Brad Templeton on CALEA, the threat to VoIP. Fun presentation. Part of three that dispensed with PowerPoint slides and better for it. See also David Isenberg.

(Note, this was recorded on my iPod with iTalk, it is not meant to be IT Conversations. In a few weeks I'm sure many of these will be available there)

David on Freedom to Connect a conference scheduled for early April. If you listen to both David and Brad Templeton then you will understand that "forces" are trying to take the innovative opportunities away. I say join the movement! Fats Pipes! Always On! Get Out of the Way!

(Note, this was recorded on my iPod with iTalk, it is not meant to be IT Conversations. In a few weeks I'm sure many of these will be available there)

Phil's facts on Skype for ETel. Skype was on everyone's lips at ETel and yet many knew little about it. "Closed" was an anathema to many in the audience.

(Note, this was recorded on my iPod with iTalk, it is not meant to be IT Conversations. In a few weeks I'm sure many of these will be available there)

Business Week: The Great Firewall of China:

Skype had a dilemma. The Internet telephony and messaging service wanted to enter China with TOM Online (TOMO), a Beijing company controlled by Hong Kong billionaire Li Ka-shing. Li's people told their Skype Technologies (EBAY) partners that, to avoid problems with the Chinese leadership, they needed filters to screen out words in text messages deemed offensive by Beijing. No filtering, no service.

At first Skype executives resisted, says a source familiar with the venture. But after it became clear that Skype had no choice, the company relented: TOM and Skype now filter phrases such as "Falun Gong" and "Dalai Lama." Neither company would comment on the record.

Hmmm....

1. Is the filter list embedded in Skype's source for TOM? Or updated via download? Does anyone have the url for the list?
2. Is the filtering happening in the client? Or are the TOM Skype clients passing through an IM proxy service that filters the text?
3. Does this mean that Skype ceases to be a p2p client if one of the parties is operating behind the GreatFirewall?
4. Does Skype filter voice as well as text?
5. Does Skype offer governments the option to be a hidden party to any voice or video Skype call? Or just to those downloaded from TOM?
6. Does the TOM Skype filtering engine inform the Chines agency of its specific actions and identify the speakers?
   "All that is necessary for the triumph of evil is that good men do nothing." (Edmund Burke)
7. Will Skype lockout specific accounts from the Skype network if asked by a government authority? Does it have to be a national security authority or will Skype respond to requests by regional and local police or civil authorities? How about divorce courts?
8. The United States (a big market too and a target for Skype growth in 2006) National Security Agency wants the power to eavesdrop on Skype conversations too. Will Skype give them access too?

What issues affecting VoIP and telecom will come before the Supreme Court of the United States in the next 30 years? The Senate is interviewing Judge Samuel Alito this week before consenting to his lifelong appointment.

1. Privacy and the rights of individuals to secure theirs
2. Consumer control over personal information
3. Power of executive branch (FCC) vs. regulators
4. Rights of corporations, especially speech
5. Taxation of internet communication
6. Who has authority to regulate/censor internet content
7. Application of international law and treaties to US government
8. Employment law vs. employee rights to communicate
9. Coyprights vs. fair use
10. Network neutrality and common carrier status
11. Monopoly power and antitrust regulation

If you were sitting on the panel, what questions would you ask?

Is a little competition still a good thing?

Both Microsoft and Yahoo are deploying dial-out services in their Messenger clients. How do you compete when it comes to call termination? Four points:

1. Rates (converging to flat and free)
2. Reach (going worldwide)
3. Quality (expectations raised by GIPS audio quality)
4. Everything else

It's the everything else that'll matter. Bundling, niching, creative use of call metadata, convenience, caller ID pass through; they and the rest are secondary to making your softphone start up with Windows and be the conversation tool of choice.

Susan Mernit

"One of the ways Yahoo can compete with Google, IMHO, isn't to try to match then in product sets and feature to feature upgrades but to figure out what they can do differently--and do it amazingly well--and integration of tools across media and life management platforms seems like one smart way to go in this regard."

Q. Did the Microsoft-Yahoo IM interoperability agreement include voice calls?

Planck, Henshall, Shapiro, Udell, Hammersley

14 December - Quantum Physics Day. "-- the anniversary of the day in 1901 that Max Planck created the concept -- and the word -- of "quanta" and launched the revolution that has taken over the world." We've all been waiting for Heisenberg ring tones: they tell you who is calling or when, but not both.

Stuart Henshall Resurfaces (Stowe Boyd)

How Skype might help bring Network Neutrality (Mitch Shapiro via Isen. Can you blame poor Skype call quality on your ISP or other pipe-owners? If so, grounds for a consumer fight for customer choice, competition, and for no-filtering rules. David Isenberg: "We can do our part by expressing our outrage when they're outrageous. Early. And often."

Jon Udell appeals for unification of voice and data channels. (InfoWorld) Amen, Jon.

HorsePigCow restates The Madenning Octet, 8 truths driving today's changing Internet:

1. Information wants to be free
2. Zero distance
3. Mass amateurisation
4. More is much more
5. True names
6. Viral behaviour
7. Everything is personal
8. Ubiquitouos computer

This is what is going to disrupt everything you hold dear in the years to come....work with it or perish...

