Yesterday long time acquaintance Andy Abramson put up a post Skype on Three-Me Too, Me Also, No Longer Me Different where he states “Now 3 no longer has the same Skype service in the UK…” and concludes with “…. now Skype is back to being just a IM based calling service online with a few hooks to the PSTN”. I beg to differ.

Andy is talking about 3’s Skype service that was launched in late 2007 using a hybrid solution that allowed IM and call signalling data to be handled over the data channel while the actual voice call went over the carrier’s GSM voice channel. It provided a way to make free calls to Skype contacts worldwide while using SkypeOut for calls to the PSTN outside the home country. In fact I was on a 40 minute call with a 3 user on the INQ phone earlier today; however it’s lifetime as a service appears to be coming to an end.

Skype on 3 also was significant in building a customer base for 3 who was a fledgling 3G service trying to enter a U.K. market dominated by somewhat larger players. At the time all the reviews were positive; it was well received by a younger demographic keen to expand their social networking circles. Initially the service was offered on “brew”-based 3 Skypephones; later it also became available on the “brew”-based INQ phone with its social networking features. However, for infrastructure It did require “gateway” servers using iSkoot’s software that had developed this protocol. And, as pointed out in an iSkoot presentation at the initial eComm 2008 there were royalties paid to both Skype and iSkoot associated with the monthly subscriptions involved. From the carrier perspective, the economic key to providing this unlimited calling service was that Skype-to-Skype calls had no termination charges as they go direct to the end user contact without any requirement for termination by another carrier.

In the spring of 2010, Verizon launched its Skype mobile service using a similar protocol to much fanfare. Skype’s carrier-specific arrangement with Telus was very different with respect to the services offered, especially the Skype client and the associated Android phone.

But times are changing; the key for addressing these changes is how 3, working with Skype, can make a transition that keeps their customer base while offering Skype calling through alternative arrangements:

• Brew-based phones have been outsmarted by smartphones from Apple, Android and RIM. I would imagine today’s demand for an INQ or 3 Skypephone has diminished to a level that does not encourage further manufacturing.
• Skype has since launched full Skype clients on iPhone and Android phones, offering not only chat and voice but also video calling.
• Not only do these clients  use the data channel of wireless carriers for voice and video but they also support Skype’s SILK codec for optimum voice quality.
• Data plan rates have come down by orders of magnitude from charges four years ago; the launch of iPhone helped drive these down.
• There is carrier and Skype overhead in running the iSkoot servers at 3.
• I would imagine, partly based on some anecdotal information, that many of 3’s customers who had 3 Skypephone and INQ phones have migrated to other phones. While both iPhone and Android phones are market players in the U.K. that same youth demographic actually has been strongly attracted to BlackBerry and its BlackBerry Messenger feature.

The bottom line is that the entire mobile market has evolved and 3’s initial Skype calling service has been left in the dust. Skype says these services are still operating in U.K., Australia and Ireland, probably due to the current size of the user base yet they will go away in the near future.  However, at some point I would imagine 3 would have to be working on a strategy to phase out its initial Skype service and transition their customers to newer platforms.

As for “No Longer Me Different” it is too simplistic to say Skype only offers IM and voice services duplicated by others. From both Tony Bates’ post, Tony Bates Weighs in on Microsoft’s Acquisition of Skype, and the accompanying infographic, expect to see a heavy emphasis on Skype’s video calling where there has been no duplication that combines the available resolutions (VGA, HD), frame rates (30 fps, 22 fps) and minimum network upload speed requirements by any other service provider. Of course there is also the other strength of having over 170 million active users that remains a key differentiator.

While 3 has definitely demonstrated the demand for Skype services on mobile platforms, both the market players and underlying wireless carrier infrastructure have changed over the past four years. The questions that arise include:

• How long will Verizon continue with its Skype mobile offering? We have already seen Verizon’s plans for offering Skype over its LTE network using Android phones where the focus was on video calling.
• While Verizon’s service could be replaced with Skype for Android on its Android phones, what would happen to its BlackBerry customers who would not have a native Skype for BlackBerry client?
• Can Skype address the battery drain issue on both Skype for iPhone and Skype for Android to provide users with the same user experience as Skype mobile in terms of recharging frequency?

It’s easy to want to position a perception that other players can be competitors of Skype; however, the real challenge for MicroSkype is how to build a business that justifies a $8.5B purchase price, not how to skirmish over services whose usefulness and viability has been overtaken by the evolution of the market participants and carrier infrastructure.

Full disclosure: the author has made the only 3 Skypephone call on the Rogers network back in early 2008. Ten minutes cost me about $100 as Rogers did not have an iSkoot server available.

During my recent interview with Russ Shaw, Skype’s VP and GM for Mobile, he emphasized Skype’s focus on having a true Skype user experience when it comes to supporting Skype on mobile devices.

What is meant by a “true Skype user experience” on a mobile device? Some examples, based largely on my own experience with several applications that support Skype via a mobile device:

• Find a person in an address book; press the “Green” Call button on the device and have the option to call via Skype or SkypeOut with a single click.
• Ensure access to ALL your Skype contacts with no limitation on the number of contacts displayed on the device
• Search for, and add, new contacts
• Support for Skype Contact groups
• Access and manage Skype voicemails
• Ensure that Group Chat threads are maintained on a mobile device; whereas many attempts at supporting Skype on mobile result in losing the “group thread” aspect of a Group Chat.
• Easily sign up for a new Skype account and manage Skype Credits
• Support for call forwarding (to three Skype ID’s and/or numbers)
• Chat history and call history log
• A consistent call quality
• and many more

Now that Skype is becoming mainstream on mobile via Skype for iPhone, Skype mobile^TM over Verizon and the recently released Skype for Symbian where these and many other Skype features are fully supported, Skype has decided to remove download access for two older Skype on mobile offerings: Skype Lite and Skype for Windows Mobile.

So what happened? According to Skype’s FAQ on Skype for Windows Mobile their crime was “…. Skype Lite and Skype for Windows phones were not offering the best possible Skype experience”.

• Skype Lite served as a beta product for building expertise with the architecture and user experience that is now about to be implemented by Skype mobile over Verizon. But Skype Lite, as offered, had no formal carrier support. However, a key business aspect of this architecture is how it can be used to allow Skype to be adopted by carriers such that both Skype and a carrier partner win. And, frankly, I doubt many were using Skype Lite as it really requires:
  • carrier support at the Skype-PSTN gateway inherent to this architecture to provide the robustness and scalability required to ensure consistency of both call completion and call quality.
  • the hardware and intelligence resources of a smartphone to run reliably
• Skype for Windows Mobile – dropping support here is simply a reflection of the market statistics where iPhone, BlackBerry and Android have become the major players in the smartphone market, especially in North America. Its operation over carrier networks were a gamble; it was a battery hog and did not offer a consistently reliable voice calling experience. And the drain on Skype developer resources to continue support simply would take away talent required to support platforms with broader market acceptance. Maybe a review of this decision is in order once the recently announced Windows Mobile 7 becomes available down the road.
• As for Nokia, still the world leader in smartphone devices sold, Skype recently released Skype for Symbian where one gets a complete Skype voice, Instant Messaging (presence and chat), SMS and file transfer experience over both 3G and WiFi using a VoIP client on the device. (Warning, when using Skype for Symbian over 3G, ensure you have a data plan that will not clean out your wallet in one or two calls. )

Going Forward: So what are the options for Skype on mobile:

To further enhance the user experience, three other factors come into play:

• Ideally a Skype application on a mobile device allows multitasking such that IM activities (presence and chat) are being handled in real time in the background while using other applications on the smartphone. Skype for Symbian provides this experience while it has been highlighted as one of the key features of the forthcoming BlackBerry and Android Skype clients for Skype mobile over Verizon.
• Battery Life: while providing higher speed data services both 3G and WiFi have tendency to drain batteries more rapidly. These are issues that are also being addressed in Skype over Verizon client; this is especially easy to execute on BlackBerry with its API’s that facilitate battery management.
• Use of superwideband Skype SILK codec: this really requires a full VoIP client that supports SILK. The first mobile Skype client to support SILK will be the next release of Skype for iPhone.

