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Yahoo launches instant message phoning

Yahoo Inc. on Tuesday said it is launching a service in the United States that lets people make phone calls through the company's instant messaging software.
/ Source: Reuters

Yahoo Inc. on Tuesday said it is launching a service in the United States that lets people make phone calls through the company's instant messaging software.

Available in several other countries since December, the service allows people to make calls from their computers for 2 cents a minute or less to the top 30 national phone markets, including the United States.

The "Phone Out" service also allows calls from computers to regular phones at varying rates to a total of 180 countries.

Using instant messaging for phone calls is one of the latest ways that technology companies are finding cheaper ways to allow people to talk all over the world without relying on traditional phone networks.

"Right now the competition is just about cheap voice calls," Forrester Research analyst Maribel Lopez said.

The move also attempts to undercut rates offered by Skype, a similar service offered by eBay Inc.

Yahoo Messenger with Voice rates average between 20 percent and 30 percent lower than Skype to many major markets outside the United States, according to a comparison furnished by Yahoo.

Tests in the initial five countries where the service launched proved more successful than anticipated, especially in France, said Yahoo Vice President of Communications Brad Garlinghouse, where strong demand for both Yahoo Phone In and Phone Out services occurred.

Phone In allows customers to receive calls on their computers from regular and mobile phones for $2.99 a month, or $29.90 a year.

Yahoo's service is one among a growing list of competitors, including Time Warner Inc.'s America Online as well as Microsoft Corp.

While initially the focus is on offering cheap phone calling for computer users, the battleground should quickly shift onto mobile and cordless phones, analysts said.

Toward that end, Garlinghouse said Yahoo has struck phone partnerships with headset maker Plantronics, VTech, a maker of USB handsets, and Siemens AG, a big maker of cordless phones.

Attracting and retaining mobile phone customers also is something Yahoo, with its ties to major U.S. and U.K. carriers, could use to distinguish itself from Skype.  "Realistically, most of the IM services all look the same right now," Lopez said. "A lot of it has to do with who do you have the relationship with, whatever IM you may have."

But Garlinghouse stopped short of saying when Yahoo Messenger might feature on mobile phones: "We have not yet announced any relationships to Yahoo Messenger with Voice onto a mobile (phone)," he said.

In response to consumer complaints, Yahoo has dropped X10, the previous provider of software used to control sound quality, and has signed up Global IP Sound as a supplier instead.  The move brings Yahoo's audio quality exactly in line with rivals AOL, Google and Skype who rely on Global IP Sound themselves.

Yahoo has also added an unobtrusive advertisement at the bottom of the Yahoo Messenger window. By contrast, America Online often features a blinking ad at the top of its AIM service.