The Enemy (you know who you are)

1. Copyright
2. Borders
3. Censorship
4. Network blocking
5. Identity cards and databases
6. More network blocking
7. Everything is trackable
8. No privacy

(I would add that anybody unwilling to change or open up or collaborate will perish as well)

From the brilliant Ben Hammersley

Syndication, Structured blogging, and the Adaptive Blogosphere

One of the two new ideas in syndication this year: SSE, making RSS bidirectional so you can post back to an RSS publisher. The other, structured blogging, lets you add forms to blog posts and to news readers. Structured blogging is something I wrote a lot about starting three years ago on my a klog apart blog and as proposals to the first Atom specifications for Semantic Component Blogging leading to an Adaptive Blogosphere where your newsreader learns new form types from feeds, and then trains your blogging tools to support those forms, so your blogging tools become smarter over time and the blogosphere shares more structured data. See also: about my liver's weblog.

Most conferences are lovefests, fraught with groupthink. Not this one. Jeff Pulver brings combatants together. He exploits the tension between telecom upstarts vs. incumbents, regulators vs. entrepreneurs, industry vs. academe. It's dramatic (if you don't mind the language of lawyers and lobbyists). If I'm lucky, I'll understand a little more of the conflicting interests, the rhetoric, and their awareness and understanding of Skype.

If anyone wants to grab a coffee, beer or meal on Friday, call/skype/email me.

There’s been a lot of press in the last year or so about port blocking, open access, Net Freedoms, and so on. I won’t provide the links, you go find ‘em. Every forum, mailing list, conference, and discussion panel seems to have a lot of heated opinion about it. Although I couldn’t attend the VON sessions, there was heated debate there between the “Freeloader!” and the “Freedom fighter!” factions.

But why should I, emotively, care at all?

Stop for a moment. Why do you, personally, care about this issue? Telecom isn’t the only industry with distribution bottlenecks, significant market power, and cross-subsidy between the stages of production. Just look at how baked beans are positioned in supermarket shelves. Manufacturers in the UK pay the supermarkets to buy prime positions. Yet telecom incites such great passion in intelligent people. Baked beans don’t. What’s going on?

I think I’ve finally worked out why. It’s David Isenberg’s elephant in the corner — what he ambiguously calls Freedom to Connect. Most of these arguments attempt to build a logical economic thesis about why we do or don’t have the correct balance between price discrimination, competition and common carriage. But it increasingly misses the point. We sense there’s a deeper, more troubling, aspect to getting cut off from part of the conversation.

Whilst nebulous and fluffy, it’s all about democracy. The rest is post hoc rationalization of our more fundamental beliefs about how a 21st century society needs to be wired up to work. And my thesis is that we are underestimating the importance of this political (as opposed to economic) side of the debate.

The sense of indignation you feel inside you when you hear about port blocking is because you sense the loss that those customer are enduring. You and I have come to realize that if you don’t have access, you aren’t able to fully participate in society any more in some non-trivial way. You can still do the old analogue things, have a protest at the street corner. But the crowds have moved online. Nobody can hear you.

Not only that, but when someone else gets the chop, you’ve lost a member of the demos from your democracy. Your conversation is impaired by others no longer being able to participate.

Why don’t we feel so upset about the closed, walled gardens of wireless networks? There are several reasons, I believe. Firstly, the very nature of the medium lends itself to competition (through multiple overlapping networks), which ensures some degree of openness. The low cost of wireless telephony is also in itself a great democratising force. Going from zero phones to one closed one is a great step forward. Participation is everything. We also have lower expectations based on the natural capacity limits the technology has had until recently. Our tolerance of “co-operative bottlenecks” has been greater in order to share the resource better.

On the other hand, when someone’s Net connections to their home come under pressure of restriction, we react differently. I think this is partly a psychological issue of how we view these spaces differently. We are defensive of our homes. Somewhat tenuously, the family still is the organising unit of society. We aspire for every household to have at least some form of unfettered access to all forms of information discourse. That’s why it hurts when we fall short.

Which brings me to my real point. This conversational chatty democracy stuff all sounds fine. But that’s hardly going to energize society into fits of fiber laying and open access regulation. Where’s the beef? Well, here’s my outrageous suggestion:

The ability to access Internet content and services is the new Right to Bear Arms.

Wow. I’ve said it. So what does it mean? The founders of the United States of America in their wisdom saw the seizure of excessive power by government as a central risk. To counteract this, they ensured the general populace would always be sufficiently armed. This gives any putative dictator or tyrant pause for thought before exercising the machinery of government violence for undemocratic ends. The price is a certain undercurrent of everyday violence, but the experiment has by and large succeeded. The USA is one of the longest-standing constitutional democracies, and has withstood extraordinary change in demographics and fortune during that period.

We’re moving from a society where physical force was the prime means of coercion to one where ideas have ascendancy. Physical force doesn’t scale well as a means of subjugation. It’s one thing to take a man’s posessions; quite another to persuade him to make your dinner every night for nothing. The hardest part of the civil rights movement wasn’t undoing the yoke of the white man, but persuading the everyday black man that it was his inalienable right to have that yoke removed. Once that was achieved, the outcome was largely a foregone conclusion.

