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.


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