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    Skype and Google Have Lessons For Operators in How To Compete

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    Arunkumar
    Operators see Skype and Google as threats to their business as these over-the-top companies offer voice and video calling services to customers for free or low prices. However, some operators have also worked with Skype by offering integrated services on their networks. For example, Verizon Wireless allows customers to make free Skype-to-Skype calls and also use SkypeOut services. Meanwhile, KDDI in Japan will offer unlimited Skype calling on Android phones. While these partnerships generate some revenue, telecom experts warn that the bigger threat is that these services could undermine operators' brands and turn customers away to apps instead of network services. Operators will need to offer their own innovative services to build customer loyalty rather than

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    Skype and Google Have Lessons For Operators in How To Compete

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    Arunkumar
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    Operators see Skype and Google as threats to their business as these over-the-top companies offer voice and video calling services to customers for free or low prices. However, some operators have also worked with Skype by offering integrated services on their networks. For example, Verizon Wireless allows customers to make free Skype-to-Skype calls and also use SkypeOut services. Meanwhile, KDDI in Japan will offer unlimited Skype calling on Android phones. While these partnerships generate some revenue, telecom experts warn that the bigger threat is that these services could undermine operators' brands and turn customers away to apps instead of network services. Operators will need to offer their own innovative services to build customer loyalty rather than

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    52-53 GTB NovDec10 Distruptive Techs

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    Operators see Skype and Google as threats to their business as these over-the-top companies offer voice and video calling services to customers for free or low prices. However, some operators have also worked with Skype by offering integrated services on their networks. For example, Verizon Wireless allows customers to make free Skype-to-Skype calls and also use SkypeOut services. Meanwhile, KDDI in Japan will offer unlimited Skype calling on Android phones. While these partnerships generate some revenue, telecom experts warn that the bigger threat is that these services could undermine operators' brands and turn customers away to apps instead of network services. Operators will need to offer their own innovative services to build customer loyalty rather than

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    32 views2 pages

    Skype and Google Have Lessons For Operators in How To Compete

    Uploaded by

    Arunkumar
    Operators see Skype and Google as threats to their business as these over-the-top companies offer voice and video calling services to customers for free or low prices. However, some operators have also worked with Skype by offering integrated services on their networks. For example, Verizon Wireless allows customers to make free Skype-to-Skype calls and also use SkypeOut services. Meanwhile, KDDI in Japan will offer unlimited Skype calling on Android phones. While these partnerships generate some revenue, telecom experts warn that the bigger threat is that these services could undermine operators' brands and turn customers away to apps instead of network services. Operators will need to offer their own innovative services to build customer loyalty rather than

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    Disruptive technologies

    Operators see Skype, Google and other over-the-top companies as threats yet they should
    also learn from the way they have developed and won customer loyalty

    Skype and Google have lessons


    for operators in how to compete
    customers with smartphones and data plans the option
    to extend their unlimited calling community to hundreds of millions of Skype users around the globe.
    Innovative Japanese mobile operator KDDI said
    in October that it would start offering Skype on its
    Android phones from November.

    Deeper integration

    Scott Stonham, CommuniGate:


    The worry is that large numbers of
    subscribers are choosing to use third
    party applications instead of those
    offered by the network operators

    Telecoms operators the world over are terrified about


    the long-term impact of Skype, the over-the-top
    internet company that offers free voice and video
    calls the world over between Skype customers, and
    cut-price calls to regular phone numbers.
    Trouble is, for Skype-to-Skype calls the word customer doesnt really apply, as the software is free to
    download and use: all the customer needs is a broadband service. Skype gets nothing, but neither does the
    broadband provider.
    Skype customers do pay for two optional features: a
    phone number where ordinary callers can reach them
    calls are diverted to their Skype service and a feature
    called SkypeOut, by which they can call standard fixed or
    mobile numbers around the world, at rates from 0.019
    a minute upwards or less with a monthly account.
    But at the same time many operators the world over
    are working closely with Skype to offer integrated services, including Verizon in the US and KDDI in Japan.
    Verizon Wireless announced at Mobile World
    Congress in February 2010 that its customers would
    be able to make and receive free calls to other Skype
    customers across the world.
    Customers can also use SkypeOut service to call
    regular phone numbers at a fraction the cost charged
    by regular operators, including Verizon Wireless itself.
    The only proviso that Verizon Wireless 45%
    owned by Vodafone made was that customers
    taking up the offer should have a data plan for their
    smartphones.
    Verizon Wireless chief marketing officer John
    Strattons said at the time: Were effectively giving

    52 Global Telecoms Business: November/December 2010

    The VoIP services will initially be made available on


    two smartphones in the au range, the IS01 and IS03,
    but the operator says in plans deeper integration on a
    range of au Android devices and other devices in 2011.
    Users of the service would be able to make unlimited Skype-to-Skype voice calls without being charged
    against their monthly minute allowance or data plan.
    Takashi Tanaka, a senior vice president and board
    member at KDDI, said: Skype on au is a breakthrough in giving customers in Japan unlimited,
    global communications options, while expanding
    their calling community to hundreds of millions of
    Skype users worldwide.
    Skypes CFO Adrian Dillon acting CEO until
    new CEO Tony Bates was able to start said:
    KDDIs position as a leading network provider in
    Japan that offers a wide range of communications
    services makes it a natural partner for Skype given
    our vision to make Skype available everywhere and
    enable users to take their Skype conversations with
    them wherever they go.
    Hutchisons Three has been offering Skype services to
    customers for a number of years and the company claims
    that its users have already made a billion minutes of calls.
    The deals havent brought Hutchison down; on the
    other hand they havent pushed Hutch to the number
    one position in any of its mobile markets either so
    perhaps Skype is not the threat that many think.
    Meanwhile the industry is starting to worry about
    another potential theat, this time from Google. For
    years the company has been running Gmail chat, an
    add-on to its email system that allows users to have
    voice and video chats free of charge as does Microsoft for its Hotmail customers.
    From August 2010 Google added a feature that
    allowed US customers of Gmail to be able to call telephones directly from their email. The search engine
    company said it would provide free calls to the US
    and Canadian phones from Gmail for the rest of 2010
    and charge low rates for calls made to other countries.
    Calls from the US to the UK, France, Germany,
    China and Japan were priced at $0.02 a minute.
    The service is available only to Gmail users in the US

