The Skype's the Limit

For all of the times that eBay (Nasdaq: EBAY  ) has bled my disposable income dry by presenting some irresistible item on its flagship auction site, it's payback time.

eBay is now saving me money as I travel with my family through Canada and several U.S. states. Thanks to my laptop and the growing availability of wireless Internet access at many hotels -- and my wireless broadband card -- I have been able to stay in touch with friends and family back home, all because of Skype.

It was my last-minute decision to download Skype, just after its mid-May announcement that it was offering domestic outgoing calls to mobile and landline telephones for free through the end of 2006, that has really paid off. Even my mother, the typical mom who complains about her son never calling enough, is tiring of my voice.

Talk is cheap and getting cheaper
I realize that Skype isn't the only reason to explain the belly flop of an IPO from Vonage (NYSE: VG  ) last month. However, Skype's gutsy promotional gimmick of making its SkypeOut stateside calls free couldn't have helped Vonage. Skype is indicative of how cheap voice chat has become.

All three of the major search engines are following Skype into free or dirt-cheap voice calls. Microsoft (Nasdaq: MSFT  ) and Yahoo! (Nasdaq: YHOO  ) have been working on that transition with their popular text chat platforms, and Google (Nasdaq: GOOG  ) is looking to get up to speed quickly. Time Warner's (NYSE: TWX  ) AOL is also clearly a major player here. But none of them can compare with Skype.

Throw in the traditional telcos and cable service providers offering competitively priced phone service, and you'll understand why Vonage is getting hit from all sides just as Skype is laying the limbo bar close to the floor.

It's not just the telephone companies that stand to suffer. Many hotel chains have tacked on beefy fees for overnight guests. Cell phones have been nibbling away at the market for years, but now Skype is further blurring the value proposition.

The price of free
How seriously is eBay taking Skype? Last week, eBay CEO Meg Whitman sent an email to more than a million eBay registered users in a call to action against proposed legislation that would make the Internet a two-tiered system.

"The top tier would be a 'Pay-to-Play' high-speed toll-road restricted to only the largest companies that can afford to pay high fees for preferential access to the Net," Whitman explained. "The bottom tier -- the slow lane -- would be what is left for everyone else. If the fast lane is the information 'superhighway,' the slow lane will operate more like a dirt road."

Major Internet companies are often sensitive to issues that would have an impact on their businesses -- things like e-commerce heavies battling interstate taxation or search engine companies, by force of subpoena, begrudgingly divulging users' surfing habits. Yet this particular instance of making noise is intriguing, because Whitman isn't usually one to take to the political soapbox.

What makes this move even more compelling is that eBay's namesake marketplace and its PayPal payment system are completely accessible through slower connections. It's Skype that relies on the proliferation of broadband to hook up callers.

When eBay agreed to pay as much as $4.2 billion for Skype, it became clear that the acquisition was going to be costly. Yet even $4.2 billion accounts for less than 10% of eBay's current market cap. Given Whitman's vocal stance, it appears that Skype is being considered a big piece of the eBay puzzle.

Will Skype continue its free calling come January? I think so. Will Skype be even more popular then than it is now? I know so.

That's how I see it. That's where I stand. Thanks to Skype, I can now call eBay and let Whitman know exactly that.

It's payback time.

Time Warner and eBay have both made the cut as activeMotley Fool Stock Advisorrecommendations. Microsoft is a recent addition to theInside Valuenewsletter. Try out any of our investing servicesfree for 30 days.

Longtime Fool contributorRick Munarrizhas a few more voice calls he would like to make. He does not own shares in any of the companies mentioned in this story and is a member of theRule Breakersnewsletter team. The Motley Fool has adisclosure policy.

Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 504348, ~/Articles/ArticleHandler.aspx, 10/10/2015 12:33:42 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Rick Munarriz

Rick has been writing for Motley Fool since 1995 where he's a Consumer and Tech Stocks Specialist. Yes, that's a long time. He's been an analyst for Motley Fool Rule Breakers and a portfolio lead analyst for Motley Fool Supernova since each newsletter service's inception. He earned his BBA and MBA from the University of Miami, and he now lives a block from his alma mater.

Today's Market

updated 15 hours ago Sponsored by:
DOW 17,084.49 33.74 0.20%
S&P 500 2,014.89 1.46 0.07%
NASD 4,830.47 19.68 0.41%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/9/2015 3:59 PM
EBAY $24.30 Up +0.15 +0.62%
eBay CAPS Rating: ****
GOOGL $671.24 Up +4.24 +0.64%
Alphabet (A shares… CAPS Rating: ****
MSFT $47.11 Down -0.34 -0.72%
Microsoft CAPS Rating: ***
TWX $73.09 Up +0.11 +0.15%
Time Warner CAPS Rating: ****
VG $6.04 Down -0.15 -2.42%
Vonage Holdings Co… CAPS Rating: *
YHOO $32.52 Up +0.15 +0.46%
Yahoo CAPS Rating: ***