Last week Skype and TELUS Mobility announced an agreement, where Canada’s third largest national wireless carrier will be closely working with Skype for free Skype-to-Skype and low cost SkypeOut international calling. While Canadians can use Skype for iPhone and Skype for Android on any Canadian carrier offering iPhone and Android phones, this agreement represents the first formal agreement between Skype and a Canadian wireless carrier with value-added services.
To give some background, both TELUS Mobility and Bell Mobility were spinoffs of legacy landline carriers where TELUS covers British Columbia and Alberta while Bell covers Ontario and Quebec. Since their respective cellular networks commenced operations back in the mid-1980’s , both have expanded to cover the entire county for wireless services; in TELUS’ case they acquired a major Bell/Rogers competitor who covered Ontario and Quebec.
However, whereas Rogers, the leading national carrier has always supported GSM protocols, TELUS and Bell both launched their services using the CDMA protocols (a la Verizon and Sprint in the U.S.). The 2010 Vancouver Winter Olympics, where Bell Canada was the “official carrier”, was the stimulus for Bell Canada to upgrade their network to GSM-compatible HSPA+ service in November 2009.
But this is a large country, 90% of the Canadian population lives within 160 kilometers (100 miles) of the 6,000 km (4,000 mile) U.S.-Canada border. So the capital cost for a new network infrastructure, so long yet so narrow, runs up quickly. As a result Bell Mobility and TELUS Mobility partnered to build one 4G/HSPA+ network infrastructure to support the two retail operations. One ironic twist is that, at the time of the network’s launch in the fall of 2009, Bell and TELUS both launched an offering for the iPhone 3G S (and later iPhone 4) which already had support for HSPA+.
Launch of this network broke not only the Rogers Canadian monopoly on the Canadian iPhone franchise but also its monopoly on international roaming for visitors to Canada (since most of the world’s carriers supported GSM). There also occurred some legal and regulatory battles (Bell/TELUS vs Rogers) over the promotion of each network’s speed ; effectively they ended up in a draw. (Note also that Canada’s two legacy CDMA carriers were offering iPhone a year before Verizon could launch a CDMA-compliant iPhone in the U.S. market.)
From its launch in late 2009, TELUS has called their network a 4G 21Mbps network, with a speed increase to 42Mbps this year and plans to go to 4G/LTE “coming soon”. So they certainly have the data speeds required to support Skype calls over a data network using a native carrier-agnostic Skype client.
Under the leadership of CEO Darren Entwistle TELUS has been noted for aggressive, “outside-the-box” marketing initiatives that appeal especially to a younger demographic . The most recent example occurred earlier this week when, following release of a OECD report pointing out that Canadian carriers had some of the highest international roaming charges anywhere, TELUS came back immediately announcing they would be reviewing their roaming plans with a view to lowering roaming costs.
Upon reviewing the Skype/TELUS press release, along with responses to some questions I posed to Skype’s PR agency, here is how I see the positioning of the service:
- TELUS customers will be using Skype for iPhone and Skype for Android installed on the relevant devices via downloads from the respective application stores or via the web at skype.com/m.
- TELUS will be reinforcing the customer experience by providing enhanced customer support for TELUS customers using Skype on their smartphones
- Skype Credit can be purchased directly from the TELUS customer’s mobile phone with the transaction billed to his/her TELUS account
- A Skype edition LG Optimus Black phone will be launched in July by TELUS to give customers easy access to Skype through a pre-installed icon on the home screen, a detailed “getting started” guide, and Skype Credit to begin making calls to landline and mobile phones immediately
- TELUS customers will be able to make free Skype-to-Skype calls worldwide as well as use Skype’s Instant Messaging presence and chat features.
- TELUS customers will be able to make calls to landlines outside Canada (and mobile phones in countries where phone owner pays for inbound calls) using either Skype Calling Plan subscriptions or Skype Credit on a pay-as-you-go basis.
- Carrier data charges will apply when used over the 4 G network. TELUS recommends a Data Flex plan or Wi-Fi connection when making Skype calls (according to the TELUS website)
- The Android-based LG phone will support Bluetooth connectivity (not available with Skype for iPhone currently)
Here’s my take on the announcement:
- This is Skype’s first carrier arrangement involving carrier-endorsed support of the native Skype client on a mobile smartphone as compared to the carrier-specific “Skype mobile” arrangements with Verizon and 3.
- It’s a major marketing move by TELUS to associate itself with leading edge services without the need for any major capital equipment costs (such as “Skype mobile” gateway servers) other than those already planned for their 4G evolution.
- There are ongoing operations costs for TELUS involving marketing and customer support.
- Skype does not have to develop a carrier-specific application for these services
- Skype’s significant data requirements will drive demand for TELUS data plan subscriptions and ARPU when the customer is making calls, including Skype-to-Skype calls, from within Canada.
- For the supported smartphones Skype basically takes over TELUS’s responsibility for managing TELUS Mobility’s international calling with Skype revenues coming from Skype Calling Plan subscriptions and Skype Credits required to make international calls to the PSTN.
- One would have to assume the above two revenue drivers would incorporate revenue sharing between TELUS and Skype.
- Question: are there any Skype software royalties involved based on customer revenues?
- Will the LG Skypephone support Skype mobile Video that was announced for Verizon at CES 2011 or an equivalent service?
- When roaming internationally, it would be wise to turn off 3G/4G and only make Skype calls from WiFi connections in hotels, airports, restaurants, offices and other WiFi hotspots – which are quite prevalent in Europe from my own experience over the past two years.
- Is WiFi growing as a Stealth Carrier? Can it be a viable alternative to roaming charges?
- Skype-to-Skype messaging will certainly impact TELUS revenues for SMS text messaging services but Apple’s recent iMessage announcement will probably have an even larger impact on carrier SMS messaging revenues
- With no native Skype for BlackBerry application, TELUS’s Skype service will not be available to their BlackBerry customers.
One final but very important concern: will the supported phones have enough battery life to support this initiative? I have covered this issue previously with some suggestions.
And one irony: While there are no Canadian Skype Online numbers available due to a conflict between a regulatory issue and Skype’s past policies re e911 services, TELUS Mobility customers can now set up as many as ten Skype Online numbers in any of the 26 countries (U.S., U.K. included) where Skype Online numbers are available. Calling a “local” Skype Online number in those countries, an “expat” relative or overseas customer can reach a TELUS Mobility customer via Skype on a call that would have no termination charge revenue for TELUS.
Bottom line: Skype is once again being endorsed for its ability to be a marketing tool that attracts a younger “always-on” demographic seeking lower cost communications and new communications services. Skype is a service that has a low implementation cost for TELUS while taking advantage of their higher speed network, yet expands TELUS’s appeal to a country where international communications plays a significant role not only for business but also for the various ethnic communities that want to keep in touch with relatives and friends in their country of ethnic origin.
We look forward to following its actual implementation, especially the launch of the LG Skypephone and its feature set, over the next couple of months.