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VoIP service is getting easier and more popular.

But are there compromises and trade-offs with a low cost (and sometimes free) service such as Skype VoIP compared to a regular commercial service such as Packet 8 or Vonage?

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Skype VoIP Internet Phone Service

VoIP technology continues to improve, making this way of placing phone calls more convenient, and competition is dropping the cost of VoIP service down even lower than before.

Skype's service, with more than 50 million registered users, offers perhaps the lowest cost VoIP solution of all.

But is it a case of 'you get what you pay for' or is it a genuine bargain?

Part 5 of a 7 part series - click for Parts  One  Two  Three  Four  Five  Six  Seven



VoIP phone service continues to drop in price, and also to competitively pressure reductions in regular phone service rates.

No longer an experimental odd-ball service with poor quality, VoIP has become mainstream and easy to use.

But, mainstream or not, innovative new startup companies are pushing the envelope (and affordability) of this technology still further.  Skype is probably the best known example.

The evolving nature of VoIP service

I first wrote about VoIP a mere two years ago, but the concept of 'internet' or 'dog' years also applies to VoIP.  A lot is happening with this concept, and very rapidly, and the passing time has seen enormous changes.

VoIP - a product that needed careful introduction and explanation two years ago, is now accepted and mainstream.  And, even if you don't knowingly use VoIP yourself, you're benefiting from the presence of VoIP, because the very low calling rates offered by VoIP companies are now forcing the major long distance companies to drop their rates.

It is now possible, for example, to get unlimited calling plans with Verizon in some areas - a phone line, plus unlimited local and long distance (within the US) calling is sold for less than $50/month.

Chances are you might be using VoIP without even realizing it.  Many of the regular long distance services now send your call over the internet, although for you as caller, it seems just like another ordinary call.

Dedicated hardware no longer essential?

One comment I made two years ago possibly needs to be revised.  When first introducing VoIP, I attempted to differentiate the new dedicated phone services such as Vonage and Packet 8 from earlier software products that simply run on your computer, connecting to similar software on other computers.

The big disadvantages of most software based calling programs were (and still are) :

  • They only work when both you and the person you're calling have your respective computers turned on and connected to the internet

  • They only connect you to other people using the same software

  • You have to learn a new software program, rather than just pick up a phone and dial

In the past, software based products were less likely to offer good reliable sound quality.  Ever increasing processing power in our computers, and more sophisticated software, means this disadvantage is no longer as substantial as before.

But, with my main computer - a 3.2GHz Pentium IV with 1 GB of memory and fast RAID disk - I'll sometimes notice glitches in the sound quality of a software based voice call; glitches that coincide with the computer being briefly busy doing some other background task.

If you want to be 100% certain of having the absolutely best possible sound quality at all times, you probably need to continue using a dedicated hardware solution that is unaffected by other processing on your computer.  For many of us, though, the occasional and brief glitches caused by your computer briefly doing something else while you're at the same time on a Skype call are an acceptable tradeoff for the lower cost of a software rather than hardware based phone service.

Skype - a hybrid product that minimizes these disadvantages

We're now seeing an evolution of software based VoIP services that are much more useful than their predecessors.  The best known (and perhaps best) of these is Skype (pronounced to rhyme with 'pipe').

Skype can be considered a hybrid product because it combines both 'pure' VoIP computer to computer calling with access to the PSTN (the regular Public Switched Telephone Network) too.  Skype is a software program and runs on PCs, Macs, Linux and Pocket PC based computers.

Basic and Free Skype

In its simplest form, you download the free Skype program, install it, create a user profile, and then, using either your PC's sound card, speakers, and microphone, or a plug in USB headset or USB phone handset, you can call other Skype users, and have them call you.

In this simple computer to computer mode you don't have a phone number.  And you can only communicate with other Skype users.

So far, this is unexceptional, and similar to many other products available.  Now for the clever extra features :


This allows you to call from your Skype service to any phone number in the world.  This service is convenient, but not free.  However, it is typically less expensive than calling with regular phone service and usually less expensive than calling through a mainstream VoIP service.

