What Will Tip the Old Phone System?

October 8, 2003

in Accelerating Innovation

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 isn

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