Building tyranny is harder when the populace is armed with good information. It’s not impossible; indeed, a tyranny of the majority is still a major risk. But when I can have a cheap encrypted Skype conversation with Iranians, Syrians, and Mexicans, something qualitative has changed. For example, when I visited Syria a few years ago, we went to Hama. This town was largely razed in 1982 (with the loss of tens of thousands of lives) when its own army shelled the city to put down an Islamic uprising against the Baathist government. I pass no comment on the politics of it, but merely note that this is a little-known episode of history. You certainly don’t see it mentioned on the official tourist website. Can you imagine keeping such news under wraps in the era of video cameraphones, satellite Internet and Skype?

Consider a populace that wants to rise up against its political masters. We’re already at the point where the government response isn’t to take away the populace’s arms, but to take away its means of communication. Militias don’t congregate in the woods and more, they start their own Yahoo! group and MoveOn and Meetup from there.

There’s no point in demanding universal access if you don’t have the economic means to deliver. Much of the debate is about means, not ends. But those ends deserve greater exposure and reflection. If we are serious about transformation of society through information technology it means sweeping away many of the special protections the telecom industry has managed to accrue, enforcement of competition law, and greater collective effort to deploy connectivity and open up wireless and fixed rights of way.

There’s more at stake here than cheap phone calls and unlimited TV channels. Cheap airlines have done more for European cohesion and understanding than decades of political exhortation. Cheap, ubiquitous and unfiltered communications are becoming a prerequisite of a pluralist participative democracy. Societies that fail to encourage the free flow of information will suffer because ingrained interest groups will ensure the rules are set up to perpetuate their privileges. When you can’t make a Skype call, you’re losing something more than money.

You might believe that your political system is a stable one delivering endless contended freedom and openness. But your average American feels a lot more secure in that knowledge with a rifle in the basement. I’d want the same feeling of security, just with symmetric gigabit fibre so I can host my own subversive content if necessary.

Next time someone is vigorously defending the existence of filters on the Net, dig deeper. Don’t ask them for the logic of their argument. Rather, try to find out why it excites them so much. Perhaps they aren’t aware of what animates their own passions.

Don't get me wrong...

I don’t want anyone to think I’m about to become a crypto-socialist, so a quick clarification. The correlation between “network freedom” and the right to bear arms is only a partial one.

Taking up arms is something that can be done unilaterally. A network is by its definition a collective effort, even if an emergent rather than centrally co-ordinated one. So it cannot be purely a personal “freedom”.

The right to bear arms is equally re-stated as a right not to have your arms taken away from you. It doesn’t mean anyone has to provide you with a gun. Network access is a positive outcome of economic activity over which there are rivalrous claims to finite resources, like network engineers. But you don’t (yet) own the network, so there’s no corresponding right not to be deprived of the use of your possessions. Bearing arms is really a negative freedom (something bad that won’t be done to you), whereas Net access is a positive freedom. Freedom doesn’t do free lunches.

As I have said before, price discrimination in competitive markets is your friend. Filtering can be used for price discrimination. Filtering is a symptom of how well the system is performing. In a mature telecommunications sector, such as wireline, it is a symptom of ill-health. In a nascent one, such as cellular access in the developing world, being only able to access closed phone and SMS service is a vital part of the pricing regime that makes the network possible. The existence of network filtering is an output, not an input; a symptom, not a cause.

You do not automatically make your society freer and healthier by outlawing all network filtering. Indeed, you might achieve the exact opposite result.

Guns don’t come with enforceable end user license agreements that say “For shooting small furry animals only”. But we do distinguish between bunny-hunting guns and machine guns. We discriminate based on lethality. We don’t expect unlimited freedom to bear arms. A farmer wanting to blow some cute crop-nibblers to kingdom come is given carte blanche to blast away. Walk into a bank carring the same hardware, and expect trouble. We might likewise expect some boundaries to our communications freedom.

So I would caution people from taking the analogy too literally. The right to bear arms is also a means to an end — a populace willing and able to resist attempts to capture the machinery of state to perpetuate undemocratic activity. Unfettered and affordable network access is correspondingly essential to the operation of a free and dynamic post-industrial society.

So I’ll say it again, differently. Rules against network filtering are one way of dealing with significant market power in a vertically integrated part of the market where someone has significant market power in the access layer. It isn’t necessarily the best way of doing it, but it’s one way. In all other cases, it’s likely to be harmful. You should use the existence of such activities as a yardstick for the development and maturity of the industry. Expect new technologies and markets to be full of filtering, which slowly recedes over time as competition heats up. Meanwhile, municipal networks and other co-operative of user-owned connectivity systems should aim for more opennness that simple economics suggests, because the benefits are hidden in the political layer.

I alluded to the special privileges and protections that exist in telecom. I guess I ought to enumerate a few to back up such a claim in what is becoming sometimes a suicidally competitive environment.

The US is the easiest example of how barriers to entry are built via co-option of the regulatory infrastructure, but examples about all over. Tariff sheets and their attendant cost of lawyers to issue, public utility comissions stuffed with friendly faces, exclusionary numbering schemes, sweetheart deals on rights of way, spectrum auctions that have singularly failed to recover the maximum public benefit, suspicious tax rebates, opaque pricing schemes that fail to come under scrutiny, faux taxes; the list goes on and on. Mostly it’s just a matter of not having to comply with normal competition and cross-subsidy rules and establishing your own parallel (and captive) regulatory environment, plus special deals on costs on inputs and prices of outputs. Check out the usual places for more data.

