SkypeOut Rates Blow-Up

July 27, 2004

in Skype Journal

SkypeOut launches with rates way up versus the “beta” version. Some of the early adopters are hopping mad with more than one thread in the forum. Here is a comparison of the rate changes. This PR mistake are very similar to MT’s announcement of new license terms. The community was outraged there too. For my two cents:

  • The change in rates is just poor communication. The rate card was easy to find and well known for weeks. It’s not surprising that “we” thought these were real rates. For that matter I blogged the link here and promoted Skype based on the impact at at less than US 2 cents per minute. The only PR answer is for Skype to immediately credit all “early” users with outstanding credits with 50% more value. In good faith that is what people paid for. And just like the MT case you better listen.
  • The new cost strategy should still be put in context. The rates internationally are good however locally they are much less attractive now. I have a Vonage line with a 500 minute plan for $15 / month. That’s three cents a minute. Now they charge me extra for Overseas. So a call to New Zealand is effectively 9 cents per minute compared to Skype’s new rate of 3 cents. However Vonage does provide me with an inbound line. Skype minutes are also roll-over minutes with a 180 day limitation. My mobile minutes (four lines) effectively average out at 10 cents a minute.
  • I’d expect that SkypeIn’s DID direct inbound call system will now present some pricing challenges. The biggest single problem is getting people to either change their old numbers or close an old service and open a new one. It’s a hassle. For similar reasons to not changing bank accounts frequently we are are careful about our phone numbers. Skype may now be in very messy territory. We have our IM handles, we have our phone numbers, while Skype connected them conceptually first, the question is now can Skype retain that advantage and get there at the lowest cost?
  • The noisemakers above will not give up Skype for their PC to PC call quality is still unmatched by the old telephone system. It’s time that Skype said a little more about their audio quality. It’s more than a few tricks with good echo cancellation. Possible learning is that Skype still doesn’t have the leverage and the numbers to get the “rates” low enough. In users and potential paid users it is still smaller than Telecom New Zealand or some other small countries. Frankly I’d run some conjoint research on price points at this stage. Skype also needs some other reseach done quickly. Listening to the forums and bloggers won’t provide a balanced view. Todays pricing model is not “disruptive” enough at this point in time. That will take an edge of Skyper’s fanaticism.
  • Concurrently the thrust for PSTN interconnect has apparently impacted on innovation. Conference calls were an innovation, lots more could be done in that area. Similarly, audio quality still presents opportunities. The expansion to other operating systems is admirable but must be consuming enormous resources. It’s nice to finally have file transfer but we still don’t have a conference text channel (like IRC). I could go on. Concurrently enterprise plans remain very “secretive”. If Skype can really still move so fast then it is time to open up more dialogues. There are enough SME’s using Skype now to capture some interesting research.

    I remain bullish on Skype, however some of their strategies must change. In particularl rethink interconnect strategies, viral marketing approachs and “broader” PR communication methods. Through all this I’m sure they had a tough day today. We should really be congratulating them on 1.0 instead a combination of Slashdot and 1.0 events clearly brought down servers today adding to confusion. These quotes came from the forums.

    You should know that I was completely shocked when I found out about the rate change. Why shocked you ask? After all you have argued that it’s right there in the license agreement, indeed it did say Skype was in beta and that the service was subject to changes. The answer is quite simple but also quite powerful, at least in my humble opinion: I like many other longtime users trusted you. By “trusted” I mean that I, not even for a moment, thought that you would even consider raising the prices on average over 30%, especially without any explicit warning whatsoever. In fact I trusted your service so much that I recommended it to friends, family, girlfriend, various online forums, even my grandmother who lives across the ocean. Of course it is well know that :: View topic – A sad day for Skype fans

    The majority don’t buy the “subsidizing” line below. More likely one ITSP provided really aggressive rates and through testing they found that they couldn’t cover the world. Putting together the latest four party deal… meant higher rates although a better chance for connect quality.

    For example, they are about 90% lower than the price I would pay with fixed line telephony to call my brother in Singapore. We were quite explicit during the beta period in notifying that it’s a beta product and subject to change. In reality, we were subsidizing the cost for these early users == paying you to use SkypeOut, until we could work out the kinks.
    If you look on the bright side, our early beta users were rewarded by being there early. You can still decide if you think our rates are attractive. We don’t expect to get many new customers if you don’t believe that they still are. :: View topic – SkypeOut: How can I get my money back?

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