Fergus Cassidy

Many are called

EVEN during the stampede that became the dotcom gold rush, there were voices of reason. Those in search of a rich seam, they warned, should tread carefully. The safe money was in shovels and pickaxes. How true that was.

Back then, the internet appeared on the horizon like some undiscovered continent. Waiting to be conquered and its bounty enjoyed. Some people did just that but found precious little by way of reward. Certainly, no gold mine.

Yet that shouldn't have happened to Niklas Zennstrom, a smart thirtysomething Swede with a business and engineering degree to his name.

Zennstrom and his business partner Janus Friis, were the brains behind a file-sharing program called Kazaa, which remains one of the most popular internet downloads ever. Up to January 2004, over 314m copies have been pulled from servers across the world.

Kazaa uses peer-to-peer technology (P2P), which is shorthand for transferring files from one computer to another without going through a centralised one. It was a concept which was smouldering away for quite a while before Kazaa provided the petrol. To this day, the music and movie businesses are still trying to douse the flames.

In the ensuring battle to stop copyright infringement, the entertainment industry's first big victory was Napster. It was also a file-sharing program but the company had a faultline. It used a centralised database and once that was hobbled, the whole thing collapsed.

Into Napster's slipstream came Zennstrom's Kazaa. On a recent visit to Canada, his backward glance emphasised his innocence: "The architecture of peer-to-peer could be used for all sorts of things. I didn't think it could be used for music - people were using Napster for that. But it's just a tool, like a hammer or scissors. You don't know what people will use it for".

And boy did they use it. In their millions. If the figures coming from the record companies were true, then the children were loose in the sweet shop and Kazaa had to go.

In October 2001, he was served with a law suit by every record label and movie studio in the US. Three months later, Kazaa.com disappeared and Zennstrom along with it. He wanted out. Days later, the company was reborn. This time, though, it was as decentralised as the technology it was using.

A string of holding companies was set up in such a way that even Sherlock Holmes would baulk at the case. The footprints stretched from Estonia, Australia, Russia, Vanuatu, Denmark and a disused oil rig off the British coast.

Zennstrom sold his software to Sharman Networks for a pittance but at least he was finally out. Just as well, because the company became enemy number one of the record industry. Jerry Leiber, who wrote Elvis's 'Jailhouse Rock', said of Kazaa: "If we don't stop it in its tracks, it will become a monster".

Having dusted himself off, Zennstrom has got back on the horse and is ready for a second bite of the cherry. Along with his old colleague Friis, he's taking what they learned at Kazaa and applying it to another task. Now there are no sheriffs or posses to worry about.

The two men founded Skype Technologies and their software enables people to bypass the traditional telephone system using the same peer-to-peer technology and routing calls across the internet.

This time around there is an absence of innocence as Friis attests: "After Niklas Zennstrom and I did Kazaa, we looked at other areas where we could use our experience and where P2P technology could have a major disruptive impact. The telephony market is characterised both by what we think is rip-off pricing and a reliance on heavily centralised infrastructure. We just couldn't resist the opportunity to help shake this up a bit".

Skype joins a growing number of software companies who see in Voice over Internet Protocol (VoiP) a way of carving out for themselves a slice of the multi-billion dollar cake of global telecoms. Skype, however, is the new kid on the block but already it has shown remarkable growth.

It has been claimed that the test version of Skype has had over 12m downloads and Zennstrom revealed there were 5m users worldwide. "It is the fastest growing internet software ever, much faster than Kazaa" he said recently.

VoiP is at a very, very early stage of development. Hype surrounding the technology has been heavy of late, but the figures mentioned indicate that early adopters are attracted not only by the cost savings on telephone calls but also by the reputation of Zennstrom and Friis.

Whatever lies in store for Skype, disrupting sleeping telcos is not going to draw the wrath of the law. He has even received praise from Michael Powell, America's chief of communications regulating and son of Colin.

He told Fortune magazine: "When the inventors of Kazaa are distributing for free a little program that you can use to talk to anybody else, and the quality is fantastic, and it's free - it's over. The world will change now inevitably".

Zennstrom's rocky road from music to phone calls might now lead to the elusive fortune. If it doesn't, then two out of three ain't bad.