Google's Calling Service Challenges Skype Robert Siegel talks to Arik Hesseldahl of Bloomberg BusinessWeek about Google's expansion into phone calls. People with Gmail accounts can now make free calls from their computers, putting it in direct competition with the Web-calling service Skype and more traditional phone service companies.

Google's Calling Service Challenges Skype

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This is ALL THINGS CONSIDERED from NPR News. I'm Melissa Block.


And I'm Robert Siegel.

This week, Google expanded into yet another phase of internet culture: phone calls. People with Gmail accounts can now make free calls from their computers to the U.S. and Canada, and cheap calls overseas.

It's new competition for Skype and iChat and, of course, that friendly dinosaur, the telephone company. Joining us to talk about this is Arik Hesseldahl, technology writer for Bloomberg BusinessWeek. Welcome to the program.

Mr. ARIK HESSELDAHL (Bloomberg BusinessWeek): Thanks for having me.

SIEGEL: And what's in it for Google to get into the telephone business?

Mr. HESSELDAHL: Well, I think what's happening is Google wants to take yet another step in making Gmail, its email program or email site, really, more central to people's day-to-day communication in every single way. Email, of course, and it came on the scene in, I think, 2003 or '04 with gobs and gobs of storage.

Then came instant messaging and integrated instant messaging through Google Talk, directly into Gmail later on. Google Voice, which was based on a company that it acquired not too long ago, called Grand Central, which is a calling service. And now we're seeing Google add calling services directly into the Gmail interface. Part of that is the result of an acquisition of a company called Gizmo5.

SIEGEL: But if I were to ask: What's the Google catch here? I mean, how are they making some more money off of me by doing this? Is it obvious?

Mr. HESSELDAHL: It's not exactly obvious, partially because you have to remember how Google makes its money. Google makes its money by organizing the world's information, and then when you need to search or somehow use that information, they sell ads against it.

What it's trying to do now perhaps is - I mean, I don't know how, you know, advertising subsidized phone calls might be, but the Gmail interface does have some advertisements based on the contents of your email. That was a little controversial. But if you pay Gmail for the right for more storage, they get rid of the ads.

So there it's not immediately obvious how they will make money from this.

SIEGEL: Is the quality of either the audio or the video connections on Google any different from that on Skype or iChat?

Mr. HESSELDAHL: I haven't had time to try it yet. It just came out yesterday, and I haven't been home long enough. But what I've heard anecdotally is that it's comparable to Skype.

Sometimes, people who use Skype will hear the occasional echo. It's the sort of thing that you typically hear in a VOIP, or voice over Internet call. Sometimes, you know, your own voice will reverb back to you.

But it's generally pretty good, and the one thing that Google is doing is it's taking feedback, was this a good phone call, so that they can work on it and try to do better.

SIEGEL: What is this likely to mean for Skype, the Luxembourg-based company that people already use to make lots of video and audio phone calls?

Mr. HESSELDAHL: It will be another competitive overhang, but specifically, as Skype goes forward with its plans to IPO, after being spun out of eBay, it will be a competitive overhang. But you have to remember that Skype has something on the order of half-a-billion users.

I think one of the things that Google wants is to have people spending more time and having more reason to be in Gmail and not in other sites, namely Facebook.

SIEGEL: How about the companies that began the whole idea of calling up other people, the telephone companies?

Mr. HESSELDAHL: Yet another business in decline, one of those old analog warhorses that is still just in decline. I wrote a piece in the magazine not too long ago about how the number I forget the exact numbers, but they've come down like by half over the last decade - of actual circuit-switched, old-fashioned phone lines in American households have come down by roughly half in the last decade.

And some people of a certain age, and I'm one of those people, still like having an old-style telephone. I recently dispensed with mine, though. I still have a phone at home, but it's not an old-fashioned phone. It's an Internet phone.

SIEGEL: And even old-fashioned telephone means the kind of instrument people might have had, say, in 1999.

Mr. HESSELDAHL: Exactly.

SIEGEL: Arik Hesseldahl, thanks a lot for talking with us.

Mr. HESSELDAHL: You bet.

SIEGEL: Arik Hesseldahl writes about technology for Bloomberg BusinessWeek.

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