Saturday, September 17, 2005
Kevin Werbach on eBay-Skype-Paypal
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I see two ways to justify the deal. eBay has tried to articulate the first one. Real-time communication has always been an important component of commerce, and eBay sees opportunities to enhance its particular form of electronic commerce with the voice, messaging, video, and presence capabilities Skype brings to the table. Add to that the low-hanging fruit opportunities for pay-per-call advertising, in which eBay would take a commission for generating leads that turn into Skype-powered phone calls, and the potential connections between Skype and eBay's subsidiary PayPal, not to mention Skype's potential for continued organic revenue growth through eBay's user base, and you've got some solid opportunities for real synergies.
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Traditional telecom companies face two huge economic anchors that prevent them from innovating and growing new revenue opportunities. (They also have to struggle with regulation and internal cultural limitations, but I'll put those aside for the moment.) The biggest economic challenges for a telecom carrier are the costs of its physical infrastructure and its billing system. Skype solves the former, by virtualizing the network into peer-to-peer links between end-users riding on top of the broadband Internet. And PayPal solves the latter, by virtualizing the financial system into similar peer-to-peer links. If Skype wants to realize its potential for generating real revenue and profits, it's going to need a cutting-edge billing infrastructure capable of scaling to hundreds of millions of users. It just got one.
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Communications and the Internet are converging. As a result, the idea of paying per-minute for basic telephone calls is quickly becoming an anachronism. The telecom industry as we know it will be replaced by a converged broadband environment with very different economic drivers. The major communications infrastructure providers -- telephone, cable, and wireless companies -- think they will dominate this new world. By controlling the pipes, they hope to extract a share of profits from the applications running on those pipes.
eBay-Skype represents an end-run around that "walled garden" vision. Skype is a self-contained communications platform, effectively designed to circumvent both traditional government regulation and private efforts to constrain applications. Given its huge user base, it could become the dominant Internet communications ecosystem, just as eBay has become the dominant ecosystem for person-to-person transactions online.
...No one knows how exactly this story will play out. What is clear is that every major player will want to have communications capabilities as part of its toolkit. Users will get converged communications services from multiple providers: it will sound as awkward to talk about "your phone company" as it would to identify "your e-commerce company" or "your search engine company."
Get ready for some creative disruption!
See also his previous post on Smoking Gun on Network Neutrality, also related to Skype:
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The Net Neutrality concept has gradually gained steam in recent years. Former FCC Chairman Michael Powell advocated similar principles in his "Four Freedoms" speech in early 2004, and the full FCC recently adopted a "policy statement" along similar lines. Unfortunately, neither of these statements had any binding force. And the FCC's recent pronouncement was full of caveats and limitations. As Susan Crawford notes, several tech companies have been lobbying for enforceable Net Neutrality rules in the forthcoming rewrite of US telecom laws.
All along, carriers have been making the argument that Net Neutrality rules are unnecessary. Where's the evidence, they ask? What incentive would we have for hurting our own customers?
So then, what to make of this press release from Verso, announcing "Carrier Grade Skype Filtering Technology"?....
So Skype is "undesirable" traffic, along with instant messaging and streaming media? Given data from Cachelogic suggesting that roughly half the traffic on the global Internet is peer-to-peer video file transfers, the argument that Skype VOIP traffic (which uses far less bandwidth) is causing congestion is a red herring.
A more revealing quote comes later in the press release:
"This traffic runs outside the traditional carrier revenue generation models and is therefore highly undesirable for them."
In other words, Skype VOIP traffic is undesireable to broadband network operators because it poses a competitive threat. Verso's solution allows those operators to filter, degrade, or block that competitive traffic, leveraging their control of the network.
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"No one knows how exactly this story will play out. What is clear is that every major player will want to have communications capabilities as part of its toolkit. Users will get converged communications services from multiple providers: it will sound as awkward to talk about "your phone company" as it would to identify "your e-commerce company" or "your search engine company."
The problem I see is a huge dilemma:
Is it the right road to follow Skype (with or without ebay) like we followed Microsoft?
It has indeed the advantage to make us able to communicate with 50.000.000 users and more...
Or wouldn't it be better, after we saw where Monopolies bring the customers, to follow an open standard (like SIP or H323) platform and leaving this way the possibility to competition to play the role of driving the market?
VoIP IS the Future, like the PC was the future, but do we really want a new Microsoft?
: 23 January, 2006 21:54