There is no monthly fee.  You simply pay per minute of calling, and most common destinations are charged at €0.017 (approximately the same as $0.021 or 0.012).  Calls to mobile phones are more expensive, as are calls to less common countries (such as Andorra, Barbados, Cambodia, and so on through the alphabet).  European residents are charged 15% VAT on these rates; residents of all other countries pay no extra taxes or surcharges at all.

You need to prepay for this service, and to purchase at least €10 of credit (about US$12.50) per transaction.  As long as you make a single short call at least once every six months, your account remains active, meaning that the fixed cost per month is as close to zero as possible.

Note that there is no such thing as a free local calling area.  All calls out to regular phones are charged, no matter where in the world you are and they are.

Calls are billed in whole minute increments, and rates are based solely on the country you are calling to, not the country you are calling from.  Your remaining balance is continuously displayed in the Skype program window.

When you are calling out, there is a perceptible delay between selecting a number to call and when the ring tone starts to be heard - anywhere from about 7 secs to 12 secs in testing.  No Caller ID data is sent when you make a call, because, after all, you don't have a regular phone number to send to people.  Sometimes, when calling internationally, a strange number might appear in caller ID (eg 1000012345 on one occasion) and when calling locally, generally the caller ID display just shows 'unavailable'.

Skype Voicemail

SkypeOut solves the first problem - how to call someone who doesn't have Skype.

The next problem is how to get in contact with a Skype user when they are not at their computer, or not connected to the internet.  And so, Skype added a voicemail feature.  Part of this is free, and part will cost you money.

All Skype users can receive voicemail messages for free, and anyone can send voicemail messages to other Skype users if either the sender or the receiver of the message has signed up for voicemail service.  But if neither person has signed up for the service, it won't be possible for voicemail messages to be exchanged.

Voicemail service is inexpensive.  It is included, at no extra cost, with the SkypeIn service (see below), or can be purchased as a standalone service at a cost of €5 for three months or €15 for a year (about US$6 or US$18).  This is a flat rate, and there are no extra charges for either sending or receiving voicemails.

A clever feature of Skype's voicemail is the ability to directly send a person a voicemail message without needing to try and speak directly to them first.  Maybe it is a commentary on our increasingly impersonal interactions, but many times it feels more efficient and appropriate to quickly send a voicemail message rather than to interrupt the person you are calling with something that is perhaps not vitally time sensitive.

Skype's voicemail service is good, but has some annoying limitations which would be very easy to resolve.  It would be very helpful to be able to forward voicemail messages to other people - the messages are stored as data files on your computer, so forwarding them is, in theory simple.

But there is no built in means to forward voicemails, and because they are stored in a proprietary format which regular audio file players such as Realplayer and Windows Media Player can not understand, even if you manually found the individual message files and sent them to someone else, there's no way they could play them.

You can set your voicemail to immediately answer the phone, or to only answer the phone if you don't pick up the call yourself after a specified time interval.


SkypeIn resolves the remaining limitation of most other software based computer to computer VoIP services.  You can add a regular phone number to your Skype account, so that anyone, from any phone, can dial you on your Skype account, exactly the same as they would dial anyone else, anywhere else in the world.

Indeed, you don't need to limit yourself to just one SkypeIn phone number.  You can have up to ten of them, all feeding in to your same account.  Better still, the phone numbers can be located in nine different countries :

  • Denmark

  • Estonia

  • Finland

  • France

  • Hong Kong

  • Poland

  • Sweden

  • United Kingdom

  • United States

This list of countries is expected to grow over time as Skype gets bigger and extends into other countries.  Not all area codes are available in all countries, and toll free numbers are also not available.

There can sometimes be benefit in having multiple phone numbers.  For example, if you have friends, relatives or business contacts in one of these countries, but you live in a different country, then creating a number in their own country they can reach you at is an easy way for them to keep in touch with you.