Bottom line: Skype has set new performance and user experience standards for its supported use on mobile smartphones and handsets. Recall that Skype’s initial adoption on PC’s resulted largely from its straight forward ease of installation and configuration; they are now looking to replicate and enhance that ease-of-use experience in the rapidly expanding mobile smartphone space. And, finally, it appears that we can look forward to additional carrier agreements, modeled on the 3 and Verizon experience.

Update: Skype Journal’s Phil Wolff, Orphaning Skype for Windows Mobile users shows Leadership:

Practicing product management sometimes feels like raising livestock. We have great hopes, spend time nurturing them, and get the most out of them during their productive life. When that productive life is over? Take them to the slaughterhouse and kill them. Make room for the next generation.

Update, March 3, 2010: Say hello to Skype for Symbian – now available via the web or the Nokia Ovi store. Includes video interview with Mark Douglas, Product Manager for Skype Mobile.

Update, March 6, 2010: Jason Harris over at TechCraver has been making multi-party Skype calls from his Nokia N900

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At CES 2010 last month I had the opportunity to record interviews with Skype CEO Josh Silverman as well as Russ Shaw, Vice President and General Manager of Skype Mobile and EMEA, and Matt Jordan, Enterprise Business Development Manager.

In this second interview Russ Shaw covers a wide range of questions about Skype on different mobile phones, the business model that complements wireless carriers’ goals and other challenges as Skype executes on its mobile component of “Skype Everywhere”.

In the first segment Russ discusses revenues from Skype for Mobile activities, execution on the Nokia agreement and the Sony Xperia, the challenges of working in the mobile ecosystem and carrier partnerships. Russ emphasizes that Skype for Mobile’s main goal is to get usage on as many mobile devices as possible as part of the Skype Everywhere goal.

In the second segment Russ discusses Skype for BlackBerry (announced last spring but still running a beta trial), their learnings from the beta and how to ensure a positive user experience. He then goes on to explain how Skype can provide a carrier partnership business model that, based on Skype’s experience with 3, can be a complement that builds a wireless carrier’s overall business. He then provides an analogy of how O2 used a freemium model to build their business around free offerings of music; free Skype-to-Skype calling is the basis of a freemium model for carriers. We go on to discuss Skype for Android in the next segment. This is followed by asking Russ to sum up what’s ahead for Skype on mobile smartphones.

But then I ask one closing question that would really support “Skype Everywhere” in a very common user situation; I can only supplement the discussion by pointing out that, when I get into my car, a Bluetooth-enabled BlackBerry is on my belt (with my Otter Box Defender case). And, during the discussion, Canadians will learn about one more Skype service coming soon to Canada.

Bottom line: Is 2010 the year we can access our Skype contacts worldwide from the majority of smartphones? How many carriers will really catch onto the “3” business model and adopt Skype as a formal offering? And will I be able to get into my car and simply say: “Call Russ Shaw on Skype” to make a hands-free Skype call from my mobile smartphone?

Update: As mentioned above Russ talks about the success with 3 using Skype and the Skypephone. Just prior to posting I learned that 3 has now logged 1 billion minutes of Skype-to-Skype calling. In their summary notes 3 states also that “Over 2m people use internet services like Skype on 3” out of their 4 million active UK customers. (BTW, this is not the only story I have heard about how Skype is helping to maintain communications with Haiti; I have seen a few Skype video calls as television interviews as well; probably makes for another story.)

Of interest: Russ has authored an article at Connect World, Mobile operators should co-operate with application and content providers to take advantage of the mobile Internet boom, where he discusses the  issue of mobile operators working with VoIP providers to build their overall business where he supports the success with 3:

There is already some evidence that the entire discussion is based on a misconception, and that, in reality, using the Internet to make calls does not cannibalize the revenues of operators. Some operators, like Three in the UK, have already changed their business model. They are challenging their competitors by partnering with a software company, offering a popular application that allows mobile VoIP calls at no extra cost, providing their customers with a very tangible extra value and comprehensive user experience by integrating the application into a range of mobile handsets. As a result, the group of customers using these services generate 20 per cent higher margins than non-users, voice revenue being a key contribution to this. A survey undertaken in August 2009 revealed that users of this application used on average 17 percent more traditional voice minutes than non-users. Next to this, a comparatively lower churn rate and higher ARPU (average revenue per user) was one of the positive outcomes as well. [Author's bolds]

Other Skype executive interviews from CES 2010:

• Skype for Business: An Interview with Skype’s Matt Jordan
• A Conversation with Skype CEO Josh Silverman

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Hutchison-Whampoa’s 3 service in the UK has been the pioneer in offering Skype access and other data-based services, such as SlingPlayer, at low cost. For as little as £10 per month, one could have almost unlimited Skype calling and text messaging on the Skypephone and other selected mobile smartphones. Already 3 has said they are delivering over 1.5 million minutes of Skype-to-Skype calling per day. However, earlier this week 3 announced they were pushing the envelope for free Skype calling even further.

Effective May 1, 3 subscribers will be able to purchase a special 3G SIM card which will allow the user to download Skype software and start making calls to Skype users worldwide with no minimum monthly payment obligations. Come summer 2009, 3 will expand the availability of this offer; from the same press release:

During the summer, 3 will expand its offer making it possible for anyone with a compatible unlocked 3G handset in the UK, to take advantage of free Skype calls, whether or not their phone is from 3. Anyone that wants to talk on a mobile for free will be able to use a Skype-enabled 3 SIM to make and receive totally free Skype-to-Skype calls and to use Skype’s instant messaging (IM).

Basic cost of the SIM will be £1.99; revenue will be generated via associated pay-as-you-go or 3’s other mobile phone services contract offerings. In addition new subscribers will have to purchase one of the supported phones, such as a Skypephone 2 (or, later this year, a new Skypephone 3 which is speculated to have a QWERTY keyboard).

According to 3’s website, their focus from the beginning has been to provide services built around their purpose-built data network using the HSDPA protocol. And, of course, any VoIP-based service requires a high speed data network. However, questions remain:

• What will be the impact on handset battery life? This has been a major factor hindering the provisioning of VoIP over 3G networks.
• Will this service be available to 3’s UK customers when they are roaming in other 3 countries, such as Austria, Denmark, Italy, Sweden and Ireland?
• Which smartphones will be able to take advantage of the expanded offer coming in the summer? Does this mean i can bring my BlackBerry to the UK, buy the 3 SIM, and have free Skype-to-Skype calling while in the UK (or even other 3 countries) and using 3’s service for other calling, messaging, email and browsing requirements?

A hint of 3’s business reasoning is given further down the press release where they provide some information on existing services:

3 UK has found that regular Skype users:

• Are less likely to churn than non-Skype users
• Use more traditional voice minutes than non-Skype users in addition to calling their Skype contacts
• Use Skype IM, but also send more SMS than non-Skype users
• Are more likely to browse the internet on their mobile
• Are higher margin customers
• Are twice as likely to access social networking sites as non-Skype customers

In addition, with the support of SkypeOut calling from 3’s various Skype-enabled phones, one can expect that 3 will share with Skype revenues resulting from SkypeOut minutes generated by this change in services.

3 is also lobbying within the EU for reduced termination charges and “fair pricing for roaming”. In practice they are really pointing out, very pragmatically, that a wireless carrier can generate significant customer recruitment levels, satisfactory revenues and improved ARPU when adopting Skype support with properly structured services.

Which raises a cost advantage of 3’s obligation-free Skype-to-Skype calls and chat messaging: there are no termination charges involved. Skype’s secure peer-to-peer technology has essentially eliminated the need for termination charges along with the associated business development, call record tracking and billing infrastructure costs.

At last fall’s Mobilize 08 Conference organized by GigaOm, 3’s Frank Meehan, Director & GM, 3G Handset and Application Group, stated (hat tip to Om for the reminder):

The Skype phone makes us more margin than any other phone in pre-paid with the exception of the iPhone. About 65 percent of the UK market is prepaid and only 5 percent of those are using data. Smartphones are not as relevant. We also have a massive churn in prepaid in all markets where prepaid exists. So we basically told people, if you spend 10 pounds a month and top it off every month, you get Skype for free. That’s driven incredible loyalty to the device. We have a huge level of top-offs and we’re seeing growth on voice and text on those devices.

3 is certainly providing wireless carrier leadership in the adoption of Skype as a mobile accessible service, demonstrating that there is a business model for the wireless carrier that not only drives subscriber recruitment but also can generate increased ARPU (and revenues) while lowering the overhead costs associated with supporting international calling. Would it be fair to also say that it has the potential to drive down international roaming charges?

