Verizon Plan Requirements Won't Change With Skype

Once the shock of seeing Skype on Verizon Wireless phones wears off, it may look like not much has changed: Subscribers who want to use the application will face the same required service plans.

Late next month, Verizon is set to introduce Skype Mobile. Even though Skype-to-Skype calls and text messages will be free and unlimited, and international calls to regular phones will carry regular SkypeOut prices, Verizon won't give customers a break on having to sign up for voice and data plans. To buy any of the phones that can run Skype Mobile, users will still have to buy both, according to Ryan Hughes, vice president of business development.

All the phones require a minimum voice plan with 450 minutes, priced at US$39.99 per month, and a minimum data plan for $29.99 per month. That data plan includes so-called "unlimited" Web and e-mail use (capped at 5GB per month), but not corporate e-mail access.

On the one hand, Verizon isn't imposing any extra conditions on customers who want to use Skype. But on the other hand, Skype users won't be able to get away with buying just a data plan, because all the handsets that can use the Skype application require a voice plan.

And most subscribers who use Skype will probably need that voice plan, because the service falls short of traditional Skype in one important way: Calls to conventional wireline and cell phones in the U.S. will be carried and billed like any other call, even if the subscriber uses the Skype software to make the call, Hughes said.

"We're providing this service to our customers to make free Skype-to-Skype calls," Hughes said. "We're connecting the Skype community. We also have a business, which is just connecting 90 million customers with the people they're interested in calling. And we're not going to throw the baby out with the bathwater," he said.

Verizon's SkypeOut service initially will be offered for just nine handset models: Research in Motion's BlackBerry Storm 9530, Storm 2 9550, Curve 8330, Curve 8530, 8830 World Edition and Tour 9630, Motorola's Droid and Devour, and HTC's Droid Eris.

Verizon's research found that free calls to regular phones in the U.S. wasn't what most consumers were looking for from a mobile Skype client, Hughes said. However, consumers could see significant savings from having that ability. Skype charges just US$2.95 per month for "unlimited" calling to wireline and cell phones in the U.S. and Canada, subject to a few limitations, including a cap of 10,000 minutes per month and 6 hours per day. Skype users can also pay $0.021 per minute to call any phone in the U.S. and Canada, excluding Alaska. Verizon's unlimited voice plan (with no cap on minutes) costs $69.99 per month.

Even though Skype is a VoIP (voice over Internet Protocol) application, Verizon will carry all Skype calls on its conventional voice system and not its mobile data network. Skype calls coming over the cellular voice network will go to a gateway and be sent onto Skype's network, unless they are destined for traditional U.S. wired and wireless phones. This helps to ensure high-quality calls, Hughes said.

"The data networks were built to optimize the speed and throughput of data packets, not necessarily with the consistency required to deliver a voice stream," Hughes said.

However, this also means users with Wi-Fi-equipped phones, including the Droid and BlackBerry Storm 2, won't be able to use Skype over Wi-Fi. Among other limitations, at least in the initial release, subscribers won't be able to use the application outside the U.S. or use Skype videoconferencing.

Verizon is taking a cautious approach to Skype that will probably limit the value of the application, analyst Jack Gold of J.Gold Associates said.

"What they're clearly offering is a hybrid system that's sorta-kinda Skype," Gold said. Running Skype calls over the traditional voice network seems needlessly complicated and may add latency to calls as they are converted from circuit-switched voice to VoIP, he said. Also, treating calls to U.S. phones as regular voice calls leaves out a potentially useful component of Skype, though it should preserve the voice quality consumers expect from cellular calls, he said.

"I just don't see this as a very big deal," Gold said. "I just don't see all that many people utilizing it."

Skype Mobile on Verizon will probably appeal mostly to three segments of customers, Gold believes. Users who typically use Skype, such as in a business, could use the same tool and buddy list on mobile phones. Subscribers who have a lot of Skype friends could save some money by not using up the minutes in their mandatory voice plans, and users who make calls overseas could save on long-distance charges, he said. Calls to non-Skype phones in most countries cost less than $0.50 per minute, with 30 popular countries included in a $0.21-per-minute plan.

Verizon won't be the first company to introduce mobile Skype, but its offering will work differently from others. The Skype application for the iPhone, introduced about a year ago, works only over Wi-Fi.

British mobile operator 3 UK has been the figurehead for operators using Skype. It first announced support for Skype in 2006, and in October 2007 it announced the first Skypephone, tailor-made for using the service.

Currently, the operator offers free Skype-to-Skype calling on any unlocked and compatible handset with one of its SIM (Subscriber Identity Module) cards, which can be ordered on 3 UK's Web site free of charge. With the SIM, users can make Skype calls forever without having to pay the carrier again. Like Verizon, 3 UK sends Skype calls over the conventional voice network, and subscribers have to use its Skype client.

Working with Skype has had a number of advantages, according to 3 UK. Subscribers who have started using Skype are lees likely to move to another operator and actually use more voice minutes, the carrier said last year.

(Mikael Ricknas in Stockholm contributed to this story.)

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