AT&T, in conjunction with some 10-15 incumbent telecom carriers, is plotting to launch a Skype competitor, according to a research report issued this morning by ThinkEquity analyst Anton Wahlman. He argues that big shifts in the telecom landscape are forcing the carriers to think along these lines: Voice has become a losing proposition, and they’re losing fixed-line customers at an alarming rate. Continue Reading

AT&T, in conjunction with some 10-15 incumbent telecom carriers — British Telecom, Deutsche Telecom and NTT among them — is plotting to launch a Skype competitor, according to a research report issued this morning by ThinkEquity analyst Anton Wahlman.

This is Wahlman’s theory for now, but his track record is full of theories that have eventually been proven right. For instance, he once issued a report that outlined 16 reasons why Cisco should buy Scientific Atlanta — which the networking giant went on to do, for $6.9 billion. For that reason alone, I put in a call to AT&T to get the lowdown, but all they would offer was the boilerplate phrase, “We can’t comment on this type of speculation.”

Anyway, back to the Skype competitor! Essentially what Wahlman is saying is that incumbents are going to offer a VoIP client that will work on the incumbent broadband/3G wireless pipe, and will use a backend platform that will allow folks to make free voice calls to anyone who’s logged into it.

Much the same way as Skype-to-Skype calls are free, incumbents could use their platform to keep calls from each other’s network free. The plan could help them avoid the termination charges and still make money when the calls go off the network to, say, a rival’s phone service or wireless network. “We believe that they will have to use a common client and common software platform in order to make this work,” Wahlman said.

Isn’t it too little, too late? Realistically speaking, there’s a slim chance of anyone catching up with Skype, which keeps adding subscribers and which, despite being mismanaged by its acquirer, has a momentum all its own. “Better late than never,” was Wahlman’s take.

Here are some key points about this yet-unnamed proposed Skype killer:

* To be launched in 2009.
* The concept will be extended to mobile phones eventually.
* The service would run on the carrier broadband connection, and also on top of the 3G/4G wireless broadband pipe.
* The service will be used as a lure for selling other services such as video.
* The incumbent consortium partners can brand this service any way they want.

Big shifts in the telecom landscape are forcing the carriers to think along these lines, Wahlman said in a chat earlier this morning. First, carriers are reluctantly facing up to the fact that voice has become a losing proposition. Thanks to competition from folks like Skype, voice is becoming essentially free. Second, they are losing fixed-line customers with an alarming rapidity.

As I have noted previously on several occasions, the carriers are in a race against time — these line losses basically make their plans to sell other services such as broadband and video impossible, thereby risking their future plans all together. The cost of winning back the customer who switches to, say, cable, VoIP, or a rival’s wireless service is just too high.

In the past, carriers have merely taken half-measures to address the voice-for-free problem. So this is radical new thinking: If voice is a losing business, why shouldn’t the carriers cannibalize it themselves, then sell other services, including video? As Wahlman noted, “Robust data connection is the most valuable service the carriers sell.”

Amen to that. I just find it hard to believe that the dinosaurs are finally getting jiggy with this new way of thinking.

  1. Dont think the “free calls within my walled garden” approach is going to fly. The consumers are already used to free PC to PC calling anywhere over the internet.

  2. I did not know that Skype made money for Ebay. Amazing how a service that does not have a great means to monitize its service develops competition.

  3. This could be huge if the telcos of old drop their old-style bureaucratic paranoid methodologies. Maybe they are ready? Sadly, I doubt it.

  4. Too little, too late is right. By the time the telcos roll this out, free calls to any device, anywhere in the world will be much closer to reality. So, the telcos will keep chasing a moving target.

  5. Addendum to my previous comment: I meant free calls to any device, anywhere in the world via non-telco channels similar to Skype, Grand Central-GTalk, Gizmo, etc. So essentially, the telcos will still be behind the leading edge VoIP applications.

  6. Skype should either just rent out their infrastructure to the Telcos or license their model to them. Either way I’m sure they could work out an agreement whereby the telcos would pay them a fee of some sort (sliding or fixed depending on the arrangement) and the telcos could basically keep all the revenue generated from the customer calling actions.

    I think outsourcing the infrastructure to Skype would be the ideal way to go since this model has proven extremely cost effective with emerging technologies (see Amazon Web Services) and allows the end consumer (in this case the telcos) to focus on the user experience (something that they suck at) instead of the mundane management of the infrastructure.

    Skype has tried to maneuver their way onto handsets basically through the back door, but failed to realize that their true benefit is not the client itself, but the infrastructure behind it. Oh and their massive customer base doesn’t hurt either. In order to leverage those existing customers, by creating a deal with the telcos to use their infrastructure a la AWS it would be beneficial to just make those accounts transferable to their users’ preferred carriers thus creating a massive value add for the carriers, Skype, and the customers. Monetizing the telecommunications business is tricky but something that the telcos know how to do and Skype has had relatively limited success in doing. They basically fill the gaps in each other’s portfolios, Skype provides the infrastructure and their users (thus generating them revenue) and the telcos provide their marketing and revenue generating plans/services to their customers along with access to cheap calling.

  7. [...] GigaOM picked up the story, and they’re also not bullish on the idea. Wahlman suggests that British Telecom, Deutsche Telecom, NTT, and about 10 others, are planning to offer a VoIP client (sometime in 2009) which would enable users to make free voice calls to other users of the software. However, since they’re, well, telecoms, they could offer web-to-phone line calls at a lower fee than Skype because they save on termination costs. [...]

  8. [...] Competitor Coming from The Telcos? May 06th, 2008 | Category: Voip News This story by Om is rather interesting on the possibility of a global telco led initiative to compete with [...]

  9. Hopefully they will be smart enough to use SIP and make it open instead of something like the closed and proprietary Skype bullsh*t


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