Other posts:

• GigaOm: GigaOm: 3 of UK Marries Itself to Skype; Shakes Up the Mobile Market
• Andy Abramson, VoIP Watch: Skype Winning With 3? Actually It’s 3 Winning With Skype

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I follow several forums about Skype, for instance at LinkedIn and on eCademy. Recently I have noticed a thread on the LinkedIn Skype for Business Group asking about using Skype without a PC. While eventually I intend to have more detailed information in response to such a question in the reference content on this site, let me summarize what is available as of today. The sales channels for these products are largely through the Skype Store (which is country-specific). Unfortunately several players who had good offerings have abandoned their Skype hardware offerings over the couple of years; however, we are starting to see the emergence of new devices.

Mobile Phones

Update: March 1, 2010: Access to Skype on mobile smartphones has evolved to several platforms; there are several posts that provide an update to what is stated below:

• Skype for Mobile – Now Focusing on a True Skype User Experience includes a summary table of options, as of March 1, 2010, for running Skype on mobile smartphones.
• Skype for iPhone: Now Legally Available for Canadians

Update: May 30, 2010: Skype for iPhone now works over GSM 3G/HSPA+ networks:

• Skype for iPhone 2.0 Released: 3G Skype-to-Skype Calling to Require a Fee
• Skype for iPhone 2.0: The End User Experience
• Skype for iPhone 2.0: The Commentary and The Reality

Obviously the most popular is Skype for iPhone. With over 1 12 million downloads since its introduction in late March 2009 earlier this week, the major caveat is that you need either an iPod Touch (with a microphone accessory) or iPhone. In both cases you also need to be at a WiFi access point to take full advantage of Skype’s voice and IM features; however, you can also use Skype IM (presence and text chat) on the iPhone using a carrier’s 3G or 2G/EDGE data plan (but not voice). Currently Skype for iPhone is not available in Canada pending resolution of a patent licensing issue. Skype for iPhone does require that the application be open in order to received messages and Skype calls.

Skype Lite for Nokia has been replaced by Skype for Symbian.

Skype has also been developing Skype Lite for a wide range of Java-enabled phones, including the Nokia N- and E-series phones. Again one can use Skype IM (presence and text chat) for those phones that support a WiFi connection (such as many of the Nokia N- and E-series smartphones). But for voice, one needs a carrier for which Skype is setting up arrangements in ten countries. Skype announced earlier this week that a Skype Lite for BlackBerry will be available in May, 2009.

As mentioned in the first update post above, Skype for Windows Mobile has been withdrawn.

Skype for Windows Mobile has been available for several years, recently released version 2.5 and demonstrated the Skype for Windows Mobile 3.0 beta. They recommend its use via WiFi access points; however, its use on a Windows Mobile smartphone over 3G may have performance limitations, especially with respect to battery life.

If you are in one of the nine countries served by 3 as a carrier, you will find the Skypephone 2 available as well as a few other devices that supports Skype operation. Later this spring Skype will appear embedded into Sony Xperia X1 and new Nokia smartphones.

There are two third party solutions that I have used quite often: iSkoot (BlackBerry, several Nokia smartphones) and IM+ for Skype (BlackBerry, iPhone/iPod Touch, a few Nokia smartphones). On the BlackBerry they can take advantage of the inherent background processing to allow Skype chat sessions to remain active while executing other applications; they also require both a voice and data plan (2G or 3G GSM) in order to complete voice calls; chat sessions are supported over a WiFi connection.

There are several other third party offerings which provide Skype access, including Truphone (iPhone, BlackBerry, some Nokia models), Fring (iPhone, some Nokia) and Nimbuzz (iPhone). Suffice it to say that, while one can carry on conversations via these services while dealing with user interface, performance and/or call quality issues, the best service level is achieved from a service where Skype has full control of the software and network connections.

Skype’s strategy for mobile was recently outlined by Skype COO Scott Durchslag.

Dual Mode Phones

About two years ago several hardware vendors introduced dual mode PC-free phones that allow you to connect to both Skype via a broadband Internet connection and the PSTN. However, currently these devices are undergoing a transition as Skype restructures, the only phone that is readily available today is the Philips VOIP3211 which can be found for several countries via the Skype Store. Update, Fall 2009: The only dual mode phone that is readily available as of fall 2009 is the RTX 3088 Dualphone; feedback here. The one caveat for these phones is that they support voice and presence but have no chat capability.

IPEVO also offers their Skype Desktop Phone S0-10, which only provides Skype calling over an Ethernet connection into a router.

Skype Video Phone

I recently received an evaluation ASUS Eee Videophone AirGuru SV1, which provides support for both Skype voice and Skype video calling along with presence information (no chat). My few conversations with it have been quite satisfactory and the user interface provides easy setup of calls. Basically all operations are done via a five-way trackball where you have up/down/right/left to navigate and a central push button to perform an action. While it is basically a video speakerphone, there are headphone jacks on the rear.

To get started you simply plug it into an Ethernet port on a router or switch with a minimum broadband Internet service and enter the setup routine to provide your Skype account information. Optionally it also supports WiFi access if you are not attached via an Ethernet connection.

WiFi Phones

These are again available via the Skype Store with models provided by Netgear and Belkin that support voice and presence. I have never been a fan of the Skype WiFi phones, especially from a price/performance perspective, as they have very limited functionality and have found them to have battery life issues amongst other problems. But some people seem to like them. More recently IPEVO has offered their WiFi Phone for Skype S0-20.

Others

Skype can be found on the Nokia N800 and N810 N900 small tablet handsets; Sony Mylo and some Sony PSP models. However, these are examples of embedding Skype into a device as part of Skype’s “Skype Everywhere” strategy where conversations become one more feature of a specialty device.

Conclusion

“Skype without a Computer” is inherent in Skype’s new “Skype Everywhere” strategy recently outlined by the new Skype executive team. With the current restructuring of Skype where more mature business processes are being introduced to incorporate product marketing, build partnerships and spread the availability of Skype across many platforms, we can expect to see new “PC-free” Skype hardware coming out in the future. In their visioning statements, beyond mobile devices, they point out that we may see it attached to TV sets, automotive dashboards and embedded into other hardware.

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Yesterday eBay held an analyst event at its San Jose headquarters location with a keynote by eBay CEO John Donahoe followed by presentations by various eBay executives and Skype President Josh Silverman.

Josh’s presentation broke a lot of new ground for Skype addressing issues such as:

• How does Skype generate revenue?
• What drives Skype’s cost model?
• How will a software company change real time communications in ways that legacy telcos cannot?
• How is Skype structured to address its various market opportunities?

In a long-term financial outlook issued by eBay in conjunction with this event, they state:

Skype is expected to more than double its revenue to over $1.0 billion in 2011. With more than 400 million registered users currently, Skype’s metrics continue to accelerate as the company further establishes leadership in free and paid Internet-based voice and video communications, with growth opportunities in core consumer, mobile, businesses and platform. Skype’s leadership position has strengthened over the past year, driven by a new management team and the launch of many innovative products.

The overriding aspect of Josh’s presentation was repeated emphasis that, fundamentally, Skype is a software company. As verified by many of the presentations at eComm 2009 last week, Josh stated that there is a communications paradigm shift going on where hardwired networks and devices are gradually being replaced by software-based networks and flexible devices. Skype’s “opportunity is to become the world’s leading communications software company.” Josh’s analogy: It was not the railways that invented air travel; in a similar manner, software will drive the future of real time communications innovation and efficiencies going forward, not the existing telcos. To reinforce his point, Skype will not simply be on familiar telephony devices, it will show up in intelligent TV sets, car dashboards and intelligent public access terminals such as bank ATM’s all tied to a common network.

Josh continued: Communications is no longer just about voice; it’s now multi-modal: mood messages, chat, voice calling, multi-party calling, video calling (did I also hear him mention multi-party video calling?) and online screen sharing. Where and how we communicate is expanding: laptop, mobile phone, flat panel TV’s – “any connected computing device with the addition of software becomes a communication device”.

He went on: With hardware and network access becoming a commodity, the opportunity for margin is to capture it at the application layer. Software companies will drive the innovation in the industry, drive the demand for new hardware and better access. (Did he effectively read from the Voice 2.0 Manifesto?) Solutions must be device and network agnostic.

