A scathing criticism of Skype, the new Voice over IP Peer-to-peer system from the KaZaA founders, was voiced in the Wall Street Journal last week in an article by Lee Gomes, stating that “Skype calls are peppered with frequent voice drop-offs, as well as all manner of clicks and pops and the call often ends for no good reason. A traditional phone call may not be any sort of audiophile dream, but at least it's reliable.”

The author said that Skype has no chance of becoming the new global phone network as its creators hope, because it is largely unnecessary with phone bills down to just $40 or so a month and discount international calls coming on the scene. The article went: “Free music. Now that was a great Internet deal. But free phone calls don't have quite the same appeal.”

Niklas Zennstrom, Skype founder, immediately hit back at the comments in a communication with Faultline: “Lee is comparing Skype, 8 weeks out of beta launch, with the traditional circuit switched phone companies who have been around since the T-Rexes (well OK for 100 years at least).

“I don't know how much people on average were spending on music, but I don't think it was as much as $40 per month as all Americans are spending on calling plans.”

His implication is that people who decided to download file sharing music were not even saving $40 a month, but they were happy to make the savings, so why not on phone calls?

“I also know there are millions of people who have relatives and friends abroad who would love not to have to pay for those international calls.”

“Gartner Group predicts that all calls in Europe will be internet based from the year 2020. I see a clear analogy of the shift from fax to e-mail with the shift from circuit switched phone calls to internet based phone calls. Today the fax is still around but lots of people use the email as their primary text/image communication system, and the fax is used when you want to send a signed document or something.”

When asked directly about the call drop offs and the quality problems, Zennstrom said, “We are in beta and the first priority is to deal with scaling and stability, secondly with audio quality. I am sure we will be able to improve the quality even more over time.”

The WSJ article did acknowledge that Skype may become the de facto standard for Internet phone calls and that it will no doubt get better in time.

In Faultline’s view Lee Gomes of the WSJ fails to understand how disruptive and discontinuous innovation works. The rules that have been observed through history are that you need to offer something half as good, for a tenth of the price. At least they’re the Faultline version of the rules, and Skype seems to fit in quite perfectly.

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