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.