How big is the market? The $300B EBITDA of the $1.4T communication industry revenue is almost equal to the total revenue of global ecommerce and Search.

How did Skype build its business last year? Inherent reliability; it “just works”. While so much of Skype’s operating environment stands outside Skype’s control, yet Skype must try to provide the ability, through its software, to readily adapt to these conditions, especially at the user end point.

How does Skype make money?

• From user services:
  • What’s free (at no cost to Skype)? Skype-to-Skype calling, video calling, Chat/IM, Multi-Party calling, File Transfer
  • What’s Paid? Subscriptions (unlimited calling), SkypeOut (pay-as-you-go), Online Numbers, Voicemail, SMS
• From a partner perspective, licensing opportunities. The Skype-Nokia and Skype-MySpace relationships are two examples. Hardware royalties are another source. Carrier relationships, such as the 3 Skypephone example discussed below, are a third source for what are effectively licensing revenues.
• The third leg of revenue generation comprises some advertising opportunities that have arisen.

Yet Skype has inherent fundamentals that have made it profitable for the past six quarters:

• negligible customer acquisition costs (mostly word-of-mouth; compare with Vonage whose customer acquisition costs are in excess of $250)
• negligible capital expenditures and network maintenance costs (being peer-to-peer it’s Skype’s users who invest in capital items, such as PC’s, routers and Skype hardware, and in network maintenance through their Internet subscriptions)
• pre-funded accounts which result in negative working capital where subscriptions and Skype credits are paid up front but the revenue is recognized on a pro-rated quarterly basis (Have you ever noticed there’s no “phone bill” sent for payment once a month? – Skype has no collection costs)
• strong free cash flow conversion ($1.00 of EBITDA for Skype is almost $1.00 of free cash flow)

The results: Skype’s profitability has grown to the point where they achieve 20% “segment margin” an amount that Skype contributes to eBay’s overall profitability (segment margin makes no allowance for allocation of eBay corporate costs).

Additional data provided:

• Skype continues to add over 350,000 new account registrations per day
• account registrations are distributed geographically as shown on the map to the right; he labelled North America as a “developing” market with rapid growth
• A year ago Skype celebrated support of over 100B cumulative calling minutes since its launch; in 2009 Skype expects to do this same number within the year
• Over 8% of the world’s international calling minutes are on Skype
• from December 2007 to December 2008, video calls increased from 27% to 34% of calls
• due to its peer-to-peer architecture only Skype can deliver a video experience for free, and at performance levels unequalled elsewhere.
• while active users rose 39% in Q4 2008, engagement, defined as ‘calling minutes per active user’, rose by 72%
• while calls under 2 minutes duration dropped from 41% to 33% comparing October 2007 to October 2008, calls in excess of 10 minutes rose from 37% of calls to 47%. Josh attributed this to higher reliability and call quality.
• small changes make a huge difference:
  • increasing penetration of paid products by 1% brings in $60MM of additional revenue
  • to be a billion dollar business, Skype needs its existing paying users to make just one more call per day
• Skype’s marketing approach was to drive awareness through embedding Skype into the “popular culture”, where it has been used on Oprah, Who Wants to Be a Millionaire?, CNN and other news reports.

Going forward Josh talked about three markets where Skype has barely scratched the surface: core consumer (size: $240B), mobile (size: $603B), and business (size: $203B).

For the consumer market, Skype has four approaches:

• continue driving new users (by building “communities” or leveraging social networks)
• better promote its paid products (make it obvious, upon registration, where paid products can be found – not buried three levels deep in the “My Account” tab)
• increase revenue per paying user (encourage adoption of revenue services based on calling patterns; continued focus )
• monetize free users via advertising (but be smart about it, do it tastefully and carefully all the while protecting the core business)

[Author’s note: Execution on the last will be interesting, given some experience with “free” voice services that have attempted to “blatantly” introduce advertising into calls themselves.]

Josh went on to discuss mobile, but that’s the subject of a separate post. However, take a look at the Skypephone on 3 success story:

• Over 500,000 units have been sold; this generates a monthly revenue stream to Skype
• 3’s margin on Skypephone is 20% higher than their average margin across all handsets
• 79% of Skypephone customers are new 3 customers

As for Skype’s business offering:

• 35% of users use Skype primarily, or often, for business
• adoption into business often grows out of individual employees using  Skype to call friends and family when on the road, start using Skype for multi-party calls, do video calls with customers and vendors
• leads to a call to Skype from IT managers who are getting pressure from their colleagues’ experiences (and, by the way, you can charge for it)
• needs to expand from being a product to being a solution that fits with other PBX and software solutions they are already working with
• create the infrastructure required to provide service and support services (revenue opportunity)
• build out a channel that reaches out to businesses that are familiar with dealing with VAR’s

Going forward:

• Act 1: (completed) one platform (PC’s), one revenue stream (SkypeOut), one market segment (long distance calling), one primary service (voice), one primary market (mature Internet markets – Europe and Asia) and one target user (consumers)
• Act 2: (now to 2011) is about “Many” – many platforms (PC, mobile, TV, web), diversified revenue streams (subscriptions, licensing, advertising), including business subscriptions; many conversation modes (voice, video, chat, collaboration tools), many regions and many target markets
• Act3: (2012 and beyond) “Any” – any mode, any platform, anywhere, multiple market segments, established products, regional ubiquity and mature target markets.

Josh’s forecast for 2011:

• More than double revenue in excess of $1B annually
• Maintain segment margins of 18% to 20%
• More diversified revenue streams: telecom, service and licensing fees, advertising)

His summary:

• Accelerating growth, outstanding fundamentals
• Attacking an enormous opportunity and positioned to win
• Business is getting stronger

Bottom line: For the first time a CxO level Skype executive has put out an extended set of benchmarks and guidelines against which their activities can be measured by all; the challenge now lies in the execution. And analysts finally get a more detailed view into this “mysterious” and oft-questioned Skype acquisition by eBay in 2005.

The audio recording and complete sides can be found for 30 days: click here and then select “Analyst Coverage” in the left sidebar. (viewer registration and Windows Media Player or Real Audio Player required). Or go directly to this link. Josh’s portion starts at 2:37:15 into the recording.

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• Nokia to preload Skype onto handsets beginning in Q3 (mobilecrunch.com)
• eBay: Good in Parts (readwriteweb.com)
• Is Skype for sale? (news.cnet.com)

Apparently the Skype-Nokia partnership announcement has irked some legacy European carriers such as Vodafone, O2 and Orange according to Mobile Today:

A rift has emerged between Nokia and operators over its plans to incorporate Skype onto its Nseries handsets, Mobile has learned.

O2 and Orange responded furiously to Nokia’s declaration that it will equip its upcoming flagship Nseries device, the N97, with Skype.

If the row is not resolved the two operators may refuse to stock the N97 – or any future Nseries handsets containing Skype – unless Nokia strips out the Skype client. The two operators are understood to have vented their anger in high-level discussions, which involved group level executives from Nokia.

However, Hutcheson’s 3 has seen great success in providing access to Skype for calling Skype contacts, making SkypeOut calls, exchanging presence information and holding text chat conversations. For the past year I have been making calls to Skype contacts from my BlackBerry 8820 and Bold via iSkoot and IM+ for Skype over my Rogers subscription. And I have been beta testing Truphone for BlackBerry.

Unfortunately for these carriers they did not attend last year’s eComm conference where iSkoot CEO Mark Jacobstein made a presentation “Operator Friendly VoIP: No Longer an Oxymoron”.

So what’s the background and where can having Skype access as a carrier offering be of a win, not only for Skype and its partners such as iSkoot, but also for the carriers:

The background:

• A scalable, robust channel for handling voice over wireless already exists. The data channel can transmit text plus information related to setting up a voice call.
• Device resource issues, especially battery life but also processor speed, memory resources and display issues, challenge the ability of current smartphones to handle calls using a VoIP client at a sustainably satisfactory level of reliability.

Recall the basics of the architecture and voice call process:

1. Use the data channel for handling text messages and the information required to set up a Skype voice call session
2. Use the existing voice channel for making the voice connection from the mobile device to an iSkoot/Skype/etc. server via a “local” point of presence.
3. The client on the device is designed to handle Skype IM over the data channel; however, when a voice call to a Skype contact is initiated, data for setting up the voice call is sent to the server. The server then triggers a wireless call from the server back to the mobile device while also calling the party on Skype from the Skype session on the server. (Effectively the Skype session on the server uses a variant on Skype’s inherent multi-party calling feature.)