UPDATE: Susan Crawford has some thoughts along similar lines, with the money quote being:

I’m trying to create a normative map that will help reveal the assumptions at the heart of the network providers’ arguments. The key issue should be: is access to the internet a public goods problem, for which incentives are necessary to ensure buildout and maintenance? or — Is access to the internet a monopoly problem, for which you have to find ways to ensure frictionless competition?

Right now, we can’t tell what the right answer is.

My hunch is that we’ve not found ways for the invisible hand to operate that also allows collective action by users, groups of users, communities and regional government. It’s an “economics technology” problem, not a “technology technology” problem.

David Weinberger documents Tim Wu’s similar analysis of how the world is divinding into “openists” and “deregulationists”, where a confused cross-purposes of terminology, worldviews and methods collide.

via Martin Geddes' Telepocalypse.

It is my country; but I am not always proud of it.

Stupid

Publish your SkypeIn numbers though List Yourself. It lists your number in databases used by directory assistance operators in 23 countries. To the operators, this will be just another number for you.

While you're at it, be sure to add your SkypeIn numbers to the US National Do Not Call Registry. (foil those telemarketers).

Are you a Skype user in New York City? Well today's election day is half over and you've probably not voted in this piddling election. Skype Journal stays out of partisan politics, and that's not changing today. But Andrew Raciej, running for NYC Public Advocate has a platform that promises free or cheap bandwidth, bandwidth for every New Yorker, bandwidth in subways and skyscrapers and tenements and schools, bandwidth for disaster preparedness, bandwidth for citizen participation in local government, bandwidth everywhere.

He makes the case that a universal Wi-Fi system is needed for economic development. That it fuels better government, better public education, economic mobility, attracts business, help bus and train riders commute. He says Wi-Fi bridges what he calls three digital divides:

First, New York City as first among American Cities. I love that he raises the spectre of Philadelphia having better municipal connectivity. You can hear New Yorkers growl at that.

Second, NYC competing with foreign cities for capital, talent, culture, and industry. The most wired cities have an unnatural advantage.

Third, high-speed haves and have-nots. "Having broadband access without affordability is like having a highway without a car: you can’t go anywhere." It's not enough, he says, to offer dial-up to the poor in a broadband world. Universal access creates opportunity and a level playing field for individuals and for small businesses.

So in a Wi-Fi'd New York, everyone can be a Skype user. Mobile and laptop users could connect any time, everywhere. And as we know, the more people in a social network, the more valuable the social network is to its members.

These arguments apply to any metro. To Oakland, California, (are you listening Mayor Brown?). To a recovered New Orleans. To Mumbai and Beijing. New York has a slight edge: lots of dark fiber to create the muni backbone.

I met Andrew at the first Web 2.0 conference just before he launched the Personal Democracy Forum online magazine in Fall 2004. He's smart, professional, cooler than me, and eager to make a difference. Now I don't know him well enough to give him a character reference. And since I haven't looked at the other candidates and no longer live in New York I'm unable to endorse him. But his ideas, his platform, merit every civic minded voter's consideration, wherever you live.

Deal done. Retail VOIP in the offing? Views later.

eBay has agreed to acquire Luxembourg-based Skype Technologies SA, the global Internet communications company, for approximately $2.6 billion in up-front cash and eBay stock, plus potential performance-based consideration.

Skype generated approximately $7 million in revenues in 2004, and the company anticipates that it will generate an estimated $60 million in revenues in 2005 and more than $200 million in 2006. For Q4-05, eBay expects the acquisition to be dilutive to pro forma and GAAP earnings per share by $0.01 and $0.04 respectively. For the full year 2006, eBay expects the transaction to be dilutive to pro forma and GAAP earnings per share by $0.04 and $0.12 respectively, with breakeven on a pro forma basis expected in the fourth quarter of 2006. On a long-term basis, eBay expects Skype operating margins could be in the range of 20% to 25%.

The acquisition is subject to various closing conditions and is expected to close in the fourth quarter of 2005.

eBay will host an investor conference call to discuss the announcement at 5 am Pacific Time today. A live webcast of the conference call can be accessed through the eBay's Investor Relations website at http://investor.eBay.com. An archive of the webcast will be accessible through the same link.

Full text of news release...

On Skype.com:

eBay to Acquire Skype

London, September 12, 2005 – eBay Inc. (Nasdaq: EBAY; www.eBay.com) has agreed to acquire Luxembourg-based Skype Technologies SA, the global Internet communications company, for approximately $2.6 billion in up-front cash and eBay stock, plus potential performance-based consideration. The acquisition will strengthen eBay’s global marketplace and payments platform, while opening several new lines of business and creating significant new monetization opportunities for the company. The deal also represents a major opportunity for Skype to advance its leadership in Internet voice communications and offer people worldwide new ways to communicate in a global online era. Skype, eBay and PayPal will create an unparalleled ecommerce and communications engine for buyers and sellers around the world.

“Communications is at the heart of ecommerce and community,” said Meg Whitman, President and Chief Executive Officer of eBay. “By combining the two leading ecommerce franchises, eBay and PayPal, with the leader in Internet voice communications, we will create an extraordinarily powerful environment for business on the Net.”

