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Unbound Spiral: Supersonic Skype

February 24, 2004 10:45 PM

I've taken some flak recently for my "SkypeMe" middle name. Similarly I've had a few comment from different quarters that Skype will never be a real telephone company. With that comment I probably agree. My point is that Skype is leading us somewhere new.

From time to time my work involves me in scenarios and strategy. I tend to press the boundaries of the possible. By now if you are reading this blog you will know I also like the devils advocate and contrarian roles when appropriate. For that divergent thinking is part of the real role of scenarios for minimizing risk and maximizing learning. Through that lens Skype remains an early indicator. Like Napster and Kazaa (for that matter) it is a radical change in the way things operate.

Much of the debate around Skype focuses on the telephone industry rather than seeing something new. Skype may be the airlines and aircraft while POTS remains the train tracks and trains.

I also believe there are a number of lessons from presence to mobility that "old style" telecom providers fail to understand or aren't actively pursuing. Most of the marketing I see remains phone centric rather than about communications. The type of new and emerging functionality that people includes things like can I handle my voice mail while on a plane? Of course you can, just most people have yet to experience it. Similarly in a car. Concurrently I've been more interested in the opportunity for new information markets around Skype type functionality. The future of call waiting, caller id etc. Even 0900 style numbers provide opportunities. No much is new here. Just the opportunity to tie it into computing applications and the big screen. Skype's biggest risk and challenge may just be the exchange on the desktop that just accesses the lowest cost solution whereever I am using the highest quality sound.

Similarly I still get comments re MSN and Yahoo. What out Skype they are coming. From what I can see MSN has had more than six month to launch a voice centric version of their IM product, Yahoo the same. Both however have significant issues with increasing "voice" which I'd guess is much more expensive than brokering test messaging. Thus theyy have two problems. To compete with Skype for consumers and SMHO they must adopt a P2P approach and they must adopt a sound codec that is better than the one they currently use which is I think SIP compatible. Similarly they have to solve their NAT problems. MSN and Yahoo don't deliver on voice. Yahoo can deliver a fairly good but sometimes delayed webcam in conjunction with a clear Skype call even at full screen size.

This is perhaps not the ultimate in communication. It's also not a full telephone system. However Skype has started a battle that the telecom giants are not well equiped to handle. That battle is around sound quality. It's also a challenge for mobile providers. I know there are also other technologies out their that are better than Skype. I expect they will continue to improve. I also see headset operators whether Nokia or Motorola or HP adding WiFi and bluetooth capabiliies everywhere. Then we will see which "quality" level is preferred.

So.... Will Skype fly fast enough and high enough to break more than just the sound barrier?



Comments (7)

I wasn't trying to give you any flak, Stuart - I was just looking for a quick handle to identify you with. I was talking to Phil Wolff over the weekend and at one point he mentioned you by first name, but I was thinking he was talking about Stewart Butterfield and was confused, so he mentioned Skype to clear things up.

I'm still a Skype virgin myself...

Posted by: xian at February 25, 2004 8:10 AM

Stuart Skype Me Henshall :) :)

We’ve had Voice Conference Calling for a long time. Cheap too! At least compared to the burn rate of the other resources being consumed during the conference call. Five managers connected by PSTN burn $30 to $100 per hour in Telco costs while they burn $500 to $1000 per hour in salary and overhead costs.
So the opportunity to pool information or assets and resources isn’t moved far along the pipeline if Skype’s only contribution is reducing the Telco costs to zero. Those costs were already spiraling downwards anyway.
Where’s the value for business? Well, you might say now more people in the organization can participate. No, that won’t fly. Why? Telco costs were headed towards zero in North America anyway. Different story in Euro-land, which is one reason for Skype’s far deeper penetration in that market.
So Skype (in business) is not about free. Skype is, as you pointed out Stuart, about voice quality, and as both you and Doug Galbi pointed out, about enriched communications. We already had voice quality with the Telco’s. So that leads us to enriched communications. And Skype’s only enrichment (at this time) over POTS is IM.
Except possibly for the fact that Skype is part of my Desktop and can integrate with my work more easily.
Global conference call costs have not been driven downward at the same rate as North American costs. But is Skype makes a contribution here is doesn’t appear to show up in the “Users Online” data shown on Skype’s Start Window.
The social segment is different. So too is the SOHO business segment. It is very much about cost and, I would agree with you, also about voice quality.
I do not think if Skype won the social communication market (which basically didn’t exist at the old cost structures) and SOHO market in North America it would not show up on their balance sheets. Bringing the Telecom industry to its knees may warm many hearts, and make great headlines, but I do not think Skype deserves the credit.

Posted by: Bill Campbell at February 25, 2004 1:20 PM

"Oh, the places you will go"
Dr. Seuss

There are 203 812 Skypeheads online at the moment. Compared to (I can only estimate) probably somewhere in the 10’s if not 100’s of millions around the world using Yahoo, and MSN – and the countless others that have never clicked on the little green man in their IE Toolbar, to see what happens. It costs significantly less to convert an existing customer than it does to acquire a new one. I continue to use and promote Skype as it is clearly superior in every way to it’s running mates, but if the QOS was equal in MSN tomorrow (which with one phone call and a big check – it could easily be) or even in 6 mere months, which in internet terms is an eternity I realize, Skype will be relegated to a band of talented, and wealthy programmers and two Internet visionaries looking for a new apple cart to turn over.

You, I, Microsoft, Yahoo, can all purchase software and codec’s from Global IP Sound (the engine behind Skype’s compression and resulting amazing quality). Skype; has started something - whether or not it is “a battle that the telecom giants are not well equipped to handle” remains to be seen, check out the list of International Traditional Telecom companies that are adding this technology quickly and profitably to their already established and paying customer base.

