Skype Spooks Operators

It crept up out of nowhere... and now it's sucking customers away from traditional phone companies faster than a vampire on a bender!

Skype, the Internet phone service from KaZaA founder Niklas Zennstrom, now has over a million users, just eight weeks after its launch. The software, which enables PC-to-PC voice-over-IP (VOIP) calls, has seen as many as 120,000 people connected at the same time.

How are traditional phone companies reacting? Boardwatch has collected some anecdotes from a range of carriers. Here’s what they think:
  • "Skype has gone from 5,000 users to 120,000 users in two months. Is it going to replace the PSTN overnight? No, but it's certainly a very interesting thing to watch,” said Joe Glynn, VP of product strategy at Qwest, during a presentation at the Multiservice Switching Forum meeting in Vancouver this week (see Carriers Say VOIP & SIP Are Hot).

  • At the same conference Tadanobu Okada, director of R&D for NTT Communications Corp., said that VOIP will cost his company "one trillion yen" in 2004. Although he didn’t mention Skype in particular, Okada said, “NTT is not happy about the current IP phone business at all.” He asserted that, according to Japan's Yano Research Institute Ltd., there will be as many as 28 million VOIP users in Japan by 2007.

  • One major U.S. operator, which agreed to comment on condition of anonymity, was even more scathing of Skype. “We're talking about phone service, which folks have come to rely on like electricity and water. At the first sign of trouble, and with no customer service to call and no company to blame, consumers will find a full-service alternative... Most people want to use their current phone in their home and not be tied to the computer,” he said.

  • ”Skype is for the younger generation, kids on campus -- it’s not for the mainstream,” says a spokeswoman for MCI.

  • Naturally, established VOIP providers such as Vonage Holdings Corp. and 8x8 Inc. (Nasdaq: EGHT) have a different take on Skype’s early success. “It’s part of a growing movement that will eventually replace the PSTN,” says Huw Rees, VP of sales and marketing at 8x8. However, he notes that services from the likes of 8x8 and Vonage that bridge the gap between the PSTN and Internet telephony are “more universally useful” than Skype. “Grandma in Idaho is not about to start making Skype calls over the Internet, but she may well want to receive a VOIP call from her family who live abroad and want to connect directly to her regular phone line,” Rees says.

  • Vonage VP of product development Lou Holder says the quality of Skype calls is “terrible,” adding that “there’s always a market for stuff that’s free.”

    Skype is of course working hard to improve the quality of its service and to interconnect with the PSTN in future releases, but right now it has more immediate technical hurdles to overcome.

    Zennstrom admits the company wasn’t ready for the huge number of people that signed on. “The scaling was an issue initially,” he says, but he insists it is under control now. Another glitch involved people who registered fashionable names, such as J.Lo and Darth Vader, and then tried to sell them.

    Skype spam might also be a problem down the line. “We will have to work on some kind of spam filter then. The simple thing to do is to only allow calls from people in your friends lists,” Zennstrom says.

    Release 1.0 of the software is expected sometime this winter and will offer improved sound quality with a few new features, as well as some bug fixes. In addition, the company will launch a premium version, which will offer extra features (call holding, call waiting, multiple lines), conference calling, and voice mail. Pricing has not yet been released.

    Analysts say that once Skype starts to make money, traditional operators will be forced to take notice of the service. That is, if Zennstrom’s vision of it hasn’t already shaken them to the core.

    He predicts that over the next five years POTS (plain old telephone service) will be reduced to something you use in those rare cases when you call someone who refuses to migrate or to some third-world countries. “I see a clear parallel to the shift from fax to email,” he says... Skype is the email, POTS is the fax.”

    And the last time you sent a fax was...?

    — Jo Maitland, Senior Editor, Boardwatch

    Do you want to toss in your two cents on this issue? Check out Boardwatch's new poll on Skype! You know you want to!

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    aswath 12/4/2012 | 11:17:54 PM
    re: Skype Spooks Operators The article says that the anticipated spam problem can be controlled by "allow(ing) calls from people in your friends lists". Well and good. But when Skype interconnects with the PSTN, I guess we can only pity the "someone who refuses to migrate or to some third-world countries".

    mr zippy 12/4/2012 | 11:17:53 PM
    re: Skype Spooks Operators Clay Shirky has written an interesting article about networks like Skype, titled Customer-owned Networks: ZapMail and the Telecommunications Industry

    Very interesting reading.

