Google gears up for a free-phone challenge to BT

[David Farber <dave () farber net>]

------ Forwarded Message
From: Michael Kende <Michael.Kende () analysys com>
Date: Mon, 24 Jan 2005 13:46:28 +0000
To: <dave () farber net>
Subject: FW: FYI: Google gears up for a free-phone challenge to BT

Interesting development in VoIP.


January 24, 2005
The Times 

Google gears up for a free-phone challenge to BT
By Elizabeth Judge, Telecoms Correspondent
  
 
GOOGLE revolutionised the internet. Now it is hoping to do the same with our
phones. 

The company behind the US-based internet search engine looks set to launch a
free telephone service that links users via a broadband internet connection
using a headset and home computer.

The technology that will enable Google to move in on the market has been
around for some time. Software by the London-based company, Skype, has been
downloaded nearly 54 million times around the world but no large
telecommunication firms have properly exploited it.

BT, which connects seven out of ten British households, has developed its
own internet-telephone service. However, the telephone giant, which has the
most to lose if the new technology takes off, has been reluctant to promote
it heavily. 

Julian Hewitt, senior partner at Ovum, a telecoms consultancy, said: ³From a
telecoms perspective there is a big appeal in the fact that Google is a
search operation ‹ and of course the Google brand is a huge draw.²

Mr Hewitt said that a Google telephone service could be made to link with
the Google search engine, which already conducts half of all internet
inquiries made around the world. A surfer looking for a clothes retailer
could simply find the web site and click on the screen to speak to the shop.

The basic cost of making calls across the internet is almost nil. The real
cost is in developing the software; after that, the service exploits
available internet capacity. However, charging does become necessary to link
internet calls with the traditional phone network.

In addition, the sound quality of calls across the internet can be poor and
the connections can be less reliable.

A recent job advert by Google¹s on its website calls for a ³strategic
negotiator² to help the company to provide a ³global backbone network² ‹ a
high-capacity international infrastructure.

By investing in capacity, Google could circumvent the problems of quality
and reliability and guarantee better service.

Although Google is reluctant to talk about its plans, the logical use of
such a network would be to help to support a new telephone service. The
company would buy capacity cheaply, by taking up slack capacity left behind
when the internet bubble collapsed in 2001.

Around the world, thousands of miles of fibre-optic cable remain unused
because the amount of speculative development vastly exceeded demand. Such
capacity would be available at rock-bottom prices today.

Elsewhere in the world, using the internet to make phone calls has caught on
more quickly. In Japan 10 per cent of households already use the so-called
³voice over internet protocol² and an internet service offered by Softband
has 4.4 million subscribers. Its growth has depressed revenues of the local
telecom group, NTT.

In the US, a company called Vonage offers customers unlimited calls each
month for as little as $24 (less than £13).

Big companies and multinationals that make huge numbers of long-distance
calls are also increasingly switching to internet calls to try to slash
their bills. 

Google, which was founded in 1996, built its business from scratch by
offering a fast, reliable and free internet search. It gradually transformed
into a highly profitable company by offering commercial services, including
sponsored web links.

Its most up-to-date figures show that, in the first nine months of 2004,
Google made a profit of $195 million on revenues of $2.1 billion.

START OF THE BIG SEARCH

Stanford University graduate students Sergey Brin and Larry Page began
working on Google¹s search-engine technology in 1996 when they were in their
early twenties 

They tried to find a buyer for their work but were forced to set up their
own company in 1998 because nobody was interested

Two years later Google became the biggest search engine on the web
Google was forced to go public during 2004, so that some of its founding
investors could make a profit. The company raised $26 million; its initial
market value at float was one thousand times greater

The company¹s motto is ³Don¹t Be Evil²
 


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