Why is this architecture carrier friendly?

• Carriers continue to obtain revenues for local minutes
• Data plans are required to handle text and the call setup information
• There are NO termination charges for calls to Skype contacts
• Carriers can share in the revenue for SkypeOut calls
• The ability to advertise “free calling worldwide” is a very attractive marketing message for customer acquisition.
• At least in the case of the Skypephone, actual hardware costs eliminate the need to subsidize the handset. This advantage will obviously vary by device vendor.

AT&T eventually recognized that the iPhone presented a significant market share grab opportunity for recruiting customers away from its competitors. 3 accelerated its rollout of Skypephone once it saw the market response in the UK. New carriers launching in Canada and the U.S. will be looking for programs to attract customers from the incumbent wireless carriers. Thinking outside the traditional business model is necessary for carrier survival; cost effective innovation, for both the customer and carrier, will always win out in the long term.

Vodafone, Orange, O2 and others will have to succumb to the market reality that the Skype offering is a win-win for those carriers that adopt phones incorporating this implementation of Skype mobile software and architecture, whether Nokia, Android, BlackBerry, Palm Pre or any other smartphone with an inherent multi-tasking capability.

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At this year’s CES 2009 Skype press conference, COO Scott Durchslag provided an overview of Skype Everywhere (or Skype Wherever Whenever). Basically Skype is looking to become installed wherever there is a communications device with embedded intelligence (processor and memory) and an Internet connection capability. Along with the announcement yesterday of the new Skype – Nokia partnership, Scott put up a post on the Share Skype Blog that outlines the three components of Skype’s strategy for mobile devices:

• Current users: Make Skype available for consumers to download onto their existing mobile handsets. Skype Lite is architected for incorporation into any of over 100 Java-enabled handsets, including any supporting Google Android. In discussing Skype for Windows Mobile, Scott mentions that SMS messaging and File Transfer are being integrated into the forthcoming Skype for Windows Mobile 3.0.
• Smartphone manufacturers: Develop partnerships with smartphone manufacturers “tightly integrate and pre-install Skype on their devices”. Skypephone and INQ are two existing examples; the Skype – Nokia partnership announced earlier this week is the next step. These phones will be targeted to consumers who may never have attempted to use a computer to connect to the Internet. But it requires simplicity and a familiar algorithm in the user interface:
  • Find a number in the device’s native address book, click on the green “Call” button, the party is called transparently over Skype. If the call is to a Skype contact anywhere worldwide there is no additional cost; if to the PSTN, SkypeOut charges will apply at a minimum.
  • But these phones are also capable of supporting Skype IM’s presence information and chat conversations worldwide.
• Carriers: The Skyephone relationship with Hutcheson 3, using embedded iSkoot firmware, has certainly been a success. Most importantly, its “free calling” marketing campaign has certainly helped 3 acquire new users who previously would never have thought of getting such a smartphone, even if it has a limited feature set (relative to, say, iPhone, BlackBerry or Android). From the Skype Lite announcement at CES it is apparent that Skype is developing relationships with carriers in at least ten other countries, including the U.S. But details of the specific carrier relationships have yet to be announced.

Many of these services involve using the data network for Skype IM and call setup while using the robust and readily scalable GSM voice channel for voice conversations. Other issues that will provide market differentiation include:

• keyboard: QWERTY or T9? this makes a huge difference as to how much Skype IM will be used.
• display size: how readily and effectively can the device display Internet-originated content?
• battery life: will there still be enough battery life after a day of work to enjoy an evening of entertainment without a recharge?
• overall user interface: bottom line for the user experience – how readily can I get access to the services I want, using a familiar calling algorithm?

And all this leads to “What is the business model for Skype”? That will be the subject of another post.

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With the evolution of smartphones incorporating both WiFi and 3G wireless support, we are also seeing the application of Voice over IP technology as providing at least one leg of a wireless call.

• iSkoot was a pioneering example, with both their support of a wide range of wireless phones, including Nokia, Android and BlackBerry (full disclosure – I use iSkoot on my BlackBerry Bold) and their Skypephone so successfully launched on 3 services in nine countries.
• Recently we have seen the evolution of Skype Lite capable of providing access to Skype on over 100 Java-enabled mobile phones (not all smart phones), including Android.
• And Truphone has been launching services on Nokia, BlackBerry and, most recently, iPhone.

The real challenge for Skype was to get carrier adoption. Certainly the 3 Skypephone experience represents a successful business model where, as disclosed at eComm 2008, royalties associated with 3’s revenues are paid to both Skype and iSkoot. Skype announced at CES that they are developing carrier relationships in ten countries, including United States, that involve deployment of the Skype Lite client . With its new management team, including a former Motorola executive, it was only a matter of time before we would start to see deeper relationships with mobile device vendors.

And, of course, this initial device vendor relationship is with a vendor who has not exactly been a significant smartphone player in North American markets, although their market penetration has been more successful in European and Asian markets. Today, Skype and Nokia have announced a partnership where Skype will become deeply embedded into Nokia’s S60 Symbian platform with the launch device being the forthcoming Nokia N97. From the press release:

The Skype experience will be part of the address book of the Nokia N97, enabling presence – seeing when Skype contacts are online – as well as instant messaging. Nokia N97 owners around the world will also be able to use 3G and WLAN to easily make and receive free Skype-to-Skype voice calls, in addition to low-cost Skype calls to landlines and mobile devices.

The pros:

• Its support of both 3G and WiFi; this has certainly played well for Truphone adoption
• It supports the device at a platform level as evidenced by the integration with the native address book and the Nokia SIP stack. Is this a full VoIP client integration?
• The initial launch device has a QWERTY keyboard, making chat sessions on the device more viable and readily adopted
• An established smartphone vendor market leader outside of North America
• Probably a software licensing revenue generator for Skype
• Opportunity to drive (and share) SkypeOut calling revenue
• It provides free, beyond a monthly flat rate for the basic carrier service, voice and chat conversations with over 40 million Skype users worldwide

The cons:

• Nokia needs to establish North American smartphone market presence in a market dominated by iPhone and BlackBerry and where carriers largely control which devices and applications are available for use over their network
• Nokia needs to demonstrate they can provide a more user friendly smartphone user experience (a la iPhone) as opposed to simply being a handheld multimedia computer.
• Nokia needs to partner with carriers who are willing to allow open access to applications in their newly announced Ovi storefront

The questions:

• Has Nokia already signed up carriers to take on the (somewhat delayed) N97 when it launches in June? Following along with a Skype strategy announced at the CES press conference, we can probably assume that the device will first be available in non-carrier dominated markets.
• Does this represent an evolution of the Skype Lite client where chat and call setup occur over the network while the more robust and readily scalable voice channel carries the voice portion of a call?
• Where are the revenue opportunities for Skype, Nokia and the carriers?
• What is the ongoing relationship between Skype and iSkoot who pioneered this carrier adoption model? This Nokia-SKype partnership is totally independent of any iSkoot participation.
• How will the Nokia-Skype partnership compete with UMA plays such as described on the Tweet in the right?

Bottom Line: Liquid communications means turning on a device and finding Skype is “just there”. A partnership with the world’s largest vendor of mobile phones with hundreds of existing carrier relationships is not to be taken lightly. Combined with the Sony Ericssson Skype panel announcement yesterday, what hand will Skype play in working with Apple (iPhone) and RIM (BlackBerry)?

Update: Andy Abramson, VoIP Watch, attended the press conference:

Basically the underlying message the Skype CEO shared was carriers who will work with Skype will pick up users who spend more money than the non-Skype using mobile phone customer, or at least they did with 3.

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During our conversations with Skype COO Scott Durchslag last week at CES, Scott outlined Skype’s criteria for its software development going forward.

First was the emphasis on “liquid communications” through statements such as “Skype Whenever, Wherever”. Just as today you can pick up any PC or mobile platform and find all the Google Tools (Search, Maps, News, Reader, etc.) Skype wants to be on virtually any platform or device.

Pick up a smartphone, find the Skype button. Turn on the TV, find a Skype button, have a conversation. Open a web browser; start a Skype session. All this to complement Skype on the desktop. Today, besides on the desktop, you can find Skype on over 200 mobile phone handsets, several (Sony) mobile devices, Skypephone and Apple TV. But Scott emphasized, this is only the beginning. It will only start to get real when we see Skype on higher profile devices such as the iPhone and BlackBerry or when we start to see Skype seriously back into the hardware device business with vendors such as Philips and iPevo.

