Most Gizmo Project Calls Now Free

Skype competitor Gizmo Project, a free softphone-based instant messaging and VoIP service from SIPphone Inc. (see our review), has lowered its already low Call Out fee from roughly 1 ¢ per minute to . . . 0 &#162 per minute; for much of the world. The program is ALL Calls FREE.

The announcement, made yesterday, claims that Gizmo Project users will be able to reach more than 2 billion landline and mobile phones around the world absolutely free. And, unlike competitor Skype’s current policy of no charge for PSTN calls in the U.S. and Canada for the remainder of 2006, SIPphone touts its ALL Calls FREE program as permanent.

The free Call Out program applies to some 60 countries and territories, worldwide, but there are a few hitches. Calls to cell phones are free only in the 17 entities where costs for mobile termination are low. Here’s a list; scroll down to see the countries/territories where only landline calls will be free. Calls to mobile phones in those countries—as well as to countries not included in the aforementioned 60—will be charged at current Gizmo rates, which are listed here.

Another possible hitch is that the program is available only to “active” users—defined as “those people who regularly use Gizmo Project to make calls to other Gizmo Project users (on a PC) or to any landline or mobile phone.”

Speculation around the peer-to-peer VoIP community is that Skype/eBay’s free SkypeOut deal is aimed at boosting Skype adoption in North America, which lags behind that in Europe and other regions. On January 1, 2007, presumably, PSTN calls will return to their approximately 2 ¢ per minute rate, domestically.

Gizmo, by contrast, is dropping charges for the designated PSTN calls forever. This raises two questions: First, why is SIPphone taking this step? Second, how can they can pull this off and stay in business? (After all, free stuff is a business model that, although popular in the late 90s, proved to be unsustainable.)

A clue to answer number one is found in a statement from SIPphone president, Jason Droege: “This is a great reason for people to get their family and friends to make all their calls using Gizmo Project.” In other words, pumping up the user base—essentially the same thing Skype is trying to achieve.

While they don’t discuss numbers of downloads (as Skype does), SIPphone pegs its user community in the 1 million range—about one-third of those on Apple Mac.

But, can the company generate enough revenue from Gizmo Project’s remaining fee-based services, such as Call In numbers, Area775 services, fax, and other yet-to-be-launched features, to make a profit? That seems to be the bet.

If ALL Calls FREE succeeds in multiplying the current base several-fold, it might just work.

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