Skype over Verizon: Skype Becomes a Marketing Weapon in the Wireless Carrier Arsenal – The Prelude

skype_logo11[1] Full disclosure: This post was prepared prior to today’s press conference using information that was publicly available prior to the conference. In the second post I’ll discuss the service as announced at CES today.

When you can advertise “Free phone calling internationally”, they will come! In the CES interview with Skype CEO Josh Silverman, Josh makes the point about how Skype draws in customers by offering a free service that is easily adopted by consumers and then offering “premium” services, such as SkypeOut calling, to generate revenues. This model has led to:

  • over 580MM registered Skype accounts (probably 100MM are currently active)
  • over 12% of international long distance calling minutes are Skype-to-Skype calls
  • and revenues approaching $1B per year.

As mentioned in the recent CES interview with Russ Shaw, Skype’s VP & GM for Mobile and EMEA, Skype’s partnership with Hutcheson Whampoa’s 3 service in nine countries has delivered interesting carrier-friendly results from 3’s customers who take advantage of its free Skype-to-Skype calling:

  • 20% higher margin
  • 17% additional traditional voice minutes
  • lower churn rate
  • high ARPU (average revenue per user)
  • over 1 billion Skype-to-Skype minutes delivered in the UK since Nov. 2007

Results that should get all wireless carriers’ attention! And Russ did emphasize these results to reinforce where some of Skype for Mobile’s current activities and resources are being directed.

Setting the stage in the U.S. market for today’s Skype-Verizon announcement:

  • Verizon has a reputation as offering the best high speed (3G and faster) wireless data services within the U.S. and nobody’s complaining about their voice quality.
  • AT&T’s major strength appears to be its iPhone arrangements
  • AT&T’s network performance issues, especially with their data service, are well documented (even their voice channel failed me on my last two trips to the U.S.)
  • The major failing of the iPhone that impacts Skype for iPhone is its lack of multi-tasking capability
  • Skype has announced they will be making available Skype for iPhone running over 3G – a service that will only be available on AT&T for the duration of the current Apple-AT&T agreement
  • Verizon needs an offering and drawing card that will compete with AT&T’s forthcoming ability to offer a Skype-based service on the iPhone.

So it should come as no surprise that Verizon is announcing an agreement to offer Skype on several devices including the BlackBerry line and the Android phones they support.

The Service Architecture

Based on information that has come out over the weekend and content archived on this weblog, this service is modeled on an architecture similar to the iSkoot architecture used for 3’s service whereby data (Skype chat messages, presence and call signaling information) go over Verizon’s data channel but the actual voice calls are connected to the phone via Verizon’s (robust and readily scalable) voice channel. As a result:

  • Call quality is limited by the (3.7KHz) audio bandwidth of the voice channel (in particular, no SILK superwideband quality calls)
  • Verizon has no termination charges for calls to Skype contacts (or what amounts to being a Skype-to-Skype call – a key factor in making this service cost effective from the Verizon perspective)
  • There is no loading of Verizon’s wireless data network (and the associated backhaul demands) with the heavy demand that would be placed on it via a true VoIP client.
  • The resulting “Skype for Verizon” Skype Lite client on the BlackBerry and Android devices  has no support of calls via WiFi access points.

So the Verizon-Skype announcement certainly builds on previous Skype technology and business model experience; it will take advantage of proven and demonstrably reliable carrier voice and data services. I’ll have more in the follow-up post covering the actual announcement.

  • Skype Comes to Blackberry & Android With Verizon Partnership (readwriteweb.com)
  • Verizon to allow unlimited Skype calling over 3G starting next month (engadget.com)
  • Coming Real Soon Now: Skype for iPhone over 3G (voiceontheweb.biz)
  • Traveling in a Bipolar Mobile Mode (voiceontheweb.biz)
  • Skype: the “Unofficial” Personal Communications Software for the 2010 Winter Olympics? (voiceontheweb.biz)
  • Skype for Business: An Interview with Skype’s Matt Jordan (voiceontheweb.biz)
  • History Making Smartphone Skype Call During LeWeb Closing Session (voiceontheweb.biz)
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About Jim Courtney

Bringing over thirty years' experience in the sales, marketing and management of cutting edge technology businesses.

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