    mr zippy 12/4/2012 | 11:17:52 PM
    re: Skype Spooks Operators Never managed to work out LR HTML fu, here is the URL to cut and paste :

    aswath 12/4/2012 | 11:17:51 PM
    re: Skype Spooks Operators With a plan to offer "a premium version, which will offer extra features (call holding, call waiting, multiple lines), conference calling, and voice mail", Skype is demonstrably not s student of Shirky. Existing technologies can be used to realize the objectives of "customer-owned" VoIP network with these and other extra features as well and of course NAT/Firewall traversal.

    lastmile 12/4/2012 | 11:17:50 PM
    re: Skype Spooks Operators http://www.lightreading.com/bo...
    No one listened to me then!
    When LR talks about it, suddenly people respond.
    It is just not Skype that is Skoopy but the entire VOIP industry will crush POTS.
    Revenue from POTS is similar to revenue from slave labor. In this case the slave is the Copper customer.
    Happy Halloween.
    aswath 12/4/2012 | 11:17:48 PM
    re: Skype Spooks Operators lastmile:

    An innocent explanation for not listening may be that it is easy to miss a thread under "Reader Talk". If you search for Skype you will find a reasonable participation on this topic; probably some of them even answer a few of your questions.

    Since the codec is a proprietary one, I think building a standalone device for Skype is really upto Skype.

    dljvjbsl 12/4/2012 | 11:17:47 PM
    re: Skype Spooks Operators
    The comparison being made here between the PSTN and Skype is apt. There is quite a close connection in the types of services that are provided by Skype and POTS. In reading the references to SIP on the Skype pages, I find that the comparisons made there to be not very useful. SIP has been designed to exploit the opportunities provided by IP telephony. The services that SIP has been designed to accomplish are beyond what is possible in POTS (or Skype) and of a different order.

    In brief, it is quite obvious that Skype has been designed with the device orientation that is the hallmark of POTS. With Skype one can call the device belonging to another person and hope that he is there. Skype assumes that the device at the other end is always connected and always on. It assumes a device that is very much like the ordinary telephone in that it is always connected and always running. The features that Skype will be able to accomplish with this are those that are focussed on the capabilities of the telephone set.

    SIP, in contrast, is focussed on the connecting of people together. The provision of the proxy with a registration service and the use of a single address provides a service which spans the multiple devices that will be used by a single person and is indifferent to whether they are on or not. SIP in this way ahs been designed to exploit IP telephonyGÇÖs capability to exploit both person and device mobility. People will be able to be contacted no matter where they are on the most suitable device. One does not a device in SIP but the person.

    The mobility aspect of SIP is provided by its normal session set up protocol that does not seem to have an explicit name. Another aspect of SIP is its event service. This allows the gathering and distribution of information that is relevant to the user and even specific calls. The event service can provide the means for sophisticated control of conference sessions. It provides the capability to modulate call operation to the current circumstances of the users.

    SIP can do far more than this of course. It is an extensible open service. All the protocols are published. Textbooks are available to explain their operations and anyone can use them to develop and deploys new services. The proprietary nature Skype protocols precludes open development of course and they appear t be very limited in the types of services that they can provide.

    Skype to me appears to be a dead end technology. It seems to be optimized to provide POTS like services with some capability of instant or semi-synchronous services. SIP is of course capable of providing all of this and more. To extend its capabilities Skype will have to move in the direction that SIP has already explored. The Skype developers may find more efficient protocols that the existing SIP protocols in doing this. However the basic SIP architecture appears to be the optimal one for IP telephony.
    boozoo 12/4/2012 | 11:17:35 PM
    re: Skype Spooks Operators dljvjbsl,

    I heard that the biggest problem with SIP is that it does not cross NAT firewalls without some configuration.
    To me, this seems like a significant limitation that would slow down the adoption in 2 potentially big markets: homes with multiple PCs and work computers.

    Where do you see the middle ground between the plug-and-play nature of skype and the feature-rich SIP?


    sgan201 12/4/2012 | 11:17:34 PM
    re: Skype Spooks Operators Hi boozoo,
    "SIP does not cross NAT Firewalls"

    That does not seem to be true.. Packet8 use SIP and somehow it works.. Check out www.packet8.net

    aswath 12/4/2012 | 11:17:33 PM
    re: Skype Spooks Operators Ref. Msg #8: I heard that the biggest problem with SIP is that it does not cross NAT firewalls without some configuration.

    All IP Communications be it SIP, Skype or IM chat applications have issues regarding NAT/Firewall traversal. (There is little difference between them as far as functional architecture goes; they use different protocols, that is all.)

    Many solutions have been proposed to handle NAT issue; the most popular being placing some sort of relay function in the open internet. Skype utilizes community members' resources for this function whereas others have their own boxes.

    By the way, it is possible that this may turn out to be the Achilles' heel of Skype if the number of members behind a NAT is much more than those who can provide the relay function.

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