Global Insight Perspective | |
Significance | Skype and 3 UK have launched a free mobile VoIP service, offering free calls between customers using Skype-branded mobile handsets. |
Implications | Given that mobile operators that have spent billions in licensing and network roll-out costs are unlikely to cosy up to the free mobile VoIP plan, Skype and 3 UK will be fretting at the possibility of further price reductions in their much-sought-after international call market. |
Outlook | As the free service only works between customers using similarly-branded Skype phones, a failure to win a critical mass 'seed' customer base will likely confine the service to the dustbin of history. |
Hutchison Whampoa's 3 UK unit and the VoIP upstart, Skype, have finally come to market with their new Skype mobile handset, which offers free calls over the internet to customers on the Skype network. In a statement today, Skype and 3 UK said customers using the Skype-branded mobile handsets will be able to make free calls to each other, in addition to sending free Skype instant messages. "Skype is now truly mobile," Skype acting chief executive officer (CEO) Michael van Swaaij said in a statement. "This new handset lets you make free mobile Skype calls when you are on the move to other Skype users all over the world." Hutchison Whampoa's finance director, Frank Sixt, was upbeat about the future for the Skype phones, projecting millions of sales in the near term. "We are optimistic that if you look at one or two years, [we will sell] millions rather than hundreds of thousands, but in the fourth quarter [of 2007] we are looking at several hundred thousand worldwide," he told reporters (see United Kingdom: 15 October 2007: Skype, H3G Mull Free U.K. Mobile Calls).
Although initially set for the U.K. market, the Skype phone is being launched in nine markets, including Australia and Italy, with plans under way for roll-out in other countries. In the United Kingdom, the phones will go on sale on 2 November, costing £49.99 (US$102.9) on a pre-paid tariff, although they will be free for 3 UK contract customers. The phones will come with a dedicated Skype button enabling easy access to Skype services for users. However, pricing for non-Skype calls and messages will be on 3 UK's standard tariff plan.
Outlook and Implications
Ambitious Project: While clearly innovative, the new service is as ambitious as it is risky. On the plus side, the service is relying on the over 246 million registered Skype customers, the increasingly falling price of mobile data, and the reluctance of the big operators to allow mobile VoIP on their networks, to kick-start the trend. However, without the iPhonemania-type hype, and the limited number of "actual" Skype users resident in the countries where the partnership works, there is little guarantee that it will take off with a bang. As the free service only works between customers using similarly-branded Skype phones, failure to win a critical mass 'seed' customer base will confine the service to the dustbin of history.
Ruffling the Feathers of the Stalwarts: Although Skype and 3 UK will be hoping to cream off customers from existing operators, they may have unwittingly stirred up a furore in the U.K. mobile market. Skype triumphed in the nascent VoIP market by aligning itself as a peer-to-peer, PC-to-PC, VoIP provider shielded from the hassles of operating a telecoms network infrastructure. Its acquisition by eBay in 2005, and the subsequent quest to break out from the PC-to-PC framework has had little success, with eBay writing down US$1.2 billion of the original US$4.3 billion it paid for the business. So far, most VoIP providers—such as Vonage and Dixons—that have ventured into providing terminals, have either gone bust or are nearing bankruptcy. Interestingly, the reason for their non-performance is obvious. The entire VoIP business case rests on under-pricing existing telecoms services in the belief that those services will remain at a high price. But as is wont to happen, once prices of the previously exorbitant services fall, the VoIP service is left to clutch at straws. Given that mobile operators that have spent billions in licensing and network roll-out costs are unlikely to cosy up to the free mobile VoIP plan, Skype and 3 UK will be fretting at the possibility of further price reductions in their much-sought-after international call market (see United Kingdom: 5 September 2006: DSG Quits VoIP Market, Transfers Clients to Vonage).