In case you’ve been underwater this week or something, Skype’s been in the news a a bit. With the big push from its purchase by eBay for a bubble-like figure, the “Skype is going to destroy all telecoms, especially mobile” line has been getting a lot of play. As I’ve been saying for a while, Skype and mobile isn’t a big deal. But this week, The Economist leads with “How the Internet killed the phone business”. That’ll probably shift some magazines, but they’ve got it all wrong, and Tomi Ahonen does an incredibly thorough job explaining why.
Tomi hits the nail on the head with his arguments of why Skype over a mobile data connection doesn’t have mobile operators shaking. What they have to worry about is Skype being used as a substitute, not a replacement. People will substitute Skype for standard mobile service on expensive calls — international and roaming calls, for instance. But many of the charges for these are already inflated well beyond margins acceptable to an operator, and the inherent advantage of a mobile phone over Skype — mobility, and mobility in a size more acceptable than a laptop with a data card — will still allow for some premium price. Skype is nowhere near being a replacement for a mobile phone, and it’s doubtful it will ever get there.
Skype is not replacing my mobile phone, it is my office phone when travelling overseas.
From most hotel rooms, I can call any acquitances worldwide.
“doubtful it will ever get there”?? Let’s set Skype aside as a particular VOIP implementation, but why won’t VOIP over a handset with a decent always-on connection (300k/s?) take over on mobile the way it is on DSL? Admittedly, this quality of mobile network is years away but easily forseeable.
Thanks for the comments, guys.
Scott — I was speaking here just about Skype, in response to the stratospheric level of hype surrounding it at the moment. For VoIP as a whole, anything that takes off will be carrier-supported rather than something done in an effort to route around the carriers. Not necessarily for any technical reason, but because carriers will make it so, probably via pricing. Cheap, flat-rate data plans are the exception rather than the rule around the world, and unlike with wired ISPs, mobile carriers have a history of blocking access to things they don’t like.
Carlo,
Thanks for the post. I was afraid that the industry was about to plunge into dotcom-era groupthink.
And you (and vandromme) hit the point - Skype’s value proposition has been the high cost of international roaming and international calls.
In other words, we have 54 million Skype users because of arbitrage and few things else. These are users who would prefer the functionality and PSTN interoperability that fixed and mobile telephones provide…albeit at a lower cost.
In the mobile environment, Skype presents a kludgey work-around to unreasonable tariffs and roaming fees. It’s regrettable that cellular technology works so well while the tariffs so clearly don’t.
Hi Russell, Carlo, Vandromme, Scott and Daniel
Thank you Carlo for mentioning my original posting. I’m stuck here in Berlin this week as I chair the big mobile-video-TV conference (and run the full-day workshop tomorrow), so have not had much of a chance to join and comment.
My posting seemed to touch a nerve and got a considerable amount of interest and various comments - such as a dozen replies at our blogsite. I will blog an update next week and collect the various comments, when I have the chance to do so. Obviously I’ll include this blog and these comments..
For you Vandromme, Scott and Daniel, let me comment briefly on a few points right away.
Vandromme - on the hotel/Skype opportunity - I would assume you will still put in some roaming traffic when you are say at the airport or running late waiting for a cab, etc, as you run your errands around town in the other country, and have urgent needs where you cannot wait for the phone in the hotel room? And obviously any calls (and text messages) you receive on the mobile phone are equally profitable traffic for the mobile operators. I agree that is a good opportunity for Skype, and believe you agree with me that your example won’t “kill mobile telecoms” as the Economist claimed, ha-ha..
Scott - I totally agree with Carlo’s reply.
Daniel - I also agree, and offer this bit of (optimistic) hope for us all - competition will bring about reasonable price levels. The vicious price wars seen in Hong Kong, Denmark and Finland lead the way to a much more user-friendly level of prices on mobile calls, text messages etc. In that way the price pressure from Skype is most welcome to the whole industry. I do personally believe, that for MOBILE operators, Skype is a total nuisance factor, while the real commercial threats come from MVNO’s (Mobile Virtual Network Operators ie Virgin in the UK, Telmore in Denmark, ESPN in the USA etc) and mobile number portability. When these happen in any market we will see dramatic corrections to the ogercharging that the industry is notorious for. Currently the MVNO effects are just starting to be felt in the UK, Sweden etc, so those effects are spreading..
PS if you are interested in very high level discussion and debate on mobile telecoms, at a discussion board free forever, with truly world class experts, do join us at Forum Oxford. Its website is http://www.ForumOxford.com and do bring your colleauges as well.
Dominate !
Tomi Ahonen