Verizon Opens Its Network to Skype Calling Service

By ROGER CHENG
Verizon Wireless struck a partnership with Skype Ltd. to offer the free Internet-calling service on some of its smart phones, the latest sign the biggest U.S. carrier is willing to sacrifice voice revenue to lure customers willing to pay for data services.



The deal, announced at a wireless-industry conference Tuesday, comes a few weeks after Verizon Wireless and rival AT&T Inc. dropped prices for their unlimited calling plans by $30 but tacked on requirements for data services for smart-phone users.



Most telecommunications companies have been against allowing Internet calls to run across their cellular networks, because a Skype call would use a customer's unlimited data plan rather than voice minutes.



"Where we see revenue growing is from data services, not voice services," said John Stratton, chief marketing officer of Verizon Wireless, adding that he doesn't view cannibalization of voice revenue as a "huge problem."



Verizon Wireless, which has 91 million subscribers and is jointly owned by Verizon Communications Inc. and Vodafone Group PLC, hopes the Skype application will spur adoption of smart phones with pricier voice and data-service plans, Mr. Stratton said.



The Skype app, which will launch in late March, will be made available to nine smart phones, including Research In Motion Ltd.'s BlackBerry devices and phones running Google Inc.'s Android software.



While Skype users will be able to use the program to make free calls, they will still need to subscribe to a Verizon voice and data plan. The carrier's cheapest monthly voice plan now costs $40 for 450 minutes, and a $30 data plan is required with any smart phone.



Skype has had a rocky relationship with carriers in the past. A similar mobile app for Apple Inc.'s iPhone, for example, can run only on a Wi-Fi connection and isn't allowed on AT&T's cellular network.



An AT&T spokesman played down Verizon's announcement with Skype, saying it does allow customers to download Internet-calling programs and run them on its cellular network. The spokesman said that AT&T had no objections to Skype's app and that Apple had rejected the feature, which drew the eye of the Federal Communications Commission.



Last year, European operators such as Deutsche Telekom AG wanted to prevent their customers from using Internet-calling programs on their smart phones, but the ban was later lifted.



"We're seeing a real change in attitude with carriers around the world," said Josh Silverman, chief executive of Skype, which is based in Luxembourg and owned by a group of investors including Silver Lake, eBay Inc. and Skype's co-founders.



One concern is whether a carrier will be able to handle the increased traffic from such a program. Verizon Wireless insists the program won't hurt the quality of its network.



"We will do everything to prevent that from happening," Mr. Stratton said. The program was jointly developed by the carrier and Skype to optimize the delivery of the voice traffic, he said. The companies' joint effort would be exclusive to Verizon Wireless in the U.S., he added.



Neither company provided specific financial details on the deal, but Mr. Silverman said Skype would make money from the partnership.



While calls to other Skype users are free, calls between a Skype user and a regular phone cost as little as two cents a minute, or $3 a month. Skype will likely share part of its revenue with Verizon Wireless.