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Competing against Skype 102: Lobbying

Do you think Skype is a threat to incumbent telcos?

This is the second in a series outlining tactics telcos have at their disposal to answer the question "If you think Skype is a threat to your telecom profits, how can you compete?"

101: Pricing

Regulate Obstacles.
A political power attack.

BigCos have beefy political muscles. Small ones don't. If you're big you think of this as a benefit of size and experience. Small fry see this as an overwhelming, unfair advantage. 

Political muscle comes from big taxes and patronage. Local and long distance phone companies use their influence on regulators, like America's Federal Communications Commission and state and provincial agencies. They've also lobbied law makers for more nearly 150 years, going back to the telegraph. Samuel Morse worked with Maine Congressman F.O.J. Smith to lobby the U.S. congress for federal funding for his electric telegraph, back in the early 1840s. Did I mention they've mastered this by now?

Telcos use government to create new opportunities and to defend their turf from effective competition.

Some telcos convinced governments to outlaw Skype or legislate expensive technical barriers to operation. In the United States, incumbent telcos lobbied for emergency service (e911) to increase operational costs and complexity. The hope was to slow the entrance of Skype, Vonage and other VoIP providers and to raise cost and complexity for smaller, nimbler companies.

National carriers blocked or banned Skype in several countries (China, UAE, Mexico, Belize, Jordan, India), although this trend seems to be changing. In some cases, political power pushes regulatory agency attention away from an incumbent's aggressive tactics.

Three fronts affect Skype's future:

Net Neutrality for a Fair Playing Field.

Should your Internet carrier be able to charge you for VoIP minutes, above and beyond what you pay Skype? Or make your Skype calls slower than calls made with their own softphone products?

You don't want folks messing with your bits. Net neutrality is a policy: carriers should just carry traffic. No discrimination based on the content of that traffic. Neutrality advocates say government has a role in keeping the Internet fair, neutral, and open to all. 

eBay's government relations staff supports net neutrality as do nearly all web businesses.

Open Wireless (Wi-Fi, Wi-Max) Networks for Hybrid and Wi-Fi Skype Phones.

Net neutrality for wireless broadband. Google is lobbying congress for 'open' wireless networks. Susan Crawford's been following the Senate's hearings on the 700MHz auction. If your phone or laptop uses Wi-Fi, without this, Wi-Fi access providers can choose to block or cripple Skype.

Mobile Carterfone for Unlocked Access to the Mobile Phone Network.

As long as you're paying for mobile service, shouldn't you be able to use any gadget you like? Skype picked this fight with a brilliant petition to the US FCC earlier this year. Attach any device to the mobile network instead of only getting locked phones from carriers. The incumbents are lobbying hard against this.

Political power is real, complex, and not for the faint-of-heart. Political power can buy incumbents time to fight, to adapt and to change the battleground from disruption to status quo.

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Comments

Skype can definitely be a threat to telcos. In fact thats why some wireless carriers such as T-mobile expressly prohibit VoIP applications on their network.


See an interesting article 4 Reasons you wont have Skype on Cell phones anytime soon


The primary threat is that Skype operates at a much lower price point than current voice plans from wireless carriers, and voice accounts for 90% of wireless carrier revenues.

The story you reference to state that Skype is banned in India clearly states the opposite. It is NOT currently banned in India and the current ruling on the books will not ban Skype. According to the story, a trade group has petitioned the government to declare Skype et. al. to be illegal because they do not have to follow the regimen that the petitioners have to follow.

For your information, the current regulation states that PC to PC and PSTN to PC communications are unregulated. PC to PSTN is regulated in that the interconnection can take place only at the approved gateways. This translates to: Skype and SkypeIn and perfectly legal; as long as SkypeOut interconnects to Indian PSTN at the approved gateways (which I am sure they are, given that one of Indian companies are the resellers for Skype), is legal as well.

Please correct your understanding and keep a cynical eye out when you read stories, especially when they come from Indian outlets about India.

Aswath, I stand corrected. Skype does not appear to be illegal in India now.

The article does reinforce the message of the story: that PSTNs and other incumbent telcos use their market power and size to lobby legislators and regulators.

Thanks for issuing the correction. (I am not sure the implication of "now". Probably you mean "currently" as in it could change tomorrow. But I want to clarify to my readers Skype was never illegal in India, despite the fact that some have suggested to a security conscious country that it should be because it is not interceptable.)

Skype recently did a deal to provide SkypeOut termination via VSNL, the privatization outgrowth of the former India telecomm monopoly; this deal relates specifically to call termination India and Canada. Would this almost make any discussion about SkypeOut availability in India all but moot? (See SkypeOut, VSNL and Climbing the Call Quality Improvement Ladder.

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