Unlike other 'regular' hardware based VoIP services, SkypeIn numbers don't have many extra features on them - for example, no call forwarding, although Skype says it is working on this.  But it does have call waiting, and you can put one call on hold and talk to the second caller.  I don't think it possible to link both callers into a conference, but possibly I just haven't worked out how to do this yet. :)

It is possible, however, to have a conference call that you start yourself, with a mix of regular Skype users and SkypeOut people you call to as well.

Numbers are unlisted - they don't appear in regular phone directory service listings.

Skype charge €10 for three months of service, per number, or €30 for a year of service (US$12/36), and this charge includes their voicemail service as well.

There are no extra charges for calls received.  Just the flat rate per quarter or per year.

How the Skype services all tie in together

The preceding might seem complicated, but in reality, it is very simple :

  1. The Skype program is free to download, and free to use when calling other Skype users on their computers.

  2. If you want to be able to send and receive voicemail, then you need to sign up for the voicemail service, either as a standalone product or included with SkypeIn.  You are charged a flat rate per month, with no extra costs for sending or receiving voicemails.

  3. If you want to be able to call out to normal phone numbers, everywhere in the world, as well as to Skype users, you need to sign up for SkypeOut and then you will be charged a low rate per minute (most 'major' countries are about US2 a minute).

  4. If you also want to have a phone number yourself that anyone can call in to, same as if it was a regular phone line, you need to sign up for SkypeIn, and then you will be charged a flat rate per month, with no extra charges for actual calls received.

In total, if you buy all the pay services from Skype, you'll be paying only $3-4 a month plus the cost of outgoing calls.

Installing Skype

This is wonderfully simple.  Download and save the appropriate version from Skype's website (about 7MB for all versions), then run the downloaded program, which will self extract itself and install the Skype program on your computer.  Most people will choose the option to have Skype auto-load whenever you start your computer.

You then choose a user name for yourself, and at any time can sign up for the pay service extensions to Skype if you want to add these.

Skype can automatically search through your Outlook contacts to try and match any of your contacts up with the Skype identities and import this information into your Skype contact list.  You might be surprised at how many different people it ends up matching with a Skype identity.

Editing contact information is currently not possible; you have to delete the contact and then recreate it with the correct information.

Multiple Computers

If you have more than one computer (eg work, home, and laptop), you can put copies of the software on each machine.  Your contact lists are kept on the central Skype network so this data will automatically follow to whatever computer you log in from, but voicemails, once you download and play them, are on each local machine, as are call records, so you won't be able to replay voicemails at home that you've already downloaded and played at work, and your call records from work will also not be visible at home.

Multiple Computers Simultaneously

This is an amazing feature, although I'm not sure if it is an official feature or an overlooked loophole.

You can be logged into multiple computers at the same time (with the same user ID), and then if you get an incoming call, it will ring at all computers simultaneously.  This is analogous to having a phone line with multiple extensions.

However, there is a potential problem.  When you do this it may confuse the Skype servers, and may show you as off-line to other Skype users.

Using Skype

The program uses an interface much like an Instant Messenger program.  The interface is simple and easy to understand and use.  Green and red phone handset icons for placing and ending calls are prominently shown, and you simply choose which contact person you wish to call, or manually type in a phone number.

Most people can simply stop reading at this point and jump on down to the next green heading.  Because, for most people, all they want to be able to do is to place and receive phone calls.  But if you're interested in other 'goodies' and capabilities, keep reading....

A nice thing about Skype (or potentially an intrusive thing, depending on your perspective) is that people can immediately see if you're online or not.  This makes it a bit harder to convincingly explain why you didn't answer a call.  But it is possible to set your status so it appears you're away from your computer, even if you are present.

One problem with the Skype interface is that when a call comes in, a popup window appears on the screen and takes the focus from whatever was the previous window.  This means if you're typing away and then a call comes in, your typing gets redirected into the Skype window and may cause Skype to do just about anything, depending on what sequence of key strokes you're typing.  This is a very poor bit of design on Skype's part and needs urgently to be fixed.

In copying the functionality as well as the look and feel of IM programs, it is possible to have 'chat's (by typing) with other contacts, and also possible to send files to each other through the program.