I wholeheartedly agree, that Skype is rocking the boat, and forcing change in the telecom industry, where it will find its niche, what amazing new vertical market or industry it will create will be the most intriguing and compelling story to be told. It is a very big Sandbox, there is plenty of room for new kids on the block, and the shiny new toys they bring - for everyone to play with.


Don’t Type – Skype.

Posted by: Andrew Hansen at February 25, 2004 2:32 PM

First up Christian I know no flak was meant. I had a couple of IM messages last night kidding me about it which encouraged me to just use it tongue in cheek in the post. Obviously all this SkypeBlogging can get you a middle name. Follow Bill and Andrew's enthusiasm and try it out.

Bill and Andrew, these are great comments! Thank you. I'd like to see this world of "enriched communications" prosper.

While I agree with some of the economics eg it's the cost of the people on the call not the cost of the call, the real issue is the ridiculously easy way in which Skype conferencing is executed and thus virtual group forming can happen so much easier.

Concurrently the "always on" capability is yet to be valued. As you point out it is more integrated with your desktop and thus work process integration can be enhanced. Tends to suggest headsets and things too.

US participation rates are certainly lower than Europe and that's been clear from day one. However I think I'm correct in saying the US mobile users talk a lot more on thier mobile phones than the Europeans and Japaneese I think I saw data that suggested US minutes were four times Japan. So it may not be the cost of traditional calls in the US that is thwarting growth. Rather it may be that mobile usage and locations for conversations mean that the same level of demand is not there. WiFi PDA's might change that.

We are just at the edge of what can be done. Yep we probably could buy the codec from Global IP sound. That is only part of it. It may be worth exploring more the argument that Microsoft could simply buy it. I'm not sure it is so simple. For Microsoft to abandon it's current messaging system in favor of a Skype infrastructure would entail creating a new cloud and then getting everyone to download the new product. Those that didn't upgrade would not be able to talk to the old users and vice versa. If they turned off their central servers... who knows where all those users would go. They may also have some "encryption" issues etc. I'd really like to understand:

Could Yahoo, Aim, or MSN actually create a strategy that is compatible with absorbing a Skype like player? If so how would it do it?

Concurrently many of the mobile providers are starting to create alliances with these messaging systems. eg get AIM on t-mobile etc. They are also looking at bridging to WiFi. If a large mobile handset provider partnered with Skype and introduced WiFi how long would AIM last with my daughter? Somehow I think I know the answer.

There is a lot in play here. That is really the point. There is no one answer. What AT&T might do vs MS or Motorola or HP are all dependent on context and resources. We should however remember how small the team was that created the Alto computer and similarly Apple and also the first IBM PC.

Maybe Skype and iTunes can be put together....

Posted by: Stuart at February 25, 2004 3:54 PM

what I really don't understand is why skype is not getting into serious cross-platform development. Sorry guys, but leaving OSX and Linux out of the picture is simply not enough if you want to grow a customer base for a communication tool.

I have checked every now and then, but Skype keeps saying:

"Currently, Skype is only available for Windows 2000 and XP. Stay tuned for more information about other platforms."

come on... freaking Windows only?

Sorry. I am not going to change my OS to be able to try out a new P2P communication tool.

Posted by: sebastian Fiedler at March 5, 2004 11:03 AM

I am referring to an article by Shirky, Plan A ( Vonage strategy) and Plan B (Skype strategy)

"The only thing that might save Plan A from death by delay is evidence that users are adopting Plan B in large numbers, using the internet for voice applications completely outside the framework of telephony as we've known it for more than a century. We should all hope that happens, because if wide adoption of Plan B convinces the regulators and incumbents to acclerate their VoIP offerings, the users benefit. And if it doesn't, Plan B will be all we get, so we may as well start experimenting with it now. "

I really do not hope it will happen.
For once we have the chance to beat the Telecoms monopoly ( and there is much more than that) and it would really be stupid to hope that " they will accelerate their VoIP offerings".
It will be a cheaper offering of the same cheating they do everyday.

Skype is a nice way to have conversations among friends at no cost, a nice way to use the computer also for telephoning.

But it is not the nice way to say good bye to the telephone service.
After a century of using small devices like a telephone I do not think it is an improvement to have to switch on a computer, start a program, dial in a more or less complicated way ( not every body is an IT expert) and connect.

After a few decades of using a mobile phone, who is willing to wait to be home to call whoever he has to call?

Well, for sure this is not a thread.
Plan A offered a service similar to the existing one, but at a lower cost, more or less complicated, more or less working.
Plan B offers an amateurish way to call our own's friends.


I have a better solution, I have a PLAN C:

1) A mobile wireless IP phone which works within a covered range of up to 15 kilometers around an Access Point with a very good quality of voice.

2) An Access Point that can be shared among 90 users ( mobile phone users) and that can cover up to 15 Kilometers

3) One only Internet line for 90 people ( considering the consume of bandwidth up to 8 Kbits per call, with a DSL line you can have a good number calling at the same time.)

Hard to believe? I assure you it works and it works very well.

See my webpages and contact me


www.worldonip.com

patrizia@worldonip.com

Posted by: Patrizia at March 15, 2004 6:15 AM

I'd just like to add that I've been a skyper for only half a week, and I have been able to talk to my friend in Europe for the first time in the three years I've known him, as I have no long distance at my house.

It is quite awesome to see other people are making use of this Skype product as well and I most certainly enjoy being able to talk to my friends with it.

We had never even bothered with MSN or AIM voice before, but simply talked over IRC. I have tried AIM voice before and had both trouble getting it to work and issues with sound quality as well.

Posted by: philip bawn at March 31, 2004 8:10 AM