& cplSiteName &

Skype Rules North American VOIP

Light Reading
News Analysis
Light Reading
6/16/2005
50%
50%

Calls using Skype Technologies SA account for nearly half of the VOIP minutes used (46.2 percent) and about 40 percent of the VOIP bandwidth used in North America, according to an analysis done by broadband management company Sandvine Inc.

That puts Skype usage ahead of Vonage Holdings Corp., Cablevision Systems Corp. (NYSE: CVC), and other popular branded VOIP offerings (see Skype Extends Its Tentacles and Does VOIP Business Add Up?). In fact, Sandvine says Skype users account for 35.8 percent of individual VOIP callers on North American networks. “So this is not like five guys who figured out they could call Slovenia 24 hours in a row; this is a mass market phenomenon,” says Sandvine’s Steve McGeown, the company’s director of product management and main architect of the research.

Sandvine says it has a unique vantage point from which to form its analysis (see Sandvine Counts 1,100 VOIP SPs). The company monitors broadband traffic in cable and DSL provider networks, including six of the 10 largest ones in North America (see Allot Strengthens Carrier Products). So it claims to be able to identify and classify the traffic coming from about 11 million of the 60 million-or-so broadband subscribers in North America.

Why does this matter? Well, now that AOL (NYSE: TWX) and Yahoo Inc. (Nasdaq: YHOO) have entered the VOIP game, and Google (Nasdaq: GOOG) is expected to follow in some way, it remains to be seen whether these recent entrants can leverage their brand names enough to approach Skype’s progress (see Yahoo Enters VOIP Fray).

McGeown sees all this data as more pressure for existing carriers to change their stripes. “Providers out there have to realize that this is a real economic threat, that they will have to figure out a way to really differentiate their services with true VOIP. Then you get into the vision for VOIP, which is integration into Outlook, voice-to-text translation, voicemail-to-email [translation], that sort of thing...

“Niklas Zennstrom -- I have a lot of respect for this guy,” McGeown says of the Skype founder. “He understood that voice is a commodity and he marketed it as such, and that’s why it came out for free, and it worked all at the same time.”

Table 1: VOIP's Leaders

VOIP Provider Paying Customers
Skype Technologies SA 1,000,000
Vonage Holdings Corp. 500,000
France Telecom SA 330,000
FastWeb SpA 300,000
Cablevision Systems Corp. 189,000
AT&T Corp. 53,000
Source: Sandvine and Point Topic


Zennstrom's economic model was based on two things, McGeown believes. Skype is all about getting users hooked on the free part and then charging for additional services like SkypeOut and video conferencing (see Skype Launches SkypeOut and Skype Signs Four Carrier Deals).

Vonage CEO Jeffrey Citron says the pricing models are different because the products themselves are different. In fact, Citron labels Skype an “ancillary service” and not a direct competitor. “Skype says it themselves, they are not a replacement for your home telephone -- they are an ancillary communication service. “What Skype does is allow you to make a cheap telephone call using your PC -- so as an ancillary communications provider, who are they impacting? They are certainly not impacting Vonage,” Citron says.

“Skype is having its own issues with growing so they will have to figure that out,” he adds.

Sandvine's McGeown believes Zennstrom’s master plan is to begin licensing the Skype software to handset manufacturers around the world. “It would be completely, utterly brilliant, because you would make a dollar on every Sony phone that ever got sold,” McGeown says.

So while Skype may be a threat to VOIP companies and wireline carriers now, it could evolve into a threat for mobile service providers.

“So you can imagine if you’re a wireless service provider how horrifying that must be when your economic model is predicated on, basically, a free phone, and you sign the customer up for two years of service,” McGeown says. “Oh great -- now the phone’s free and so is the service.”