You can place conference calls with up to four other people participating.  These people can be Skype users on their computers or regular phone users on their regular phones.

Various program buttons and tabs take you to such things as your main contact list, there is also a call history, and configuration options to set various features.

Skype signals an incoming call by playing a sound much like a traditional phone's ring through your computer's speakers.  Various other events also trigger sounds, and you can completely customize which events generate sounds, and what sounds are used.

If your phone service is to be tied to your PC, you'll probably expect it to offer a lot more 'computer type' features than you would from a regular phone.  For example, why can't it record calls and allow you to manipulate/forward the recordings. Why not grab the caller’s IP address and show their approximate location; and/or, conversely, allow you to block your own location.

In other words, the very fact of being PC-centered creates the basis for Skypes main weaknesses - the expectation of more features than it delivers.

One feature that is missing, but promised for the future, is webcam support, so you can send and receive video from your other caller as well as audio.  This is already available as an add-on from another company, though, and that leads to the next section :

Skype Plug Ins and Extensions

Skype has bravely published the specifications for its service, and allows other companies to develop products to run on the Skype network, too.  Some of these products add extra features, whereas some compete directly with Skype's own services (such as competing voicemail services).

And so, in addition to the main Skype program, there are a growing number of add-on or plug-in type extensions to Skype (some are available on the Skype website, others you'll have to do a bit of Googling to find).  These provide features such as being able to record conversations and interfaces to send SMS messages and various other capabilities.

Skype plug-ins exist for Internet Explorer and Outlook (available on the Skype website).  The IE plug-in seems of little use, but the Outlook one allows you to combine/merge your Outlook and Skype contacts and might be helpful.

The vSkype plug-in gives Skype video capabilities and is reviewed on our page about how to add video to a basic VoIP service.

911 Service

Skype does not support the US 911 or any other country's emergency calling service.

Call Quality

Calls between two Skype users, both on broadband, were usually crystal clear and 'broadcast quality'; very much better than regular telephone to telephone service.  It was interesting to compare a call from Skype to another Skype user's computer, and then a second call to that same person's landline.  Every time, the Skype to Skype call was better than a Skype to landline call.

Skype is generally the absolutely best way possible of calling to another person out of all possible methods.

However, while generally the best, it is not always the best.  As mentioned above, sometimes my computer would be multi-tasking and doing some other job at the same time (eg receiving email, or rebuilding an index file) and at such times there would be occasional pauses and glitches in the Skype sound.

I had a consistent problem when calling using the SkypeOut service to other people on their regular landline phones.  My voice would sometimes not be heard by the other person, and this problem also applied if I was accessing an auto attendant that required me to press buttons on my phone to generate tone sounds.

Obviously something is wrong somewhere, and although I've seen repeated messages from other people also suffering problems with SkypeOut, I haven't seen any relevant solutions.  On the other hand, I know other users who have no trouble whatsoever with their SkypeOut service, so I think it is something to do with my computer and configuration, not a general limitation of the SkypeOut service.

I asked Skype's technical support people about this problem, but received no response.

Service and Support

Don't misunderstand what Skype is.  While dressed up as a very friendly 'free' product, Skype has, at its heart, a very sensible business model and revenue generating process.

Which makes it very surprising they don't offer any type of useful support.  I'd be quite happy to pay reasonable fees per minute or per incident for help with problems as they may occur, but this is not offered.

This is an important oversight on Skype's part - good support can generate revenue for them three different ways - encouraging people to use the software, encouraging people to get better/more use out of the revenue generating parts of the software, and by making a profit on selling support services.

Instead, the only three ways you can get support are :

  • To read through their knowledge base of questions and answers

  • To post on a public user forum and hope someone chooses to correctly answer your question

  • To send a form based email to their technical support people, the response to which is a message saying you might not get any response if the question is already answered somewhere else.

In my case, with a problem about their SkypeOut service (this is one of the services they sell, not something they give away for free) I have not been able to find anything in their knowledgebase, and have not received any reply from their technical support people 3.5 days after sending them a help request.  And so, for the last 3.5 days, I've been unable to use the product which they sell and make a profit on every minute I'd otherwise be using it.