Founded in 2002 by Niklas Zennström and Janus Friis, Skype offers high-quality voice communications to anyone with an Internet connection anywhere in the world. The Skype software is easy to download and install, and enables free calls between Skype users online. Skype’s premium services provide low-cost connectivity to traditional fixed and mobile telephones. Skype’s software also offers a robust set of features, including voicemail, instant messaging, call forwarding and conference calling. Upcoming product innovations include Skype video, expressive content such as avatars, and customized toolbars for Outlook and Internet Explorer.

One of the fastest growing companies on the Internet, Skype already has 54 million members in 225 countries and territories. Skype is currently adding approximately 150,000 users a day and has created a thriving ecosystem of products, services, developers, and affiliates. Skype is considered the market leader in virtually all countries in which it does business. In North America alone, Skype has more users and serves more voice minutes than any other Internet voice communications provider.

“Our vision for Skype has always been to build the world’s largest communications business and revolutionize the ease with which people can communicate through the Internet,” said Niklas Zennström, Skype CEO and co-founder. “We can’t think of any better platform to fulfill this vision to become the voice of the Internet than with eBay and PayPal.”

“We’re great admirers of how eBay and PayPal have simplified global ecommerce and payments,” said Janus Friis, Skype co-founder and senior vice president, strategy. “Together we feel we can really change the way that people communicate, shop and do business online.”

Zennström and Friis will remain in their current positions. Zennström will report to eBay CEO Whitman and join eBay’s senior executive team.

A Powerful Ecommerce and Communications Engine

Online shopping depends on a number of factors to function well. Communications, like payments and shipping, is a critical part of this process. Skype will streamline and improve communications between buyers and sellers as it is integrated into the eBay marketplace. Buyers will gain an easy way to talk to sellers quickly and get the information they need to buy, and sellers can more easily build relationships with customers and close sales. As a result, Skype can increase the velocity of trade on eBay, especially in categories that require more involved communications such as used cars, business and industrial equipment, and high-end collectibles.

The acquisition also enables eBay and Skype to pursue entirely new lines of business. For example, in addition to eBay’s current transaction-based fees, ecommerce communications could be monetized on a pay-per-call basis through Skype. Pay-per-call communications opens up new categories of ecommerce, especially for those sectors that depend on a lead-generation model such as personal and business services, travel, new cars, and real estate. eBay’s other shopping websites — Shopping.com, Rent.com, Marktplaats.nl and Kijiji – can also benefit from the integration of Skype.

PayPal and Skype also make a powerful combination. For example, a PayPal wallet associated with each Skype account could make it much easier for users to pay for Skype fee-based services, adding to the number of PayPal accounts and increasing payment volume.

In addition, Skype can help expand the eBay and PayPal global footprint by providing buyers and sellers in emerging ecommerce markets, such as China, India, and Russia, with a more personal way to communicate online. And consumers in markets where eBay currently has a limited presence, such as Japan and Scandinavia, can learn about eBay and PayPal through Skype. Skype can also help streamline cross-border trading and communications.

With its rapidly expanding network of users, the Skype business complements the eBay and PayPal platforms. Each business is self-reinforcing, organically bringing greater returns with each new user or transaction. The three services can also reinforce and accelerate the growth of one another, thereby increasing the value of the combined businesses. Working together, they can create an unparalleled engine for ecommerce and communications around the world.

Transaction and Financial Information

eBay will acquire all of the outstanding shares of privately-held Skype for a total up-front consideration of approximately €2.1 billion, or approximately $2.6 billion, which is comprised of $1.3 billion in cash and the value of 32.4 million shares of eBay stock, which are subject to certain restrictions on resale.

The maximum amount potentially payable under the performance-based earn-out is approximately €1.2 billion, or approximately $1.5 billion, and would be payable in cash or eBay stock, at eBay’s discretion, with an expected payment date in 2008 or 2009. Skype shareholders were offered the choice between several consideration options for their shares. Shareholders representing approximately 40% of the Skype shares chose to receive a single payment in cash and eBay stock at the close of the transaction. Shareholders representing the remaining 60% of the Skype shares chose to receive a reduced up-front payment in cash and eBay stock at the close plus potential future earn-out payments which are based on performance-based goals for active users, gross profit and revenue.

The above-mentioned dollar and eBay share amounts are approximate, based on the Euro-Dollar exchange rate and eBay’s stock price as of September 9, 2005. The final value of the stock component of the consideration may vary significantly from this estimate based on the value of eBay stock at closing.

Skype generated approximately $7 million in revenues in 2004, and the company anticipates that it will generate an estimated $60 million in revenues in 2005 and more than $200 million in 2006. For Q4-05, eBay expects the acquisition to be dilutive to pro forma and GAAP earnings per share by $0.01 and $0.04 respectively. For the full year 2006, eBay expects the transaction to be dilutive to pro forma and GAAP earnings per share by $0.04 and $0.12 respectively, with breakeven on a pro forma basis expected in the fourth quarter of 2006. On a long-term basis, eBay expects Skype operating margins could be in the range of 20% to 25%.

The acquisition is subject to various closing conditions and is expected to close in the fourth quarter of 2005.
About eBay Inc.

Founded in 1995, eBay pioneers communities built on commerce, sustained by trust, and inspired by opportunity. eBay enables ecommerce on a local, national and international basis with an array of websites – including the eBay Marketplace, PayPal, Kijiji, Rent.com and Shopping.com – that bring together millions of buyers and sellers every day.

