Skype offers free calls over the internet

A new piece of software called Skype is allowing people to make free telephone calls over the internet, in a development that could shake up the telephone industry.

The program was released to the public on 29 August by a small company founded by Niklas Zennstrom, from Sweden, and Janus Friis, from Denmark, with software developed by engineers in Estonia.

How it works

Skype lets users talk to each other through their computers, using a microphone and speakers or a headset. Calls between Skype users are free, wherever they are in the world, because they travel over the internet rather than the traditional telephone network.

The software uses peer-to-peer technology, in which the computers of users help to route calls, rather than relying on a central network. The same approach was used by Kazaa, the file-sharing service that Zennstrom and Friis created, which has been used by millions of people to swap music.

Calls are encrypted, making them difficult to intercept, and the company says the sound quality is often better than an ordinary telephone line.

A threat to telephone companies

Internet calling, known as voice over internet protocol, has been around for some years, but has often been complicated to set up and has suffered from poor sound quality. Skype's founders say their software is simple enough for anyone to use.

If it catches on, it could pose a serious threat to traditional telephone companies, which earn large sums from long-distance and international calls. People with family abroad could keep in touch for nothing.

Broadband boom

The launch comes as broadband internet is spreading rapidly in Britain and elsewhere. Fast, always-on connections make internet calls much more practical than they were with dial-up modems.

BT, the main provider of broadband lines in Britain, is rolling out the service to more telephone exchanges, and the number of homes with broadband is growing quickly.

Making money

Skype has not yet said how it plans to make money. Analysts expect it to charge for extra services, such as calls to ordinary telephones.

For now, the company is concentrating on building up its number of users. It is relying on word of mouth to spread the software.

Whether Skype succeeds or not, the telephone industry is watching closely.