Rewiring Skype

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When eBay bought Internet calling service Skype in 2005, Jeff Bonforte believed the company had made a serious oversight. The entrepreneur, who at the time was president of voice-over-Internet startup SIPphone, noticed that the $2.6 billion deal did not give eBay ownership of the core, peer-to-peer technology that makes Skype work so efficiently.

“’Insane’ was the word I used,” says Bonforte, who is now CEO of e-mail startup Xobni. Should the day come when eBay lost its ability to license the peer-to-peer technology, he predicted the company would face vast difficulties replacing it.

That day may soon be upon us. In a 10-Q regulatory filing on July 29, eBay disclosed that it’s in the process of building a replacement – an admission, many interpreted, that the company may lose its right to license the original technology in an ongoing court battle with Skype founders Niklas Zennstrom and Janus Friis. EBay has sued their company, Joltid, to prevent them from ending the licensing arrangement.

So with a planned public offering for Skype in 2010, lots of people want to know: How hard would it be to rewire the entire service?

“The complexity of the change is hard to overestimate,” Bonforte says. “They could just screw it up – which is completely likely.”

The Joltid peer-to-peer technology Zennstrom and Friis invented moves voice signals from one user to another by distributing the workload to its network of machines around the world. “Is it possible for them to get rid of Joltid and put a new structure underneath? Yeah. But it’s super non-trivial,” says Bonforte, who also helped create voice-recognition technology for Yahoo!

It wouldn’t be the first time Skype has moved around major pieces. In 2006, eBay acquired Camino Networks to replace the technology it licensed from Global IP Solutions, which enabled good voice quality on the service.

If eBay succeeds in building a worthy replacement for Joltid, it will have the daunting task of upgrading software for the 480 million people who use Skype. “I assume they would ask every user to upgrade to a new client,” Bonforte says. “If they’re forced to do it in a day or week or month it’s incredibly difficult and you run the risk of losing 10% to 30% of your user base over night.”

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