Accelerating Innovation

Unbound Spiral: What Will Tip the Old Phone System?

October 8, 2003 09:24 AM

What are some of the barriers Skype must overcome to tip the phone system? There are some STEEP barriers. It's by no means a home run. Skype is the most "disruptive innovation" so far targeting traditional telecom. Something like it has been on their radar for years. Like Napster and Kazaa are the worst nightmare for the RIAA --- Skype is is emerging similarly for telecommunications companies.

Why disruptive? What makes Skype so devastatingly effective? First adopt a sound system that doesn't require any backwards compatibility. No legacy. Better sound with lower cost. Just like moving from LP records to CD's. Ignore the established telecoms centralized regulated way of thinking and build it from the ground up. Ignore the centralized model of other VoIP startups and get going. Then redefine channels and access. Art Janke in a nice Darwin article asks "When will the tipping point be reached?"

Compared to music the barriers are different:
There is a barrier or investment required for using Skype that didn't exist with the launch of Napster. There was no cost of equipment to tip. You simply downloaded MP-3 files and began playing them within Napster. With the learning you may have gone out and bought a bigger disk drive, better sound card etc. However you got to do that after your first experience. By then you were already hooked.

Friends, and Initial Costs: The barrier to Skype's tipping point is higher. With free calls, that provides fun to begin, although I may need a headset and microphone ($15 - $25). Still there are no calls if you don't have friends. To really take off it will need a cost or social incentive. Recruitment isnít for everyone. Currently the beta search function is limited. The Skype Team also won't want to clog up the P2P system with detailed profiles. Thus clip-on profiles will need to be enabled between individuals and potentially connected to Skype via Enhanced Skype Profile Exchanges. Eg I provide the database, you are a member. You can search profiles and when you are both online I will connect you. Call this the blind date call example. Thus a better socializing opportunity than the current e-mail based systems. Keen is another example of this.

The Headshift Barrier. The computer is not a phone factor. Moving people to thinking about a new program that resides on their computer as the "glue" for integrating all their phone numbers, key contact details, communication handsets, messages, etc is too complex. Simply boxes that connect Skype to real phones will help with the learning curve. Then... video will revolutionize the experience. The glue will be social before it sets.

The Landline - Broadband trade-off. Skype must move us off landlines, integrate personal phone numbers, and provide improved protection from unwanted disruptions (telemarketers). Enabling anyone anywhere to call me on Skype from a landline will enable me to cancel my home SBC account. Vonage demonstrates that in some instances your current number can be reassigned. This then means you must have a fulltime computer on at your house via a broadband connection for your number to be available! Packaging this with clear communications and instructions is not a simple job. Bundling with cable suppliers may provide an interesting option.

First Experience : Connection difficulties, poor sound, learning to make it work and inadequate equipment can make a lousy first time use. We don't know very much about failed first experinces. However, knowledgeable people that say... "tried it" forget it influence others. Similarly we have comment imposters.

The Chat Hurdle Youthful IM'ers disparage the product for poor texting capabilities without ever experiencing or understanding opportunities for voice. These text centric individuals may be the hardest to convert and could become loud critics. The upside, Skype is an underdog trying to do something different. Provide the texting solutions and keep the advertising out.

Other possible barriers: Regulatory threats. Threatening letters from your broadband providers. Badboy or spyware associations. Spam calls, breakdowns in security or privacy.

While these are generic it will be worth watching the reasons why individuals become advocates.

What might signal tipping points for certain individuals. (without being able to dial a traditional phone number)

  • Their Skype buddy lists are more complete than their other IM clients. I use it as my predominant method for connecting and exchanging information.
  • When my business calls savings exceed 50% by value, rather than by number. Likely to have a large international component.
  • When the primary inquiries from my website come via the SkypeMe callto: tag.
  • Have purchased or connected permanently a VoIP telephone to an always on base computer and integrated an answerphone system.

    I'm sure there are more. Sometime in the next few days I'm also going to address the enterprise opportunity.

    In the meantime I find I am now a VoIP user watching a ridiculous debate. I don't use any of the traditional California VoIP provider services. I use Skype. I'm not a telephone operator, unless having multiple computers now makes me one.


    Techweb California to VoIP Operators: You're Regulated

    California's telecommunications division said this week that major VoIP providers, including Vonage, VoicePulse, SBC Communications, Net2Phone and Packet8, have been told to apply for telephone-operator licenses. The action is a disappointment for the VoIP companies, which had argued that they should remain unregulated because their traffic moves over the Internet.

    Where does this leave me? Next thing we know... we will have to apply for the equivalent of the old TV licenses that many countries apply.