There's been lots of buzz today about Skype's decision to offer free calling to US and Canadian phone lines through the end of the year. There's plenty of speculation about why they would do this -- from increasing their usage in the US to better competing with some of the new entrants, like AOL. However, the price of free shouldn't really surprise too many people. It's the obvious end result of the price war we saw breaking out last year. At the time, we noted that anyone trying to battle on price is going to lose out, because the price was going to become effectively free -- as it now is. The real trick was to focus on allowing people to do something new and different, which they couldn't have done before -- getting away from the price war aspect and into adding value. While this new move is supposedly only through the end of 2006, the odds can't be too high on Skype ever bringing back fees on these types of calls. When you're in a price war, raising fees isn't an option. However, a much more interesting angle to this move might be the time with respect to the up and coming Vonage IPO. Given existing reports that Vonage is struggling to find a market for their shares, it's quite possible eBay/Skype timed this little announcement to knock a few more dollars per share off the eventual IPO price.
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