If you're looking for a VoIP service that offers good support, Skype is not an acceptable solution.

Bandwidth Requirements

Skype is much more economical on bandwidth than other VoIP services.  Unlike other VoIP services which require broadband, Skype seems to work acceptably well with dialup.

Skype uses an adaptive codec which responds to line quality and the bandwidth available, and requires between 25kb/sec and 130kb/sec.

To torture test Skype's bandwidth requirement, I placed and received calls between my laptop, connected via dialup line in New Zealand (at 51kb), and a friend, also on a dialup line, in London.  To our amazement - and our delight - we enjoyed acceptably good quality service, although with more noticeable latency (delay) than on a broadband to broadband connection.

Taking things to the extreme, I also tested Skype using a GPRS connection on a GSM cell phone.  This proved to be unreliable.  In one scenario, between Britain and the US, the cell phone user could hear the regular user perfectly well, but the regular user struggled to understand the cell phone user.  In another scenario, within London, the call worked acceptably well.  GPRS calling on a cell phone is unreliable and - unless you have an unlimited GPRS plan - is probably much more expensive than calling direct from the cellphone without using Skype at all.

Skype - the right product at the right time?

Whether a perfect product or not, Skype is gaining mass acceptance.  As an interesting measure of its success and growth, in a typical week, more people sign up as new users of Skype than all the subscribers, in total, for the largest traditional VoIP service (Vonage).

Skype says more than 150 million copies have been downloaded, and claims to have 50 million different users registered.  The number of active regular users is doubtless very much smaller, and it is estimated that about 5% of Skype's users have signed up for one or more of Skype's chargeable services.

I'm increasingly having people ask me if I'm on Skype, or talking about their own Skype experiences, or including a Skype identity in their contact details.  It may be, rather like previously happened to email and faxing, Skype is achieving a critical mass where it becomes necessary to have Skype, whether you like it or not.

While the imperfections in the product make it - to my mind and perhaps overly high standards - not well suited for business use, some 30% of Skype users are businesses rather than individuals.  And although I was joking with a friend that neither of us were about to use Skype in a call center environment, some call center operations do use Skype and report great success with it.

At the same time that Skype and other VoIP companies are announcing phenomenal growth rates, regular PSTN phone lines are dropping in number.  Annualizing the rates disclosed in Q2 2005 filings, the major telco's are not only shrinking, but are shrinking at accelerating rates.

Worst North American performer was Bellsouth, which is shrinking at a current annual rate of 7.3%, compared to 'only' 4.8% same time last year.  Within these overall averages are some much more startling numbers - for example, in Rhode Island, Verizon is losing residential users at an annual rate of 16.2%.

Much of this loss is due to people abandoning regular phone lines in favor of wireless service, but undoubtedly part is due to people switching some of their phone service from landlines to VoIP lines too.

Skype is still far from being guaranteed of success in this fast moving market.  Microsoft's Messenger program is now adding voice conversation support, and there are an estimated 165 million installed copies of Messenger - more than three times the size of Skype's user base (although it is impossible to know what percentage of the 165 million installed copies of Messenger are ever used).

Skype's opportunity is also its vulnerability - it is a surprisingly unsophisticated product that is relying on quickly getting critical mass, rather than having any hard to copy technological sophistication.  If one of the already huge companies come up with a direct Skype competitor that resolves the weaknesses in Skype, then Skype could disappear as quickly as it grew.


Skype is a great additional way of contacting other people, and being contacted by them, for people who are at their computer a great deal.  It is not so useful as a complete replacement for a regular phone (unlike the hardware based VoIP services).

It is easy to install and use, and inexpensive to trial.

If you're seeking to add some extra communication capabilities, Skype might make for a good alternative to buying another phone line.  And if you just want to play with VoIP, the free basic Skype service is a great way to so do.

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Originally published 19 Aug 2005, last update 21 Jul 2020

You may freely reproduce or distribute this article for noncommercial purposes as long as you give credit to me as original writer.

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