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What's AT&T Getting From Skype?What's AT&T Getting From Skype?

AT&T lets Skype run over the top of its 3G network, but it should get more out of its deal with the VoIP kingpin, analyst says

Sarah Thomas

June 1, 2010

3 Min Read
What's AT&T Getting From Skype?

After a six-month waiting game, Skype Ltd. today announced iPhone users could make Skype-to-Skype voice-over-IP calls on AT&T Inc. (NYSE: T)'s 3G network -- but AT&T might not reap the rewards. (See Skype 3G App Lands on iPhone.)

The Skype 2.0 service is being billed as a free trial until 2011, when users will have to pay a still-to-be-determined fee for those calls. It would appear that AT&T is behind the charge, not wanting to give Skype a free ride, but a Skype spokesman says that it is not the case.

Other than AT&T's granting permission for VoIP apps to run over 3G back in October 2009, it has no involvement in the deal, he says.

So what is in it for AT&T?

Not a lot, according to Dario Talmesio, senior analyst with Informa Telecoms & Media . By staying hands-off on mobile VoIP, AT&T is enabling and even encouraging the revenue cannibalization scenario that operators have long feared. (See VoIP Still Threatens Legacy Carriers.) Consumers have little incentive to purchase a voice plan when Skype is offering a cheaper alternative.

The smartest strategy would have been for AT&T to insert itself directly into the value chain to assure that what it loses in voice revenues, it makes up for in the take up of data plans, Talmesio says.

"Having a partnership with Skype will help [operators] in acquiring more customers," Talmesio says. "There are some customers out there that would switch operators only because they can use Skype on it. This is proven in the UK market. Ultimately, this translates into lower subscriber acquisition costs for the operator supporting Skype."

Basically, AT&T should be more like Verizon Wireless .

When Verizon announced it would support Skype earlier this year, the companies were able to forge a deal because Skype ceded control to Verizon. (See Verizon Wireless Gets Skype.) By mandating that consumers purchase both a data and voice plan to use the VoIP service, Verizon ensured it wouldn't lose any voice revenues, but Skype got access to a much wider subscriber base.

Both AT&T and Apple, on the other hand, resisted this model by preventing Skype from tapping the 3G networks until regulatory pressures and consumer appetite for VoIP caused them to change their tune. Now, by letting Skype run on top of its networks, they are missing out on a real revenue-generating opportunity, Talmesio says.

Mobile VoIP services will continue to attract users on both 3G and WiFi until 2012, when 100 million wireless users will also be mobile VoIP users, Juniper Research Ltd. said in a report concurrent with Skype's news.

Juniper also believes that a high percentage of mobile VoIP will continue to traverse WiFi networks, rather than 3G, resulting in lost revenues of about $5 billion for the mobile operators by 2015. For this reason, both Juniper and Talmesio reiterated that carriers should align themselves with mobile VoIP providers and make sure they are getting a cut of the profit -- not being cut out of it.

"The really important announcements from Skype are those coming from operator engagements rather than its over-the-top strategy and direct-to-consumer strategy," Talmesio says. "The more the networks become wide and robust and fast, the more the smartphone adoption grows in the market, the better is for them, but what really accelerates the uptake is when they have a partnership with the operators, like Verizon."

— Sarah Reedy, Senior Reporter, Light Reading Mobile

About the Author(s)

Sarah Thomas

Director, Women in Comms

Sarah Thomas's love affair with communications began in 2003 when she bought her first cellphone, a pink RAZR, which she duly "bedazzled" with the help of superglue and her dad.

She joined the editorial staff at Light Reading in 2010 and has been covering mobile technologies ever since. Sarah got her start covering telecom in 2007 at Telephony, later Connected Planet, may it rest in peace. Her non-telecom work experience includes a brief foray into public relations at Fleishman-Hillard (her cussin' upset the clients) and a hodge-podge of internships, including spells at Ingram's (Kansas City's business magazine), American Spa magazine (where she was Chief Hot-Tub Correspondent), and the tweens' quiz bible, QuizFest, in NYC.

As Editorial Operations Director, a role she took on in January 2015, Sarah is responsible for the day-to-day management of the non-news content elements on Light Reading.

Sarah received her Bachelor's in Journalism from the University of Missouri-Columbia. She lives in Chicago with her 3DTV, her iPad and a drawer full of smartphone cords.

Away from the world of telecom journalism, Sarah likes to dabble in monster truck racing, becoming part of Team Bigfoot in 2009.

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