Tech Untangled

Raketu combines social networking with integrated communications (VoIP calling, IM/SMS, info feeds) and media content (IPTV) - a one-stop shop for online socializing, communication, and entertainment from the desktop PC and mobile phones.

Let’s look at where Raketu stands in each area of social networking, communications, and IPTV.

For VoIP calling, Raketu has phone-to-phone and PC-to-phone calling. Phone-to-phone calling is initiated by entering the “Call to” and “Call from” from a web interface. Raketu plans to launch a mobile application that users can install on a mobile phone to make VoIP calls and send SMS and IM. These guys have really cheap calling rates; free unlimited calls to landlines and mobiles within the US and to 42 countries (limited time offer). Since I call Sri Lanka quite often, I know that the Raketu’s rates to Sri Lanka are really low. If Raketu can offer real cheap calls to Sri Lanka, they can offer cheap calls to anywhere!

However, the VoIP landscape has some well known players such as Gizmo, Fringland, Skype, Jajah, Google Talk, MSN. One could expect new players as well, given the low entry barriers associated with all things Internet.

Now, let’s look at IM and SMS. Raketu can talk to pretty much any IM client (Yahoo, MSN, AIM, ICQ, Google, Skype, Jabber), with conferencing across IM clients. Their secret sauce appears to be very simple; The Raketu application can speak every IM client’s protocol. Again, many of the IM players could easily do that.

When it comes to social network, again, Raketu is very limited. With much better known social networks such as Friendster, Linked In, myspace, and Facebook, Raketu just doesn’t have the momentum to be a leader.

Looking at IPTV, the story is similar. Joost and Babelgum have far better IPTV applications and much better content.

Many companies focus on one service, but Raketu is trying to carve out a niche by integrating social networking, communications, and video. Raketu has the right vision, but the problem is the competition.

Companies such as Joost are well positioned to do the same thing; Joost has a highly coveted IPTV service and has integrated IM (Jabber and Gmail) and news feed services and a “Widget Menu” to house a variety of future applications. Joost is formed by the experienced founders of Skype, who’ve been there and done that when it comes to Peer to Peer technology, VoIP, SMS, and IM. These companies tend to have more market recognition as well.

With all this competition (With Joost and Babelgum and other IM/SMS and VoIP providers), is there room for Raketu? Right now, Raketu does not look well positioned to lead the integrated service offering space.

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Skype has been an amazing success in the wireline domain, with over 171 million registered users, availability in 28 languages, and a large eco-system of WiFi handsets and Cordless Phones (Netgear WiFi Phone), Telecom gateways (iSkoot), and ATA/Gateways (VoSky). However, Skype has a very limited presence on cellular networks.

Its not for lacking of trying - Skype probably has engaged cellular service providers, but with very limited success. For example, Skype has a partnership with the cellular provider ‘3′ to offer Skype on cellphones, but using a gateway from iSkoot rather than installing a Skype client on the mobile phone. This allows ‘3′ to utilize its voice network capacity and measure minutes of use. More importantly, it appears to be a great ploy to use Skype buzz to promote ‘3’s services on the X-series handsets. Likewise, even Skype’s short lived promotion with German cellular operator E-Plus was to promote its 3G service via Skype. Similarly, a partnership with Motorola to develop a Skype client has gone nowhere.

The primary reason wireless operators baulk at Skype is the fear of cannibalizing voice ARPU and over-utilizing its data network. Skype’s wireless ambitions haven’t succeeded, so Skype has resorted to complaining and petitioning the FCC. I’m sure wireless operators will welcome Skype into their backyard now!

For the following reasons, Skype will not be a mainstream cellular application anytime soon:

1. Most mobile phones are closed. It is virtually impossible for a user to install a Skype client without the cellular operators support. These are the run-of-the-mill phones that comprise about 90% of mobile phones in the US (PDA’s, Smartphones, or Blackberrys are not in this category).
2. Most users couldn’t install applications in mobile phones. Even if the users could install applications on a phone, many users don’t know how to do it. In theory, users could install applications in Java phones, but difficult in practice for ordinary users. It is much easier to install an application on a PDA, Smartphone, or a Blackberry, but still few people do it.
3. Cellular networks are not geared for Peer-to-Peer (P2P). Skype uses P2P, and if a Skype application on a mobile phone acts as a ’supernode’, it can be sending and receiving transmissions even when the user is not on a Skype call. This can clog up todays wireless networks quickly (even 3G), reducing the service experience for other wireless users as well.
4. No quality guarantees. Skype is a VoIP technology, and in packet data networks, transmissions have to compete with other transmissions. In most cases, voice communication requires constant transmission in both directions, but this cannot be guarateed without Qualty of Service (QoS) guarantees.