About Skype Technologies SA

Skype, the Global Internet Communications Company™, allows people everywhere to make free, unlimited, superior quality voice calls via its award-winning innovative peer-to-peer software for Windows, Linux, Mac OS X, and Pocket PC platforms. Skype is available in 27 languages and is the fastest growing voice communications offering worldwide. Since its launch in August 2003, Skype has been downloaded more than 163 million times in 225 countries and territories. Fifty-four million people are registered to use Skype’s free services, with over 3 million simultaneous users on the network at any one time. Skype Technologies SA is headquartered in Luxembourg and is growing its offices in London and Estonia.

Forward-Looking Statements

This announcement contains forward-looking statements regarding Skype and the expected impact of the acquisition of Skype on eBay’s financial results. Those statements involve risks and uncertainties, and actual results could differ materially from those discussed. Factors that could cause or contribute to such differences include, but are not limited to, the timing of the closing of the transaction, the possibility that the transaction may not close, the reaction of the users of Skype’s services, the future growth of Skype’s user base and public acceptance of Internet voice communication services, rapid technological changes in the Internet voice communications sector, the reaction of competitors to the transaction, global developments in the regulation of Internet voice communication services including those provided by Skype, the possibility that integration of Skype’s offerings following the transaction may be more difficult than expected, and the possibility that entry by Skype and eBay into potential new lines of business will not be successful. More information about potential factors which could affect eBay’s business and financial results is included in eBay’s Annual Report on Form 10-K for the year ended December 31, 2004, the company’s Quarterly Reports on Form 10-Q, and current reports on Form 8-K. All forward-looking statements are based on information available to eBay on the date hereof, and eBay assumes no obligation to update such statements.

The eBay announcement:

***A New Way to Communicate***

I’m excited to let you know that eBay plans to acquire Skype, the leader in online voice communications.

Skype has set a new standard in online voice communications with
outstanding sound quality and unmatched ease of use. And like eBay,
Skype has a fast-growing community -- some 54 million Skype users
around the world already use their PCs to talk with one another.

And best of all, conversations between Skype users via PC are free. You
can get up and running on Skype in just a few minutes. Just go to http://www.skype.com/go/x.home to learn more and download the free Skype software application. Try it – it’s fun!

Over time, we intend to make voice communications a part of the eBay
marketplace – a huge step forward in making transactions faster and
easier, as well as bringing even more interactivity and humanity to the
eBay Community.

You can include your Skype ID in your About Me page. For now, however,
Skype links may not appear in View Item pages. We’ll be working with
you, our Community, over the next few weeks to thoughtfully work out
the details of how eBay and Skype will interact, including any policy
changes that may be required.

We expect this acquisition to be finalized soon. In the meantime, you can learn more about our Skype plans in the news release we issued just a few minutes ago.

Working together, eBay, PayPal and Skype will redefine online trade and
community. I hope you’ll join us in this exciting new chapter in eBay’s
history.

Sincerely,

Meg

"Is Skype in China risking compromising their encryption and anonymity model?" so asks my Danish contact Torben Nyhuus after reading this article on Yahoo turning state's evidence:

Information supplied by Yahoo! helped journalist Shi Tao get 10 years in prison

It is an interesting question. The Skype Partner TOM does have a different version of Skype. H'mmmm...

xpnalex posted to a Skype forum:

I tried to call someone on Romania Mobile and Skype started to take my cents since it started ringing. The person did not respond to my call, but Skype still ate 0,24 Euro. It is not fair! What company are you running here?

Hmm, it works for me but I really haven't read the SkypeOut Terms of Service. Let's see...

IMPORTANT — PLEASE READ CAREFULLY

Yeah, right.

Entering into this agreement:

Use it, and you've agreed to all the fine print.

Electronic Signatures and agreement(s)

Umm, what's paper? Paper-less contract.

No Emergency Calls: by entering into this Agreement You acknowledge and agree that the SkypeOut service does not support or carry emergency calls.

When bleeding to death, use a "regular" phone, please.

Jurisdiction's Restrictions

If using Skype breaks the law, it's all your fault.

2.1 No warranties.

We're just human. Murphy rules. Outages? Not our fault.

2.2 Suspension and interruption.

We may break your service if we feel like it.

2.3 Change of technical features.

It's our product so we can change it.

2.4 No control.

(Hands over ears) WE CANNOT HEAR WHAT YOU'RE SAYING SO IF YOU SAY SOMETHING BAD IT'S NOT OUR FAULT. ALL ON YOU. LAH LA LA LA. MOO MOO MOO. WE CAN'T HEAR YOU.

2.5 No traditional telephone service.

Laws which apply to your phone company don't apply to us.

Article 3 — YOUR COOPERATION

3.1 Use of the VoIP service. You will use the VoIP service in accordance with these Terms of Service, the End User License Agreement and the relevant legislation.

wow. plain English.

3.2 Information.

Don't break Skypenet by hiding data it needs to work.

3.3 Suspension.

If you don't give us your data, we may kick you off the network.

3.4 No resell. You agree not to resell the VoIP service to any third party.

Oooh, this is news to me. Can I bundle the service, for free, with something else I'm selling?

3.5 Lawful purposes.

Be good. Don't mess with other's calls. Don't spam (or spit) unlawfully. Don't be a fraud.

3.6 Indemnification.

Whatever happens, It's Not Our Fault.

Article 4 — USER ID, PASSWORD AND ACCOUNT

4.1 User ID, Password and Account.

You get one. Anyone uses it to do something bad, it's All Your Fault. Even if you didn't know.