    www.globaltelecomsbusiness.com

    Disruptive technologies

    Adrian Dillon, Skype: KDDI is


    a natural partner for Skype,
    enabling users to take their Skype
    conversations with them wherever
    they go

    just like Google Voice, the companys existing phone


    offer, which has also been limited to US customers.

    Conference calls
    Google Voice is a sophisticated system that allows
    customers to set up a new US phone number which
    can ring existing office, mobile or home phones
    simultaneously or call one or two of them, based
    on features such as time of day or where the call is
    coming from. And conference calls are easier to set
    up than with conventional wired phones.
    So far, though, its limited to the US. Anyone from
    outside who tries to sign up or even express interest, is told: Thanks for visiting Google Voice. Were
    not yet open for users outside the US, but are planning to expand our service to additional countries in
    the future. No details, though.
    Skype did it the other way round: it was created by
    a Swede, Niklas Zennstrm, and a Dane, Janus Friis,
    with software from a group of Estonians and the
    team had a world view from day one. The service was
    launched in 2003 and Skype is now the biggest consumer of international telecoms minutes and its annual
    revenue is now running at around $800 million.
    So where does this leave conventional telecoms
    operators, faced with competition from these cloud
    operators? They have a number of options: they can
    watch Skype and Google provide innovative services
    to customers while they get almost no revenue apart
    from charging for a fixed or mobile data service; they
    can make deals with Skype, as Hutchison, KDDI and
    Verizon Wireless; or they can compete by providing
    advanced services.

    Competitive dynamic
    Telecoms consultant Martin Geddes pointed out the
    quandary in an article in Global Telecoms Business
    earlier in 2010. Communications in the cloud is a
    paradigm shift in which power moves from ownership
    of data networks to control of software platform, he
    wrote. It sets up a new competitive dynamic between
    the IT and telecoms industries and their respective
    ecosystems to supply the capabilities that fill the gap.
    Scott Stonham, vice president of marketing at
    CommuniGate Systems, has also written extensively
    about the challenge of voice over IP services such
    as Skype in Global Telecoms Business. While we

    www.globaltelecomsbusiness.com

    thought the competition was about voice revenues;


    that hasnt turned out to be the case, he says. The
    real threat comes from brand erosion and the costs
    operators have to bear in maintaining a network to
    support the service and data delivery of third party
    applications from over-the-top providers, such as
    Google, Skype, Facebook and many others.
    The effect of those services is far more acute than simple loss of voice revenue. A smartphone user consumes
    between considerably more bandwidth than the average
    voice subscriber see the latest analysis on page 55.
    Figures show that consumption of data bandwidth
    at AT&T, which markets the iPhone exclusively in
    the US, has grown 50-fold while its data revenues
    have increased only 250%. Meanwhile, the operators
    AT&T, Telefnica and others have to build and
    maintain networks to support that growth.
    Recent research from TeleGeography says that
    international Skype traffic amounted to 54 billion
    minutes in 2009. While the number of minutes is
    substantial, the revenue generated by Skype and consequently lost to operators has not, to date, confirmed
    the worst fears of early predictions.
    For the first half of 2010, Skype reported a profit of
    just $13 million almost insignificant on $406 million of revenue, 87% of which was generated through
    SkypeOut credit sales.
    With the remaining 13%, or $52 million of its total
    revenues, being attributed to its other services, such
    as conferencing, SkypeIn and voicemail, what is all
    the worry about?

    Impact on operators
    Stonham warns: The worry is that large numbers of subscribers are choosing to use third party
    applications instead of those offered by the network
    operators, and this in turn impacts the operators in a
    plethora of ways, of which only one is revenue.
    Google Voice is an example, he says: Google
    Voice gives users one number that is portable across
    any network, mobile, VoIP or fixed line; inserting
    a layer between the subscriber and the operator
    that, when supplied with the other network-agnostic
    features it offers, such as voicemail, call history,
    conference calling, call screening and blocking and
    voice transcription of voicemail messages, completely
    decouples the subscriber from the network.
    As a result the subscriber associates value with the
    Google applications, not with the underlying network.
    In fact, with Googles positioning, in the eyes of the
    subscriber, the network provider becomes simply a
    cost rather than a value-add, notes Stonham. Once
    a user associates Google as its voice, messaging, data,
    email and apps provider the role of the carrier beyond
    being the commoditised provider of a broadband connection or a SIM card looks significantly threatened.
    So the message is clear: carriers have to move
    beyond being just bit-transporters. That means
    offering their paying customers services that they
    will value and pay for. Operators should learn
    from Skype, Google and the other over-the-top players not just by doing something of what they do,
    but also by creating the same sort of customer loyalty
    shown by those people who spend hours at a time
    logged into Facebook. n
    Global Telecoms Business: November/December 2010 53

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