— Mark Sullivan, Reporter, Light Reading

(9)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
aswath
50%
50%
aswath,
User Rank: Light Beer
12/5/2012 | 3:10:49 AM
re: Skype Rules North American VOIP
Shouldn't the table include Yahoo!Japan BB phone numbers? Also isn't there a difference between Skype numbers and say Vonage numbers? Vonage subscribers pay monthly and Skype number is cumulative, meaning if a subscriber bought SkypeOut credit two times, then the count is incremented by 2 (in my understanding).
verome
50%
50%
verome,
User Rank: Light Beer
12/5/2012 | 3:10:48 AM
re: Skype Rules North American VOIP

It's not easy to admit the world is changing. Vonage representative isn't the only who's trying to dismiss Skype. But it's hard to compete with something you get for free. And it works. And when you need more services, you pay for that (SkypeIn, Out and Voice Mail) only and that's it.

Isn't it exactly ten years ago when Netscape listed and gave Microsoft hard time, at least for a while? There are not many companies in the world that could attack as efficiently as Microsoft did and succeed. Carriers are not like Microsoft that would be able unite and get rid of a threat (well, you never know).

McGeown's excellent point GÇ£Oh great -- now the phoneGÇÖs free and so is the service.GÇ¥ reminds me of something: did you know that there are still some countries where it is prohibited for carriers to bundle the phone and the subscription? You buy your (GSM) phone wherever you want, walk into a carrier's retail outlet and subscribe to a network service that you use as long as you want and cancel whenever you want. It works, too.

HeavyDuty
50%
50%
HeavyDuty,
User Rank: Light Beer
12/5/2012 | 3:10:45 AM
re: Skype Rules North American VOIP
"Zennstrom's economic model was based on two things, McGeown believes. Skype is all about getting users hooked on the free part and then charging for additional services like SkypeOut and video conferencing..."

But what do you do when most of your customers only want to use the free stuff?

GÇ£So you can imagine if youGÇÖre a wireless service provider how horrifying that must be when your economic model is predicated on, basically, a free phone, and you sign the customer up for two years of service,GÇ¥ McGeown says. GÇ£Oh great -- now the phoneGÇÖs free and so is the service.GÇ¥

Imagine your trying to sell a business model for VoIP where you give away the service/application, but someone still has to have facilities/physical plant to get the service from here to there (try to remember that OSI layer 3 don't go nowhere except through layers 2 then 1, and vise versa), and the faciities providers bill every month, without fail.

Anybody see a problem here?
allidia
50%
50%
allidia,
User Rank: Light Beer
12/5/2012 | 3:10:44 AM
re: Skype Rules North American VOIP
What is John Malone orchestrating in Global Broadband??? Get on it Ray.
optical_man
50%
50%
optical_man,
User Rank: Light Beer
12/5/2012 | 3:10:44 AM
re: Skype Rules North American VOIP
Have to disagree w/ Vonage's CEO on one point:
"They are certainly not impacting Vonage,GÇ¥ Citron says."

Skype offers an IP to PSTN softphone called SkypeOut (out of the IP network...) for 2 cents/minute in the U.S. You pay 10 Euros up front and use your minutes.
I use it when I'm on the road. Works fine.

Vonage has a softphone as an option to your flat rate account.
Vonage's Softphone option costs $10.00/month each month, every month. You get 500 minutes then it's 3.9 cents/minute after that.

Question? What if I don't use $10.00 worth of laptop to PSTN each month? I lose money.
Skypeout's pricing plan of pay for what you use, with no "monthly charge" is a much better plan.
If Vonage would match, I would add it to my Vonage account. They are losing my incremental business, so Citron is incorrect in stating Skype is not affecting him. It is. Not much, only incrementally, but isn't that what we are all trying to build/sell? (most of us). Incremental services, for that extra buck a month.
PO
50%
50%
PO,
User Rank: Light Beer
12/5/2012 | 3:10:43 AM
re: Skype Rules North American VOIP
Does Skype conform with the FCC's pronouncements on 911 service? Or SkypeOut?