Then Scott outlined four benchmark criteria that every implementation of a Skype on any platform or device must meet:

• High call quality
• Simple and easy user interface
• Consideration for battery life
• Security

Last week’s hotfix upgrade of Skype for Windows 4 beta 3 included the first implementation of Skype’s three year effort to develop the SILK codec, increasing the audio bandwidth to 12 KHz while effectively reducing the Internet bandwidth consumed during a Skype call.

A key reason for Skype’s rapid and widespread adoption has been associated with its ease-of-use. Yet Scott says the Skype conversation user experience needs to be even easier to encourage adoption by a broader user base. Developing a more effective user interface has certainly been a focus of the Skype for Windows 4 beta program. At the Skype CES press conference Scott reported that, in a recent survey of users, 88% preferred the new UI to the previous Skype for Windows 3.8. But I’m still wondering if the Skype for Windows team could take a look at Skype for Mac and implement a “drawer” type interface to manage and select the active conversation. For the longer term evolution of Skype clients hopefully Skype also has a look at Dan York’s post on Skype’s fragmented product strategy.

Battery life on smartphones was a key issue that prevented Truphone, who uses a native VoIP client for calls over WiFi, from launching a native VoIP smartphone client running over 3G networks. Instead they launched Truphone Anywhere that takes advantage of the underlying network 3G GSM voice channel and uses the data channel to set up a call via a server that, in turn, sets up a VoIP client. That voice channel tends to make much less use of the device battery than a constantly compressing/decompressing VoIP client that devours the underlying processor activity. Addressing the battery life issue is a major reason why we see Skype using a similar calling architecture when launching the Skype Lite Java client on over 100 Java-enabled cell phones, including those based on Google Android.

Security is an issue that I’ll leave to Dan York and others who are able to cover this issue more knowledgeably and effectively. Suffice it to say that we would expect security to continue to be a feature of all Skype products, including those that use the mobile voice channel for placing calls from mobile phones.

Two take-aways from these statements:

• Fundamentally we should expect Skype, going forward, to be a provider of real time conversation-enabling software on desktop, web, TV and mobile platforms. To use an old telegraphy term: Full Stop! For instance, rather than developing their own social network, we should expect Skype to seek out agreements with other social network service providers, such as the MySpace agreement. Skype is an enabler of real time conversations; it is not in the community building or social networking business. Facebook, Twitter and MySpace, amongst others have already captured that space and done an excellent job at it.
• These benchmarks also provide a basis not only for deciding what product offerings Skype will develop but also when they are in a position to release a product.

The new Skype executive team is finally starting to set some benchmarks and guidelines against which we can not only measure executed performance but also have a better understanding of where Skype wants to go.

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Yesterday I wrote a post for GigaOm, Skype: Coming to a Cell Phone Near You, discussing how the announcement of two new beta versions of Skype on mobile devices gave a hint of Skype’s future mobile strategy.

At the same time Truphone announced a new version of their iPhone application. Whereas the version released at the time of the Apple App Store launch back in July only supported outbound calling over WiFi access points, the new release not only supports inbound calling to your iPhone number but also makes outbound calls via the 3G carrier networks that offer the iPhone.

Innovation driven competition in delivering low cost international calling services appears to be heating up during these challenging economic times – at least for calls originating in your “home” calling country or area code(s). Here’s a brief summary of what is evolving:

We’ve seen the evolution of two architectures for making VoIP-enabled calling from mobile devices; it’s all a matter of where the calling party’s Skype (or VoIP client) session is opened up – directly on the device or on a dedicated hosted server. This leads to two other considerations:

• Carrying the voice portion of the call from the mobile device into the network cloud: either via the carrier’s robust and proven (GSM) voice channel or over via a WiFi access point
• The need to support Skype’s instant messaging (chat and presence); this always occurs as a data activity

VoIP Client on the Mobile Device; VoIP over WiFi

Skype for Windows Mobile places the VoIP client directly onto the device. As a result the device must handle the “VoIP processing” to generate the packets that are transmitted over the supporting data network (either a carrier’s 3G network or via a WiFi access point.) As mentioned previously, it places heavy demands on the device’s resources, especially the processor (running at much lower speeds than on a PC) and the battery.

Truphone’s original voice offering also runs on the device (usually a Nokia Smartphone). While both Skype for Windows Mobile and Truphone can run over either WiFi access points or a 3G network, it is strongly advised to use these only over WiFi access points to have a reliable, robust, high quality voice service. For instance, the Skype for Windows Mobile download page says:

• Log into Skype from any WiFi zone to make free calls and send instant messages to anyone else on Skype, anywhere in the world, any day of the week.
• WiFi connection or 3G/2G data connection (we cannot guarantee voice quality over 3G/2G. You may also be liable to additional data charges so please check with your operator before using)

Truphone’s original iPhone outbound calling offering was also only available using the iPhone’s WiFi capability; however, details of their architecture were never revealed.

Accessing VoIP via a Wireless Carrier

Over the past year we have seen the rise of several services that use the alternate architecture where a call is placed via a local access point to a hosted server that then opens up a Skype client. The server-based Skype client then completes the call as a Skype-to-Skype call.

While originally pioneered by iSkoot, a service using this architecture, such as Skype Lite beta, makes a call to a SIP Gateway server via a local point of presence while data about the call is concurrently sent via the underlying data network to a hosted Mobile Gateway. This dedicated gateway then sets up a Skype-to-Skype call between the SIP Gateway — now connected to your cell phone — and the destination Skype contact. Skype chat messages can also be exchanged concurrently over the data network. We are now seeing various offerings using this architecture:

• The highly successful Skypephone offered by 3 in nine countries.
• iSkoot providing service for a wide range of phones including BlackBerry, Nokia and T-Mobile’s G-1.
• Truphone Anywhere: when Truphone found they could not offer a highly reliable service over 3G networks (largely due to device resource considerations), they launched Truphone Anywhere that allows Truphone calls to be made over a 2G (GSM/EDGE) or 3G (UMTS/HSPA) voice/data network as well as over WiFi access points.
• Skype for Mobile beta – Skype’s first attempt to go beyond Skype for Windows Mobile onto other platforms such as Nokia N-Series and E-Series devices. This never got out of the beta phase; while you could use Skype chat anywhere, the voice service was only to be available in a limited number of  countries (that did not overlap with countries where Skypephone was available).
• Skype Lite beta: building on the Skype for Mobile beta experience to a service that supports not only smartphones but also over 90 cell phones that support a Java client and include basic web browsing and data capability. According to the Skype Lite page it appears that Skype is working with carriers in ten countries to support this service.
• Truphone for iPhone 1.12 release: makes Truphone calls either over WiFi or any cellular network using an iPhone, building on their Truphone Anywhere experience.

Key features of these server-hosted VoIP client services:

• They are most cost effective when calling from your home country or local calling area. You could incur long distance or, when outside your home country, roaming charges that would run up quite quickly.
• An unlimited or high cap data plan minimizes costs associated with using these services.
• Only Skype provides a full Instant Messaging capability covering both chat and presence. Some Truphone offerings have shown support for SMS messaging.
• Calls to Skype contacts are free.
• Calls to mobile numbers outside U.S. and Canada will still invoke the charges incurred in “caller pays” mobile services.

Why only the cost of a local call? Your cell phone makes a call to a local number which puts the call through to the service’s SIP Gateway. At this point you connect into a Skype-to-Skype call for which there are no termination charges involved as a result of Skype’s unique (and secure) peer-to-peer architecture.  The same applies to Truphone where Truphone-to-Truphone calls are free.

This Skype Lite beta announcement portends that we could be seeing Skype-to-Skype calling, along the lines of 3′s popular Skypephone service in nine countries, become available to mobile customers having a much broader range of cell phones and in up to ten additional countries.

One other service that can be accessed from any phone is Mobivox. However, there you have to build up and manage your address book online such that VoxGirl can help you make your calls; it does not access your mobile phone address book. It’s purely a voice service with no messaging component (other than using SMS to facilitate setting up calls under certain circumstances).