4.2 Notification and Indemnification.

Tell us when something bad happens using your account. Promptly. And... It's Not Our Fault.

4.3 Change of User ID and Password.

We can mess with your login to protect Skypenet.

Article 5 — ACCOUNT BALANCE

5.1 Credit balance.

Top up or no service. Give us your credit card number and we charge it right away. We don't have to take your card if we feel like it.

5.2 Activating Account.

Vouchers are worthless if you don't redeem them on our website.

Article 6 — REFUND POLICY

6.1

Ask Customer Service.

6.2

We'll give you your money back. Spent less than one euro? We'll throw in the change.

6.3

More than one euro? Pro rata for SkypeIn and Voicemail services. Full, if you ask in your first 30 days.

6.4

We'll pay you back the way you paid us. We'll close your account but not your Skype name, so you can open it again later.

6.5

Don't use SkypeOut for 180 days? The balance in your account is ours. Hey, we're not your savings account or the Cayman Islands.

6.6

Abuse our good nature and this contract is over, done, finito, end of story, full stop.

Article 7 — TARIFFS AND PAYMENT

7.1 Tariffs.

Tariffs are the prices we charge (stickier than a hippogriff). We set them, you pay them. Taxes too. We can change them and you'll know because we updated the tariff page on our website which you obviously check before every call. And we won't tell you what the taxes are, we'll just collect them.

7.2 Change of tariffs.

If you don't like a change in rates, leave. Write us and we'll give you back whatever money is left in your account. Otherwise, don't bother us about the rates.

7.3 Charged in error.

Did we charge you wrong? Contact customer service within 90 days or forget it.

7.4 Positive balance.

No money? No SkypeOut, SkypeIn, or Voice Mail.

Article 8 — PRIVACY, PERSONAL DATA AND TRAFFIC DATA

8.1 Privacy Policy.

Trust us. See the full privacy policy published elsewhere. We routinely give your data to local partners who helps us run Skypenet, but won't name those partners. And any governmental agency will get our help, including intercepting your calls.

Article 9 — INTELLECTUAL PROPERTY RIGHTS

9.1 Ownership.

All your Skype belong to us. Skype is ours, not yours.

9.2 License.

You're just using Skype, don't get any ideas that it's yours.

Article 10 — LIMITATION OF LIABILITY

10.1 Limitation of Liability.

Not that it could ever happen, but if, and mind you we're saying if, something happened to be our fault, we're only a tiny bit exposed.

10.2 Direct damages.

We'll only pay for direct damages, like our service burning your building down, and not indirect damages, like being out of work or looking for a new home.

10.3 Maximum amount.

We won't pay you more than you paid us, and even then never more than 5000 euro.

10.4 No incidental consequential damages.

We're just your phone service, not your mother.

10.5 Specific Disclaimer of Liability for Emergency Services.

Well, we're not really your phone service. If you have a heart attack, try to use Skype to call for help, and die because we don't have emergency service, It's Not Our Fault. No Way. No How. Big Time. All On You.

10.5.1 Alternative Arrangements.

Really. All Your Responsibility.

10.5.2 No Compulsion to Offer Emergency Services.

We Don't Do That. Nope. Not Us. Go Elsewhere.

10.6 Willful intent or gross negligence.

If we hurt you on purpose or because we're just insanely incompetent, then you can try to sue us for more than 5000 euro.

Article 11 — FORCE MAJEURE

11.1 Force majeure.

It's not our fault if Skype doesn't work becuase of ...

an act of God, insurrection or civil disorder, war or military operations, national or local emergency, a serious and sustained power outage or severe Internet service disruption, flood, subsidence, or weather conditions of exceptional severity.

Or aliens invading. Or global warming. Or the sun going nova.

11.2 Consequences of force majeure.

Not Our Fault. But we'll tell you about the aliens and when we'll be back in service.

Article 12 — TERM AND TERMINATION

12.1 Term.

This deal starts when you click and ends when you or we end it.

12.2 Termination by You.

It's done when you say so.

12.3 Termination by Skype.

It's done when we say so, and you may find out because you can't log in to Skypenet any more.

12.4 Consequences of Termination.

When it's over, you can't use Skypenet. (Does that include getting your old voice mails, address book, activity logs?)

12.5 Survival.

The marriage may be over but someone may have to pay child support.

Article 13 MISCELLANEOUS

13.1 New versions of the Terms of Service.

We can change this agreement when we feel like it. Just keep checking somewhere on our website. Love 'em or leave. Using Skype means you agree to the changes.

13.2 Adjustment of the VoIP service.

You thought you signed up for one thing but we can change it.

13.3 Entire Agreement.

Thou shalt have no other contracts before me.

13.4 Partial Invalidity.

If your lawyer shows we screwed up in one part of this contract, well, the rest of it still applies. So if you die because of something we did, you may still be able to get a refund on unused SkypeOut minutes if you let us know within 30 days.

13.5 No waiver.

You may think you're getting away with something now, but we may get you later.

13.6 No Assignment by You.

This is between you and us, not you and us and someone else. Or us and someone else. Just you. And us.

13.7 Assignment by Skype.

Well it could be between you and us and another company if we say so. Like if we sell Skype. Or sell your account to another service. Or to a collection agent. We can do this, you can't.

