(A cross posting from unreasonablemen.net)

A couple of posts today (Om Malik and a follow up on Skype Journal) discuss a rumoured Skype killing application that is allegedly being planned for. It seems that some of the Telco heavyweights want to build a VoIP based P2P calling service in order to stunt the success of Skype. Those providers in the consortium won’t charge interconnection (on net) calls, but if you call another carrier’s number (and I’d hazard a guess here) or even a POTS number within the providers number pool, you’ll get charged (like Skype out).

It’s a good strategy that has been successful before. The basics are that you enter an adjacent market, tank the revenue pool in that market to such an extent that the incumbent (Skype in this instance) has no resources left to enter your market because it’s fighting for its life in its home market.

Great plan except for a couple of things fella’s.
Firstly Skype’s disrupting you!, secondly you can’t tank what is already free, and thirdly Skype is already in your market (the oops too late moment!).
Apart from the problems with the strategy, I see a bunch of implementation issues with this the approach

  1. Can these Telco’s work together
  2. Can they get a value proposition that isn’t “old Telco” going at the same time as “Telco 2.0” – BT is a strong advocate of the “Protect and Grow legacy revenues”. How will this fly?
  3. Can they suffer the cultural change of not charging for calling?
  4. Can they physically build it
  5. Who will buy it? – only ray of hope is that they have financial security that Vonage etal don’t. They have a long way to go here. Skype’s adding 360 000 subscribers a day. That’s growth no Telco except China or India has dealt with ever.
  6. Can they sell it? Big step change for a sales teams

Thoughts on this anyone? Smacks of desperation to me.

4 Comments
  • Good questions. They tend to drive towards a ‘who wins’ scenario – either Skype or telco. Both will co-exist. But on your questions…

    1. No problems with telcos working together – they do already
    2. This is a major – setting it up within the existing business will probably lead to organ rejection.
    3.Yep – no charging for calling can be dealt with and already is by some telcos
    4. Not with existing talent
    5. Existing customers would be migrated onto it
    6. Will be sold – but not by traditional sales teams – that doesn’t work.

    I think the strategy angle has nothing to do with entering an adjacent market with the aim of tanking it. It is more to do with defending their own market.

    There are only 2 ways that this model would be more successful for telcos.

    1. They leverage their existing customer base – migrate them onto free plans with off net calling charges – relatively easy

    2. They open it up as far as they can making it genuinely web 2.0 capable – hard to do culturally

    Window of opportunity is closing – would suggest that if this is built in standard telco style then it’s not a starter.

  • Hi Miki,

    “It is more to do with defending their own market.”

    There in lies the problem, i stand by my point that culturally they aren’t there. I know where you (used?) to work. Can you honestly say that the team responsible for all that Voice revenue is anywhere close to giving permission (yip PERMISSION) to whatever team it is doing VoIP ? How does this gel with the “protect and grow traditional revenues” http://www.telecom.co.nz/content/0,8748,205912-204527,00.html from the investor day?

    The attitude of defense is completely at odds with grow and new wave. Defenders don’t innovate, defenders won’t willingly change be nimble or open.
    The attackers have nothing to loose, are fleet of foot and more culturally in tune with todays market

  • A couple of thoughts.

    1. Defending legacy revenues – Telcos are in the business of communication. The Legacy revenues are in the communications portfolio. Voice is a category underneath that with PSTN being the platform. You can move to VoIP and still be defending legacy revenues.

    2. Permission? That would being reasonable – this level of change will upset people. Permission is never granted.That isn’t a reason not to innovate (in fact its a measure of successful innovation).

    3. My point (in response to your questions) is that I agree that cultural change is the biggest barrier. And all the associated points about an attacker mentality.

    4. Your original post was about an industry move, not Telecom NZ specific – that’s a worthy conversation on its own as I was working on that same programme at Telecom hence my comments.

    5. I am still at Telecom until end of June- this post http://szikszai.blogspot.com/2008/05/clarification-of-status.html should make it clear what my status is 🙂

  • “4. Your original post was about an industry move, not Telecom NZ specific – that’s a worthy conversation on its own as I was working on that same programme at Telecom hence my comments”

    we should talk about this

Leave a Reply