While we’re getting a first step in driving down mobile costs for international calling, the next step needs to be finding a user-friendly way to drive out roaming costs. MaxRoam and Truphone’s SIM4Travel are starting to offer some hope on this front; however, at the moment their costs for USA-Canada calls are much more than my Rogers roaming charge. The winners will feature not only lower costs but a very friendly user interface, interacting with the device address book, that also provides the most complete ranges of services in terms of coverage and complementary conversation modes, such as IM.

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Yesterday UK web publication TelecomTV put out a post “Skype claims mobiles are involved in a quarter of its calls“. But a “correction” comment by the author, Tony Chan, disclaims his basic premise:

CORRECTION: As the original author of this story for CommsDay, I am corrected by Skype that the 4 billion minute figure is actually for Skype-to-Skype minutes with video, NOT mobile.

Turns out to be a confirmation of what we have heard in the past: 25% to 30% of all Skype-to-Skype calls invoke video calling.

So how can one generate Skype-to-Skype minutes from a mobile device? What % of Skype-to-Skype minutes are generated from a mobile device?

• iSkoot: sets up a Skype session on their server using information delivered from the iSkoot client on a supported mobile device, such as BlackBerry or Nokia N-Series. When you make a Skype call, it’s Skype-to-Skype from the iSkoot server to your called Skype contact.
• Skypephone: uses iSkoot’s algorithm with the one difference. 3 has set up their own “iSkoot” servers to support this service. As of October 1, 3 customers using iSkoot or a Skypephone can now make SkypeOut calls from any 3 Skype-enabled phone also.
• Skype for Windows Mobile: here the limitation is the small, and decreasing, market share for Windows Mobile devices. It requires either a WiFi connection or 3G but the former is favored but both call quality and robustness reasons. But you can make both Skype-to-Skype and SkypeOut calls from this client. (And it’s the only instance of a true Skype VoIP client on mobile device — challenging both processor speeds and battery life.)
• Skype for Mobile – currently at a beta stage with limited outbound calling; this service fundamentally uses the same architecture as iSkoot. (I suspect iSkoot has any appropriate intellectual property protected under this. After all, Skype and iSkoot are working together on Skypephone, etc. But it is interesting to experience the difference in user interfaces between iSkoot and Skype for Mobile) Again this does not put the full VoIP client on the device but rather back at a server. Probably not too many minutes here yet.
• Update: Mobivox CEO Peter Diedrich emailed to remind me that their voice-enabled service also has the ability to launch Skype-to-Skype voice calls. From any landline or mobile handset worldwide the caller makes a “local” call to VoxGirl who, in turn, launches and connects to a Skype session on a Mobivox server. Effectively creating a landline- or mobile-to-Skype call, Mobivox requires no downloads or client software. VoxGirl will determine presence information to decide whether to proceed with a call; however, there is no IM/chat capability.
• I have described my experience with Fring for iPhone when it launched almost two months ago. My problem with any iPhone application of this nature is that there is currently no background processing such that you can allow an IM session to run in background while executing other applications.

And how successful has 3′s Skypephone service been? We initially heard some qualitative information at eComm 2008 last spring. But, information supplied by Skype’s PR this morning provides us the basis for an order-of-magnitude guestimate:

“…. since Skype launched the 3 Skypephone in November last year, there have been over over 100 million minutes of Skype-to-Skype calls by users of the 3 Skypephone and other mobile handsets with Skype and there are currently more than a million minutes of Skype-to-Skype calls each day on 3 mobiles in the UK.”

So out of 16 billion Skype-to-Skype minutes each quarter (as reported in the last eBay quarterly analyst call), it would appear that, at the current > 1 million minutes/day on 3, 75 to 100 million minutes per quarter are via mobile handsets. Hmmm, that makes about 0.5%  to 0.8% of all Skype-to-Skype minutes.

Why can 3 offer this service at such low prices? As explained by iSkoot CEO Mark Jacobstein at eComm 2008 last March, there are no termination charges for Skype-to-Skype calls, even when one Skype session is on an iSkoot server.

P.S. – Want to keep up-to-date on these issues? opens a week Monday.

Full disclosure: the author uses iSkoot on a BlackBerry Bold when out of the office; he has also experienced successful use on a Nokia N95.

Tags: Skype, iSkoot, Skypephone, Skype Mobile, eComm2008, Mark Jacobstein, Tags: TelecommTV, Tony Chan

This evening iSkoot, the service that provides Skype access from smartphones, announced they had received a new $19 million venture financing round to build out and bring to market a new suite of mobile communications services. Recently iSkoot acquired Social IM, who is in the beta stage of producing a desktop Instant Messaging client linking real time communications and notifications to social networks. No further details have been released but obviously both their existing financing partners and one new partner feel there is a significant potential.

Update: VentureBeat reports that the financing relates to a forthcoming AT&T service offering “an array of Web services to users of its low-end phones — the majority of its phones, which don’t have the iPhone’s powerful features. The services will include things like social networking, email, RSS feeds and eventually services like Twitter.”

In addition to their smartphone service, iSkoot also provides the firmware behind the Skypephone, available through the Hutcheson Whampoa 3 carrier in the U.K., six other European countries, Hong Kong and Australia. According to Tech Crunch over 300,000 Skypephones are now in service. However, their recently launched iSkoot for Android appears to have encountered a rougher road; Andy speculates they may have launched prematurely to meet the G-1 launch date. I’m sure we’ll see upgrades to address the outstanding issues.

Personally I have iSkoot running on my BlackBerry Bold, largely to keep current on my Skype chat sessions when away from my office, and have experienced it on the 8820 as well as a Nokia N95. Look forward to learning more about the services whose launch is being supported by this new funding round in today’s somewhat rough economy. At least there’s still support for innovation in the real time conversation space.

• iSkoot Presentation at eComm 2008
• iSkoot Gets Third Party Recognition
• iSkoot Extends Partnership with Skype

Tags: iSkoot, Skypephone, BlackBerry Bold, Android

Andy Abramson at VoIP Watch travels a lot to keep up with his ever expanding list of clients. And he has been having his home office renovated for the past few months. So he gets more experience than most of us dealing with all the trivia of travel, including keeping his communications costs down. Check out his post “Mastering Better Working Anywhere” for the details including:

7. For places you visit regularly, buy a pre-paid SIM card, avoid roaming rates. If you visit multiple countries get a travel sim from SIM4TRAVEL or MaxRoam. If you are in WiFi environments a lot, get an account with client Truphone. Bottom line is you will save money and be more connected.

He failed to mention his overall mobile strategy but Saturday he called me from a new Skypephone 2; I initially took the call on my Blackberry Bold (to which my Skype account is forwarded). Perfect call quality for a 5 minute conversation; when I arrived home we continued the call over my PC Skype connection with excellent voice quality. Andy thinks 3 sets the standard for carrier services; the final confirmation? He actually bought two Skypephone 2′s (the second one for his wife) on prepaid plans for a total of £99. His conclusion:

Bottom line, if you’re heading to the UK or any country 3 serves, you can expect this kind of a great experience. That makes 3 a Working Anywhere Approved carrier.

Tags: 3, Skypephone, SIM4TRAVEL, MaxRoam, VoIP Watch, Andy Abramson

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Sunday Times does a “quick” review of several mobile VoIP options for the U.K. market including:

• Best for the iPhone (Truphone)
• Best for Easy Installation (Skypephone 2)
• Best for Instant Messaging (Fring for Nokia N95)

Over the past few months there have been a few Skype Journal posts about iSkoot and how they provide mobile device access to Skype’s services. Of course, iSkoot also provides the software behind the Skypephone on the 3 network in nine countries. Recently iSkoot has been getting some accolades from third parties:

Nokia named iSkoot for Skype as a featured Application of the Week earlier this month on both the Nokia site and the S60 site.

iSkoot loads your Skype contact list right onto your S60 device display screen, and with just a quick click of a button, you can call your contacts. With Skype online status information, you get the benefit of Skype’s awareness of user presence. You can see who is available to call or chat, and also change your own online status to let others know that you are free to interact with them. iSkoot allows you to talk to anyone around the world from your S60 device and offers network service in over 40 countries. Calling is as easy as just clicking on a contact on your S60 device.

Two weeks ago, John Halamka – Chief Information Officer at Harvard Medical School and the CareGroup Health System (to name a few)– named iSkoot for Skype as his “Cool Technology of the Week.” Using his Blackberry Curve 8320 he has also figured out how to use “local” pay-as-you-go: SIM cards to reduce or eliminate roaming charges while traveling abroad.

