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Summary:

There is a school of thought which believes that Skype’s value added services, SkypeIn, SkypeOut and Skype Voice Mail could become a major nightmare for Vonage. Allan Tumolillo, COO of Probe Financial Associates is one such person and he believes that, “Skype now has a product […]

There is a school of thought which believes that Skype’s value added services, SkypeIn, SkypeOut and Skype Voice Mail could become a major nightmare for Vonage. Allan Tumolillo, COO of Probe Financial Associates is one such person and he believes that, “Skype now has a product set similar to Vonage and cable and telco providers. What is most important, though, is that Skype’s product set allows us to examine what the likely cost to a subscriber will be from VoIP providers.” He believes that others will have to lower their price points to meet Skype, or else. Most vulnerable he thinks is Vonage. I kinda agree. Linux hasn’t really killed Microsoft but took a major bite out of Sun Microsystems’ game, leading to speculation that the company might go private, though that has been denied by Scott McNealy.

  1. Dmitry Goroshevsky claims that “But our monitoring data indicates they already deploying that sort [media relay points] of infrastructure. Now what is the difference between Skype and Mr. Bell?” So probably there infrastructure cost is not that “non existant” as onw would think. Skype is introducing Affiliate program, with commissions. So probably viral marketing is losing its steam. Notwithstanding these, those in the know think that Skype’s cost structure is lower than other VoIP providers. I for one still think that Skype and other VoIP providers will be comparable.

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  2. alternatively, the affiliate program would be one way to get super scale up? don’t you think?

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  3. It could be. But the question is are tey becoming more like any other company rather than one with no incremental cost.

    Recall that for a long time Vonage was claiming that it doesn’t own any network and that is why they could offer their service inexpensively. I am only raising the possibility that things may be changing in Skype world as well.

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  4. OH i agree on that point. there are no free phones in this world. i think even as they start offering in/out services, they all start adding up in terms of expenses. it is going to change, eventually… they are seemingly aligning their business to that future reality. but i agree. with you!

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  5. There are differences in cost structures between Skype and other VoIP providers. Softswitches cost money, as does the supporting infrastructure (network infrastructure like routers and conditioned space, operational infrastructure like support systems and staff). Without softswitches and the supporting infrastructure, with minimal customer care, and with no real marketing expenses, Skype has very low fixed and per-customer costs. And Skype charges for those items for which they incur incremental cost (In and Out, which require gateways, and Voicemail, which requires servers).

    It’ll be interesting to see whether this strict model of charging the cost-causers succeeds better than a subscription model, which Tom Evslin has espoused.

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  6. First of all, the point of my original comment was to suggest that Skype’s cost structure is not so different from other VoIP providers. There are indications that Skype has to, if not already, deploy similar network elements. Now the marketing costs are also creeping in. As Skype migrates to “vernacular” market they will look more like others.

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  7. Skype is more expensive than land lines. Just set up SkypeOut and made three short calls to landlines. Cost 1.8 euros.

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  8. kal, but the upside of skype is that you don’t pay the fixed line charges which you pay, even when you are not using the service. i think that is the critical difference. in the end, you end up saving a ton of money doing that.

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  9. Skypeage

    Om probes the “Skype vs Vonage” cost models and along with comments tends to believe that Skype beats them on cost. Apparently Vonage needs another round of funding too? I’ve never really understood a business that has to borrow money to buy custome…

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  10. Kal – 1.8 Euros for 3 short calls -where were you calling? Most countries are only 2c per minute. Something is wrong

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