I wouldn't be too quick to put the blame on your connection speed.
Does the program lag when you aren't calling?
If the program lags without calling anyone, then it could be a matter of client-side lag.
This occurs when either your Processor or RAM/vRAM is overused by other processes while you are using Skype.
I use Skype quite often, and I notice that Skype is quite resource demanding for Windows Vista.
My processor (or CPU) is a single-core, and sometimes Skype can use all of my CPU power just to operate.
If you are experiencing client-side lag, I would recommend these 3 methods...
1.) You may have too many programs running alongside Skype, to close out of these programs press CTRL + ALT + Delete
When the screen changes, select the choice Task Manager and then go to the processes tab, and remove some unused processes. (Firefox is very CPU demanding as well)
If you want to open up Task Manager without using any keyboard shortcuts, just right-click on your taskbar and select the Task Manager choice from the menu.
2.) You may have to change some settings inside of the Skype program, this can be useful to remove useless emoticon animations and themes.
To find the options menu go to Tools > Options...
You should now be in the General tab in General Settings, from there you can change the visual style to Classic Windows (It's not as aesthetically pleasing, but it lessens the work on your graphics card)
Now find the Notifications tab, and go to the Notification Settings.
You can mess around with these settings, and they won't hurt your program, but I would recommend that you would untick all of these except for "Starts an IM with me"
Now find the Alerts & messages tab, and untick both boxes.
Now find the IM & SMS tab, and go to the IM Appearance tab
Untick the "Show Animated Emoticons" box
Apply all of these settings by clicking the Apply button, and then close out of Skype and then reopen Skype.
These settings are great for those with bad/outdated graphics cards.
3.) Upgrade your Hardware to run Skype smoothly.
This will need a lot of money (Depending on what you buy) and this could take some frustration, I don't have an in-depth tutorial on this, because all hardware parts are unique and requires certain motherboards to install.
If you are installing a new CPU or a new Graphics Card, then you must purchase a brand new motherboard (Or a new computer)
If you aren't experiencing client-side lag, then it could be his connection and not your connection. Skype requires all connections to be working properly to send/retrieve files and share screens and share faces through webcams.
Some people's connection speed can't handle Skype's demand, although I've never seen a connection speed unable to handle 2 people in a chat.
