheap. Daily access fees at many hotspots in hotels and cafes run anywhere from $5 to $8. Monthly subscriptions for unlimited use go for $20 and up. And cheaper levies are often contingent on subscribers signing up for additional services.

So, for those who are dreaming of dumping all your fixed and mobile carriers for free VOIP calls, go back to sleep. Keep a watch on Skype, though, like other VOIP offerings, it's a great product with a tremendous value for users. Just don't expect it to displace traditional services anytime soon.

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Fool contributor Dave Mock is so cheap, he'll walk five miles uphill in the California snow to reach a free Wi-Fi hotspot. He'll just stop at Starbucks -- a stock he owns -- to pick up a latte on the way. Dave owns no other stocks mentioned here.