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Summary:

The rumored sale of Skype to Rupert Murdoch’s News Corp for $3 billion is like an open sore – every day someone pricks the wound, and the bleeding starts. Cringely, Reuters, Always On, The Independent and even Bambi Francisco have something to say about this rumor, […]

The rumored sale of Skype to Rupert Murdoch’s News Corp for $3 billion is like an open sore – every day someone pricks the wound, and the bleeding starts. Cringely, Reuters, Always On, The Independent and even Bambi Francisco have something to say about this rumor, which may or maynot be true. Maybe the VCs looking to hit one out of the ballpark are spinning. I have refrained from commenting on this for obvious reasons – since everyone is screaming about it, why not quietly make some inquires. So I did. And here is what I have found.

Skype has hired Morgan Stanley as an adviser who can screen the “buyers.” While that’s the case, my Yahoo sources tell me that Skype approached them, and they balked at the asking price. What was the asking price? No one will even as much as hint to confirm this, but Skype wanted a billion dollars. Beyond that, everything else, I take with a pinch of salt.

So what does that really tell me? Two things. First, Skype is open to the right offer. Secondly, the asking price of $3 billion is tad too over optimistic. There must also be realization that in not so distant future, the wireless and wireline operators are going to clamp down on Skype, and create quality of service issues for the service. More on that later.

  1. WTF? What type of CRACK are they smoking in Estonia? This is an example of young people who have ZERO perspective ’cause they never lived through the dot com microcosm of the late 1990s (were they in diapers then?). All it takes is an Open Source project with momentum and with an OPEN API to blow away Skype. Anyway, Skype ain’t that great yet cause I’ve been trying it out with different people around the world and it has its moments when it sucks. Morgan Stanley can smoke some of that stuff too ’cause their top guys can’t hold their job anyway (whose hiring? whose firing? rings familiar of CSFB-DLJ).

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  2. Fear is what drives those prices. Fear of getting it wrong – of being left behind – of missing the right opportunity. Remember, Morgan Stanley stands to benefit no matter what happens – it’s just a question of how many p*ssing ice sculptures they buy at their party.

    The real question for Skype is what next and where’s the money. They’ve already given away the directory, the IM, the encryption, the security, the skype-skype voice. Selling Voicemail is a joke with the API exposed to allow third party voicemail to plug in.

    With minutes devalued, to turn around and say the business is hop-on and hop-off is probably also a joke.

    Video seems like it is/will be a client side feature. Cheap to free with no recurring revenue.

    So what have you got: an audience to push advertising to? Sponsored content?

    Skype feels a lot like ICQ did when AOL bought them.

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  3. “Wireless and wireline operators are going to clamp down on Skype.” Does anyone else other than me find this to be a problem. It sounds a lot like the RBOC deciding whether the phone can be used for voice, modem, or fax calls. We all know what happened there when they tried to block those —

    Personally — I don’t like the idea that the service provider can choose which traffic to block or slow down (outside of denial of service attacks which they are well within their rights to monitor and prevent).

    I think there are enough quality concerns that operators of for fee voice services can focus on differentiating their product without outright blocking the free competitors.

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  4. problem or not, victor, this is a fact. i think the service providers are worried about this and are trying to stop it as quickly as possible. listen, they will roll out their own twist of VoIp or whatever, and that’s when they start doing some crazy things with their networks. more of a business decision that anything else!

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  5. How will Wi-Max/Wi-Fi play a part, in other words are these a way around the service providers mucking with the Skype service?

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  6. WiWhatever is just technology. To get to the Internet, you need a service provider. As long as the ISPs are trying to vertically integrate, they’ll fear Skype. The hope is in muni or co-op ISPs who don’t feel the need to “own the customer”.

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  7. I don’t think muni or co-op ISPs will end up being that different from any other infrastructure provider.

    If you own and operate the infrastructure, you get to make decisions about how it is used and how it is monetized. Public networks may actually have more problems in getting this right because they deal with more voices. When a cableco is evil, you can usually figure it out because of the obvious motive. Munis and Coops end up with numerous motives and opinions. Just think about how your local public schools operate.

    Shortly after the town of Muttsville builds out a muni network with high ideals and tax dollars, Cisco will whisper in the ears of the IT guys operating the network that it would be very high minded to offer telephony on that network. After all, wouldn’t it be great if the free networking put in the public schools for the children included a phone in every classroom. Plus, the IT guys would add another few letters to their Cisco certifications, the IT department would add a couple more headcount, and what a grand project that will be.

    Soon the town council will be given the proposal and they will agree that it will be of great benefit to all to start the Muttsville Telephone Cooperative on the muni network. And it’s great that the mayor’s own son-in-law knows enough about eye-pee to join the IT department and participate.

    Time marches on. The take rate for telephony is luke warm and suddenly the added use-tax for telephony isn’t covering the added expense. “No problem” sayeth Cisco sales dude “We’ve seen this before in Cattsville.” You need a thing called packet shaping and policy management on your network. With packet shaping and policy management, you can really really really make sure that Muttsville Telephone Cooperative offers the best kind of service.

    And the other Skypes and Vonages of the world offer the worst. Before you know it, for the greater good of the children of Muttsville and the benefit of the Muttsville Telephone Cooperative, Skype is mucked with.

    People, groups, councils, organizations, governments, corporations – they all make decisions on policy. Since the technology exists to readily squash various applications on a network, you can be assured that policies will be created to do so. The only things that change, with some subtlety perhaps, are the motivations.

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  8. Google vs. Yahoo – the battle moves on

    Whenever we think that things are cooling down for a while, not one, but both search engine giants jump up to remind us the war is not over yet.Just yesterday Yahoo! announced that:we have grown our index and just reached a significant milestone at Yahoo!

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  9. The telcos can never beat the P2P model that Skype uses, they are regulated and mostly operate within local markets. Plus the QoS issue is more generic to the VoIP platform as such and does not just apply to Skype. I think with some hand holding (Google type), and considering their span (worldwide), I think they can go places.

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  10. [...] echnologyAugust 9, 2005 7:20 pm How RBOC Can Clamp Down On Skype In Om’s latest post on Skype’s acquisition rumors (more here), he left quite a bomb at [...]

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