Do we need a broader taxonomy to deal with IP-only telecom (e.g. Skype, FreeWorldDialup, etc) separately from local- and long-distance replacement services (Vonage, Yak VoIP, etc)?

Regulators certainly seem to be making a distinction, at least in Canada and the U.S., among providers with and without PSTN connections. The latter are apparently not being considered as VoIP service providers per se.
zher
50%
50%
zher,
User Rank: Light Beer
12/5/2012 | 3:10:36 AM
re: Skype Rules North American VOIP
say providing IP soft phone service for existing or even furture subscribers. Thus a subscriber is able to make unlimited calls at home using the real phone, and make unlimited calls from his/her
PCs as long as it's online.
zher
50%
50%
zher,
User Rank: Light Beer
12/5/2012 | 3:10:36 AM
re: Skype Rules North American VOIP
No.
ajrele
50%
50%
ajrele,
User Rank: Light Beer
12/5/2012 | 3:10:35 AM
re: Skype Rules North American VOIP
they do...for unlimited calling for $25/month plus an extra fee for the softphone
From The Founder
Kicking off BCE 2017, Light Reading founder Steve Saunders lays blame for NFV's slow ramp-up and urges telecom to return to old-fashioned standards building and interoperability.
Flash Poll
Live Streaming Video
Charting the CSP's Future
Six different communications service providers join to debate their visions of the future CSP, following a landmark presentation from AT&T on its massive virtualization efforts and a look back on where the telecom industry has been and where it's going from two industry veterans.
LRTV Interviews
Masergy: It's Time for SD-WAN Options

6|28|17   |   03:09   |   (0) comments


Paul Ruelas, director of network products for Masergy, explains how adding SD-WAN has changed the service mix for his company's customers. In some cases, the change is incremental, enabling more granular customer control. Masergy's newest version, SD-WAN Go, gives up some of those controls for a streamlined version targeting mid-sized customers with the most ...
Women in Comms Introduction Videos
Intel Ushers in the Revolutionary 5G Era

6|28|17   |   5:00   |   (1) comment


5G will bring job opportunities for women in telco and IT, as well as a whole new era of communications for consumers and industries of all kinds, says Caroline Chan, vice president and general manager of the 5G Infrastructure Division at Intel.
LRTV Custom TV
VeEX at ANGA COM

6|27|17   |     |   (0) comments


At ANGA COM 2017, Cyrille Morelle, president and CEO of VeEX, updates Alan Breznick with VeEX's new products and technology. This includes VeSion cloud-based platform for network monitoring, AT2500-3G advanced spectrum analyzer and MTTplus-900 WiFi Air Expert module. He also comments on DOCSIS 3.1 deployment and Remote PHY technology.
LRTV Custom TV
The Overall Objective Is to Win the Game

6|26|17   |     |   (0) comments


SCTE•ISBE's Chris Bastian discusses Energy 2020's success to date and the importance of a flexible approach that allows for changes in specific strategies in order to reach significant milestones.
LRTV Interviews
CenturyLink: Let's Get Past SD-WAN Hype

6|23|17   |   04:02   |   (0) comments


Technology becomes a "shiny object" unless it's properly focused on solving business needs for enterprise customers, says Bill Grubbs, network solutions architect for CenturyLink. He explains to Light Reading why SD-WAN deployments have to be tailored to specific needs – and more.
Women in Comms Introduction Videos
Infinera's Sales Director Paints Tech's Big Picture

6|21|17   |   4:14   |   (1) comment


Shannon Williams, Infinera's director of sales, shares how she achieves work's many balancing acts -- between her role and the broader company, today and tomorrow's tech and more.
LRTV Custom TV
SD-WAN Innovation & Trends

6|20|17   |     |   (0) comments


Versa CEO Kelly Ahuja discusses with Carol Wilson the current status and trends in the SD-WAN market, Versa's innovation around building a software platform with broad contextualization, and the advantages that startups can bring to the SD-WAN market.
LRTV Interviews
Ovum's Dario Talmesio on 5G in Europe