The iSkoot client places a regular local phone call to an iSkoot gateway server, then the gateway server places a Skype call, bypassing all long distance charges. While connected to the iSkoot gateway, the iSkoot client enables you to

* See who is signed in and view their online status
* Manage your own online status
* Click to call a contact
* Click to chat with a contact
* Make low-cost calls to any phone number, anywhere in the world using SkypeOut
* Receive calls from Skype users
* Add or remove friends from your contact list
* Refresh your contact list automatically or on demand

And finally, Alec Saunders of iotum where, amongst other titles he is Chief SquawkBox Officer, recently spent three weeks in Europe traveling with his family. Having been supplied with a 3 Skypephone, he came home saying that he found the 3 Skypephone was the most consistent means for him to maintain the limited degree of connectivity he required while on a family vacation.

Previous iSkoot posts:

• Skype on Mobile: North American Carriers’ Backhaul is the Ultimate Bottleneck
• What VoIP on Mobile Can Learn from SS7
• iSkoot – Providing Carrier Friendly Access for Skype Calls.
• eComm 2008: iSkoot Presentation
• Mobile VoIP Services — The Ergonomics of Making a Call Counts…
• Skypephone 2 at 3 August 18?

Hat tip to the iSkoot blog for pointing us to these recognitions.

Tags: iSkoot, Skype, John Halamka, Nokia, S60, Alec Saunders, SquawkBox, iotum

While I can find no press release from any of Skype, iSkoot or 3, it appears there was some 3 media event yesterday where it was announced that 3 will be introducing a new Skypephone 2 on August 18. Key new features include:

• 3G mobile broadband supporting HSDPA
• a 3.2 Mpixel camera (vs the current 2.0 Mpixel)
• integration of Skype contacts into the phone’s address book
• support for email (post-launch date)
• software to allow the Skypephone to be used as a modem when plugged into a PC (tethering)
• slightly larger screen (2.2 inch QVGA)
• RSS feed support
• a built-in Facebook application
• pricing of £69.95 on Pay-As-You-Go or free for contract customers

Chris Dawson at TameBay saw one yesterday:

The Skypephone however is the only handset in the world that has Skype built-in as an “always on” embedded tool rather than as an add-on application. That means it doesn’t eat into your data allowance and 3 allows a generous 4,000 Skype minutes and 10,000 Skype chat messages a month for free on the Skypephone.

At this same event it was also confirmed that 3 will be carrying the Blackberry Bold (where you have a full QWERTY keyboard for handling email and other keyboard-intensive activities).

Not exactly a quiet summer for smartphone introductions!

Tags: Skype, Skypephone, 3

Blackberry Cool is floating a rumor that the U.K’s 3 network, the only carrier currently selling Skypephone – a hit in the youth market, will be selling the Blackberry Bold with a Skype client.

First problem, it is known that VoIP over 3G networks still has quality, robustness and latency issues that make them unsuitable for running a native Skype client. Can we ever convince the media that VoIP over any current wireless data protocol is a non-starter?

This issue was confirmed when Truphone, after months of attempting to launch a native VoIP client over 3G, recently launched their Truphone Anywhere service that allows you to make Truphone calls over a GSM/EDGE/3G network using the data channel for text messaging and call signaling while using the robust, scalable inherent voice channel for the voice conversation. As a result you have two wireless options for Truphone: (i) VoIP over WiFi or (ii) Truphone Anywhere over 3G (and, from personal experience, I can confirm it works on 2.5G/EDGE as well). I have used Truphone over WiFi on several occasions to make low cost or free calls from WiFi access points, especially when in the U.S.where my Rogers roaming charges would be $0.95 per minute.

And, of course we know that 3 has a previous relationship with Skype and iSkoot, who build the software behind the Skypephone. So the real question is “Will we see an iSkoot implementation on the Blackberry Bold?” I can vouch that I have been using iSkoot on my Blackberry 8820 for some time; it’s really useful to keep up with Skype chat session during commuter trips and, when in Toronto, I can make calls to Skype contacts simply for the cost of “local” minutes. (Once away from Toronto, I am charged for long distance back to Toronto, where 3 has an access PoP.)

Certainly, after seeing the Blackberry Bold’s display last week, I can see the opportunity for a very interesting Skype client on the Bold.

Well, it makes for an interesting rumor; only time will tell. And, how does this tie in with today’s announcement from 3 of Skypephone 2? (More in a follow up post.) Given that Skype’s fifth anniversary is coming up at the end of August, maybe we can expect some interesting announcements in the next six weeks or so.

Tags: Skype, 3, Skypephone, iSkoot, Blackberry Bold, Truphone, Truphone Anywhere, Blackberry Cool

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With the emergence of iPhone 3G and Blackberry Bold, certainly from a North American perspective, one has to wonder where Nokia is heading in the smartphone space. Certainly a clue evolved Tuesday when Nokia announced they were acquiring the remainder of Symbian they did not already own for $410 million along with a plan to put the key intellectual property assets into an open source “Symbian Foundation” under an Eclipse Public License. And they convinced other partners with a Symbian interest to also join the Foundation and contribute assets. Read Ed Burnette’s full post for his analysis of winners and losers.

Om then wrote one of his epic posts, “Symbian, iPhone and the New Reality” where he talked the realities of today’s mobile business:

1. Handset makers need to accelerate the release of their phones much faster than the current 12-to-18 month production cycles or run the risk of getting RAZR-d into oblivion, like Motorola.
2. Phones are now a fashion business in that you’re only as good as your last model. Phone makers need to release new models as quickly (if not faster) as Parisian couture makers if they want to remain hot and gain sizable share of the handset market.
3. They subsequently can’t afford to muck around with proprietary software platforms that can take months to be approved by the mobile carriers.
4. Carriers want standardization because they want to deploy applications quickly, without having to test them on different handsets — a slow and laborious process.
5. Users want high-end, smartphone-like features on low-end phones.

Om goes on to discuss how the industry is changing such that not only are software platforms the only way to withstand this commoditization but also how Apple is changing the game with their overall distribution control and management of third party applications. Fundamentally third party developers can focus on development and marketing while they let Apple take care of the business development overhead by Apple’s facilitating the carrier availability, the distribution and the transactions.

Yesterday I was asked to be guest host of Squawk Box where we got into an interesting discussion around this subject, involving at least one developer participant in this scenario, William Volk at My Numo, and industry participants PhoneBoy and Dan York. You can go to the SaundersLog post to hear the entire discussion.

P.S. — Want to see a prime example of Om’s “smartphone realities” – check out the Skypephone: low cost, media-savvy, carrier friendly (and no recruitment subsidy required), third party software platform and “cool” (read fashion statement), in the countries where it is available.

Tags: Nokia, Symbian, iPhone, Squawk Box, SaundersLog, Om Malik, GigaOm, Ed Brunette

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Lee Dryburgh is gradually putting up videos from the eComm 2008 sessions. Today we have iSkoot CEO Mark Jacobstein’s presentation about carrier friendly access to Skype. As mentioned in previous posts on this subject:

• iSkoot uses the robust circuit switched voice channel to connect to an iSkoot server running a Skype session — generating at a minimum “local” minutes revenue for the carrier
• since calls terminate on Skype there are no termination charges to the carrier
• for the Skypephone service (currently on 3 in 9 countries), customer recruitment costs are minimized since no device subsidy is required.
• long distance
  • iSkoot on the Blackberry, Nokia N-series and E-series, Palm and about 40 other devices can make SkypeOut calls, still providing the carrier with “local” calling revenues while iSkoot receives a share of SkypeOut revenue
  • to faciliate adoption of the Skypephone by carriers, one can only make Skype calls (at no charge), but not SkypeOut calls (changed October 1, 2008), thereby leaving the carriers’ long distance plans in tact.

Two parts to this presentation: the SD video is below: (alternative HD video)

… and the slides: (alternative PowerPoint version)

| View | Upload your own

Additional references:

• Skype on Mobile: North American Backhaul is the Ultimate Bottleneck
• What VoIP on Mobile Can Learn from SS7
• 3 Skypephone: It’s All About the User Experience

Tags: iSkoot, eComm2008, Mark Jacobstein, Skype, SkypeOut, 3, Skypephone, Blackberry, Nokia

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