13.8 Applicable Law.

Luxembourg Rules!

13.9 Competent Court.

Luxembourg Courts!

13.10 Language.

You may be reading this in Polish, but it's really in English.

SKYPEOUT SERVICE

Article 14 — EMERGENCY CALLS

14.1 No emergency calls.

You could be bleeding on the ground and we'll say "you agreed in section 14.1 not to use Skype for emergency calls." If you try and fail, It's Not Our Fault. Tell anyone using your Skype account, so they know not to even try.

Article 15 — CHARGES

15.1 Charges.

Charges are to the minute. Rounded up after 5 seconds. 64 seconds is one minute, 65 seconds are two minutes.

SKYPE-IN SERVICE

Article 16 ALLOCATION OF SKYPE-IN NUMBERS

16.1 Allocation of SkypeIn number.

Your SkyeIn number may come from someone else. A whole other contract. Or not.

16.2 No transfer of (property) rights.

Your number is still ours (or whoever gave it to us). You can't give it to someone else.

16.3 No guarantee.

When you pick a number, we'll try to to get it for you, but no promises.

16.4 Refuse, change or terminate SkypeIn numbers.

We may need to change or cancel your SkypeIn number. We will if you break this deal.

16.5 Change of the SkypeIn number.

If we change your SkypeIn number, we'll email you about it. If this hurts you, It's Not Our Fault.

Article 17 — YOUR COOPERATION

17.1 Instructions and Number plan.

You promise to be good. And do what we tell you.

17.2 Provision of information.

All your data belong to us.

17.3 Indemnification.

It's Not Our Fault.

Article 18 — CHARGES

18.1 Charges.

We'll charge right away.

VOICEMAIL SERVICE

Article 19 — CHARGES

19.1 Charges.

We'll charge right away.

Article 20 — LIMITS OF USAGE

20.1 Limits of usage.

We can change voice mail. Longer or shorter messages, fewer or more messages, less or more storage time.

The world ain't fair.

Wealth is unevenly distributed, and economic mobility isn't even close to a norm. A drive west from Lake Michigan down Chicago Avenue for an hour makes that clear.

You see the same thing in Skypeland.

The millions of dollars that Skype helps keep in caller pockets? Most of that is middle and upper class money. The savings go to those with midband connectivity, with the disposable income to pay monthly what others call a day's take-home pay. Or a week's. Or longer.

The DSL or cable buy-in to the always-on Internet remains too steep or unavailable, even in the United States. Water, electricity, telephony, sewage, public safety, public health, courts, voting. It must be a mandate to add the fast net to universal access.

That's a dream of mine. Guaranteeing access to the net to everyone everywhere.

Everyone has dreams.

Many are dashed. Some don't know it. Denial for others.

Take SIP's dream. (If you're not from Planet Voipon, SIP is a telecom standard that tells software how to act like a phone network.) SIP's vision is profound and beautiful. A world without centers, where anyone can plug in to the network the way people plug in to email. Telephony as free as your Internet connection.

SIPsters don't have momentum; it's more like the inertia of the desperate who haven't an alternative. Thousands continue to invest fates and fortunes on SIP's promise. Slow to pay out, SIP now finds itself growing but eclipsed by Skype's breathtaking J curve and flashy consumer acceptance.

Many SIP evangelists are working themselves up to condescending that the Skype-thing exists, is popular with consumers in a fad sorta way, and doesn't completely suck as a product. But Skype is so closed and proprietary and consumerish and otherwise icky that the future still lies with SIP.

And they may be right.

Nobody guarantees Skype's survival or ubiquity. But there are few serious rivals and Skype continues to raise the cost of entry.

As it stands, SIP hasn't evolved much, either in specification or in practice. Why? I've heard some blame it on big telcos dragging feet, hesitant to obsolete product families. Others blame SIP never being implemented the same way twice. Or a standards process and body slow to embrace bold changes. May disparities between software and telco cultures be at fault?

Assume Skype will keep evolving quickly, serving 300 million users before 2008. How soon will the SIP community respond to the competition? Will they act effectively? With a potent vision? With specs that everyone will embrace and stick to? We'll see. The recent P2P SIP meeting holds promise.

I had a comforting reality check over breakfast with family still in town post-wedding. Nobody there ever heard of Skype, VoIP, SIP or anything like it. The same look they gave when I mentioned blogs at another wedding in 1999, the Internet in 1993, DARPAnet in 1979. Tolerant, loving, bemused, and not the least interested.

From China Tech News:

China's Ministry of Information Industry (MII) reiterated that it still has not formulated guidelines concerning VoIP businesses and that many current VoIP businesses could potentially be illegal.

Companies like Netease (NTES), Tom Online (TOMO), Skype, and Tencent have all started VoIP services in China. And the 263 Group and HL95 have also recently entered the sector.

The VoIP sector offers great financial rewards for companies because voice communications on the network can be as much as ten times cheaper than traditional fixed-line phones.

MII says that it is still testing VoIP and forbids illegal "phone cafes" from opening in China. It also offered no clear date on when it will issue guidelines for businesses to operate legally.

Silly, I know.

Privacy and webcams.

With a paper bag I can hide a few of my physical markers. Age. Colors. Features. Gender.

This works until you open your mouth.

In a time of mass surveillance, beware. After all, today's webcam conversation is tomorrow's television newscast.