Without cooperation from cellular providers, Skype may be limited to either complaining and petitioning the FCC and working with gateway providers such as iSkoot

IPdrum has a clugy way to use Skype from a cell phone.

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Skype is well known for its innovative technology and low cost strategy that has propelled it to be a VoIP darling. And I am a big fan of Skype. However, Skype has had difficulty in cracking the wireless (cellular) industry, so Skype has adopted a unique strategy - Complaining.

Skype petitioned the FCC (the Federal Communications Commission that governs telecommunications in the US) in February seeking a ruling that the Carterfone principle applies to wireless networks and asks the FCC to create an FCC-guided, industry-led forum “to ensure the openness of wireless networks.” (a form of Network neutrality). In other words, Skype wants the FCC to apply the famous 1968 Carterfone decision that allowed consumers to hook any device up to the phone network, so long as it did not harm the network, to the wireless network as well.

Skype’s interest in this matter is crystal clear - it wants wireless carriers to allow any software or application (including Skype, of course) to make calls over their network. Some Wireless carriers explicitly prohibit users from using certain applications such as Skype in their customer agreements (does anyone ever read them!), but not all do. Others have circumvented this potential problem by keeping their devices closed - by preventing, if not making it utterly impossible, to install applications on a wireless device.

There is a certain important caveat associated with the Carterfone case that such an action should be “privately beneficial without being publicly detrimental.” Now, I can bet you that wireless carriers such as AT&T, Verizon Wireless, Sprint Nextel, and T-Mobile will fight this tooth and nail claiming that opening up the wireless network to any application could be very harmful to the overall network. Imagine some kind of virus application, or malware being installed on the network, which starts pinging all the other mobiles in the wireless network. This could easily bring down a wireless network and even prevent emergency calls from getting through.

Skype recognizes that its proposal would pose some thorny technical issues. That’s why Skype is suggesting the creation of an FCC-guided forum to handle technical specifications, one that would operate transparently and would involve all stakeholders in the issue. Skype’s view is that such a forum would ensure that “no entity can enforce techniques such as blocking, locking, or certification requirements that have the intention of preventing consumers from modifying or installing software unless it is reasonably proven that such software harms the network.”

I say good luck to that. Why should be FCC get involved in handling technical specifications for wireless carriers and vendors? FCC doesn’t do that for other industries, so why should FCC get involved here.

Part of the problem is the belief that there isn’t much competition, but there is healthy competition, as indicated by the steady decline of voice ARPU. In its filing, Skype argues that the arrival of 3G services could offer “tremendous new sources of price competition provided by entities such as Skype.”. It’s difficult to argue that the wireless industry lacks competition when numerous wireless carriers, including Amp’d mobile (see related article Amp’d Mobile in Bankruptcy), have entered the market in the last 5 years. Plus, if competition is a real issue, the FCC could grant more wireless licenses so that more wireless carriers can operate in any given area (not an easy thing).

Interestingly, in January 2007, Skype was complaining that high carrier data charges was preventing the use of Skype on wireless.

So far Skype has had little luck with this strategy. So Skype’s newest complaint is that mobile phones are ‘locked’. Skype also complained that “Carriers are using their considerable influence over handset design and usage to maintain control over and limit subscribers’ right to run software communications applications of their choosing.”

While most phones are in the ‘locked’ category, Skype doesn’t point out that not all phones are locked. Advanced Devices such as Smartphones, PDAs, and Blackberry devices that comprise a small but growing share of mobile phones are ‘open’. Interestingly, Skype doesn’t seem to have made much ground in this category. Of course, Skype will say that cellular contracts prohibit customers from using VoIP applications. First of all, I think only T-Mobile does this. Second, Skype is a Peer to Peer technology that assigns TCP/UDP ports dynamically and hence cannot be isolated and blocked successful. However, the difference is that Skype software is rather network intensive, so naturally wireless carriers are wary of Skype.

Interestingly, even Skype doesn’t allow any device to connect to the Skype telephony network. Tom Keating talks about an example here.

There are several reasons why Skype is not ready for cellular today. In a future article, I’ll articulate those reasons.