Skype may be good for something other than Internet calls. According to the Financial Times, the company is working on a peer-to-peer television service that could legally deliver videos to millions of users. Code-named ’The Venice Project’, the service will stream videos and encrypt videos directly from the content owners and Skype hopes this will bypass copyright issues that have dogged other video sharing sites.

The service will have hubs in Leiden, London, New York and Toulouse. Unlike, other major video sharing services like YouTube, the videos will be served from companies and Skype merely acts as a middle-man in the transaction. In contrast, Youtube, hosts the videos on its servers.

According to the Skype Venice Project blog, the first beta of the player client has been made and in the coming months better streaming and faster decoder will be implemented. There are currently 6000 beta testers and more are encouraged to sign up.

Skype hopes the Venice Project will launch sometime in 2007.