6|20|17   |   02:16   |   (0) comments


At 5G World 2017, Dario Talmesio, principal analyst and practice leader on Ovum's fixed and mobile telecoms European team, explains the emerging trends amongst European operators as they prepare for 5G.
LRTV Custom TV
Putting Power on a Pedestal

6|19|17   |     |   (0) comments


ARRIS's John Ulm says a major accomplishment of SCTE•ISBE's Energy 2020 program is increased focus on power cost and consumption, including inclusion of energy requirements in operators' RFPs and RFIs.
LRTV Custom TV
Gigabit Access: The Last-Mile Pipe for All Future Services

6|19|17   |     |   (0) comments


A Gigabit access platform being deployed today must be able to deliver all types of services to an increasing number of devices. A non-blocking architecture is necessary to support the ever-increasing growth in bandwidth demand. The Huawei Gigabit access solution is based on a distributed design that is fully scalable to deliver a unprecedented performance.
LRTV Custom TV
Key Factors to Successfully Deploy an SD-WAN Service

6|19|17   |     |   (0) comments


As service providers transition their SD-WAN solution from trials and limited deployments into production at large scale, there are important considerations to successfully operationalize these solutions and realize their full potential, without adding complexity, introducing uncertainty or disrupting current business operations. Sunil Khandekar, CEO and Founder ...
LRTV Custom TV
IoT Solutions: Rational Exuberance

6|19|17   |     |   (0) comments


IoT solutions are morphing from hype into viable business opportunities. Huawei has the platform and ecosystem support to help carriers successfully address new business opportunities in the IoT space.
Upcoming Live Events
October 18, 2017, Colorado Convention Center - Denver, CO
November 1, 2017, The Montcalm Marble Arch
November 1, 2017, The Montcalm Marble Arch
November 2, 2017, 8 Northumberland Avenue, London, UK
November 30, 2017, The Westin Times Square
All Upcoming Live Events
Infographics
With the mobile ecosystem becoming increasingly vulnerable to security threats, AdaptiveMobile has laid out some of the key considerations for the wireless community.
Hot Topics
No Imagination: UK Chip Biz Goes Up for Sale
Iain Morris, News Editor, 6/22/2017
Does AT&T Deserve Time Warner?
Mari Silbey, Senior Editor, Cable/Video, 6/23/2017
Netflix's Lesson in Culture Expectation Settings
Sarah Thomas, Director, Women in Comms, 6/21/2017
Verizon Takes 'One Fiber' to More Cities
Mari Silbey, Senior Editor, Cable/Video, 6/22/2017
AT&T Expects 5G in Late 2018 or Early '19
Dan Jones, Mobile Editor, 6/22/2017
Like Us on Facebook
Twitter Feed
BETWEEN THE CEOs - Executive Interviews
Following a recent board meeting, the New IP Agency (NIA) has a new strategy to help accelerate the adoption of NFV capabilities, explains the Agency's Founder and Secretary, Steve Saunders.
One of the nice bits of my job (other than the teeny tiny salary, obviously) is that I get to pick and choose who I interview for this slot on the Light Reading home ...
Animals with Phones
Live Digital Audio

Playing it safe can only get you so far. Sometimes the biggest bets have the biggest payouts, and that is true in your career as well. For this radio show, Caroline Chan, general manager of the 5G Infrastructure Division of the Network Platform Group at Intel, will share her own personal story of how she successfully took big bets to build a successful career, as well as offer advice on how you can do the same. We’ll cover everything from how to overcome fear and manage risk, how to be prepared for where technology is going in the future and how to structure your career in a way to ensure you keep progressing. Chan, a seasoned telecom veteran and effective risk taker herself, will also leave plenty of time to answer all your questions live on the air.