VOIP services

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

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wentriken 12/5/2012 | 4:34:18 PM
re: What's AT&T Getting From Skype?

Rather than being victim to questionably legal non-neutral network practices and certainly illegal false advertising by network operators, customers will simply jailbreak their iPhones and run Skype whenever they want.

"We're giving you internet access, but you can't use it for things that affect my revenue stream," preventing this is the heart of the net neutrality movement.

shygye75 12/5/2012 | 4:34:16 PM
re: What's AT&T Getting From Skype?

The opportunity that AT&T is claimed to be losing out on -- conventional voice revenue -- is getting less valuable by the day. Rather than chase those disappearing pennies, the better move would be to create a stronger platform to deliver more reliable Skype service, as one astute poster suggests.

dangeiger1 12/5/2012 | 4:34:16 PM
re: What's AT&T Getting From Skype?

Customers want choice and quality of services.  ATT could add quite a bit to the Skype experience if they were to overlay some strong policy capabilities to provide a higher quality Skype experience.  I would certainly pay for that, given that my Skype experience is best effort (and not consistently high quality) at this point.  

Gabriel Brown 12/5/2012 | 4:34:13 PM
re: What's AT&T Getting From Skype?

Skype over the 3G data channel is tolerable some of the time. But it's still long way from the reliability and quality of circuit-switch voice. You can't trust it.

I doubt Skype over 3G will ever match what we're used to. I guess it could be improved and made more tolerable more of the time.

kalvie 12/5/2012 | 4:34:11 PM
re: What's AT&T Getting From Skype?


Yes. A stronger platform, a more profitable platform.

The conventional voice revenue stream is drying up. Per-minute revenue on voice will go the way of the dodo one day, and AT&T will need a usage-based model to replace it.

They made a step toward that today. This announcement of the end of the Unlimited Data Plan changes the game. Now, instead of getting pennies for minutes, they'll get dollars for megabytes.


shygye75 12/5/2012 | 4:34:09 PM
re: What's AT&T Getting From Skype?

Is the reliability issue limited only to Skype?

Gabriel Brown 12/5/2012 | 4:34:08 PM
re: What's AT&T Getting From Skype?

3G uses dedicated bearers for voice. It's highly optmized and it works!

Skype / VOIP runs over the data channel (a shared bearer) designed for packet data. Sometimes it works well, but it 's best effort, so often quality is poor. Simply not comparable.

Some VOIP merchants think fancy codecs, etc, will solve the problem. I'm not convinced based on experience to date.



kalvie 12/5/2012 | 4:34:05 PM
re: What's AT&T Getting From Skype?

Yeah, VoIP can be lossy, depending on the connection. But the thing is, VoIP over cellular data is young. Expectations are low. And the market loves free (or nearly free). It's like an app that you download for free: you may suffer a little, but you really can't complain.

Eventually, we'll figure a way to deliver VoIP on xG and it'll be as good as VoIP is now -- depending on the underlying transport (private vs. public networks; engineering; codec, QoS...).

sarahthomas1011 12/5/2012 | 4:33:52 PM
re: What's AT&T Getting From Skype?

Looks like 5 million people have already downloaded the Skype app from iTunes. We'll see how many keep using ito once the free trial is up.

Manzo_Openet 12/5/2012 | 4:33:46 PM
re: What's AT&T Getting From Skype?

"Services like Skype stand to generate revenue for, as well as benefit from, intelligent networks like AT&T's.  There are technologies available to help operators handle the network requirements of OTT services such as Skype, and to aid with traffic prioritization; with a strong partnership in place, these tools can be agreed on by both parties in a way designed to reap maximum benefit for all players: operator, service provider and subscriber.  These types of partner service controls ensure that everyone gets the network access they need when and how it's required, in order to generate the most revenue possible. This model and these types of partnerships will continue to evolve, and with them, the opportunity to profit from innovative, value-added services."


--Mike Manzo, CMO, Openet

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