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Summary:

Ever since Skype’s iPhone client enabled Skype-to-Skype calls (and send IMs) for free over Wi-Fi, I’ve been wondering what the next step towards the mobilization of Skype would be. The answer came today by the way of 3 UK, a 3G wireless operator. The company unveiled […]

Ever since Skype’s iPhone client enabled Skype-to-Skype calls (and send IMs) for free over Wi-Fi, I’ve been wondering what the next step towards the mobilization of Skype would be. The answer came today by the way of 3 UK, a 3G wireless operator. The company unveiled a new $3, Skype-enabled SIM card that will allow anyone to make Skype-to-Skype calls and send IMs from any phone on 3′s wireless broadband network. Of course, for the service to work, mobile subscribers would have to buy 3′s data plans, which are often more expensive than those just for voice. Skype accounts for 1.5 million minutes on the 3 network everyday.

From 1 May, there will be no data charges or top-up fees for either contract or pay-as-you-go customers who use Skype on 3’s network. Anyone with a 3 handset will be able to buy a 3 SIM with Skype enabled and talk as much as they want to other Skype users without ever having to pay another penny. During the summer, 3 will expand its offer to make it possible for anyone with a compatible 3G phone to take advantage of free Skype calls, whether or not their phone is from 3.

3 was the first 3G mobile company to offer a phone that offered Skype as a core functionality. It did so with the help of iSkoot, a San Francisco-based company. 3′s move is in sharp contrast to other traditional mobile companies such as T-Mobile, which has been treating Skype like a leper. I applaud 3 for recognizing the undeniable: Mobile is going to be all about data and voice will be just another app running on that data network.

While others have looked at Skype as a potential threat to voice and text revenues we see another advantage. Did you know when you call a friend on a different mobile network their network will charge your operator a fee for carrying the call? This is called a Mobile Termination Rate or MTR and is currently charged at around 4.7p or more for every minute of the call.

At our Mobilize 08 conference last year, 3 executive Frank Meehan explained the rationale behind embracing Skype.

The Skype phone makes us more margin than any other phone in pre-paid with the exception of the iPhone. About 65 percent of the UK market is prepaid and only 5 percent of those are using data. We also have a massive churn in prepaid in all markets where prepaid exists. So we basically told people, if you spend 10 pounds a month and top it off every month, you get Skype for free. That’s driven incredible loyalty to the device. We have a huge level of top-offs and we’re seeing growth on voice and text on those devices. So we built everything into the address book and you’re always logged into Skype and everything is integrated so that ease of use is integrated, and that’s driving usage. It works and it’s very profitable for us.

  1. Here’s the big problem with 3: service.

    On paper, they seem to be a good deal but, once you’ve signed up with them, you have no guarantee that the service will actually work and, if you need to get support, you can look forward to hour after hour of truly clueless, badly organized support from Indians who are unable to help you, even if they cared.

    I had a USB data modem from 3 that never really worked. After wasting weeks trying to resolve the problem, I just gave up and continued paying the £15 per month for the full 18 months of my contract. I am usually very tenacious but so many wasted nights, going round in circles, being transferred to yet another Indian who, apparently, had no notes and needed me to restate the entire problem yet again … I finally sat down, thought about what my precious free time was really worth and wrote off the entire £270.

    Of course, it wasn’t going to be that simple. When my 18 month contract was up, canceling turned out to be just as complicated and on three separate months I was told that my contract was had successfully been canceled but, mysteriously, it always uncanceled itself in time for the next bank debit. I Googled it and discovered that this is standard practice for 3 – once they’ve got you, they will not let you go until you send them a registered letter.

    So, “free” Skype or not, avoid this company like the plague.

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  2. I should note that I don’t mean to offend any Indians, I merely mean that it is apparent that many call centers there operate as cheaply as possible and do not give their staff sufficient training to actually solve problems, and the cultural differences, on both sides, can often exacerbate this problem.

    I am sure that if 3 had call centers in the UK, they would be just as clueless.

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  3. Alexander Ainslie Saturday, April 25, 2009

    This is exactly the kind of breaking away from legacy thinking and business models that modern telco’s need to follow. Voice as we (you) knew it has changed. Companies like 3 and BT’s Ribbit are proof positive that Change has come.

    To the Telco’s of the world who are on the sidelines, I say this: “Yes, you can!”

    @AAinslie

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  4. Om,

    I think you missed something. In the begining of the article you state that it is neccasary to buy 3′s data plan. It is not. You need to spend the $3 on the SIM. You than can make calls and message without ever paying 3 another cent for voice, data plan, anything.

    Skype out works except to the UK. Sykein does not work but there are now lots of workarounds for this such as forwarding a SIP DID through opensky.

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  5. Om, sorry but 3 are not shaking up the market, they are struggling to make a return on their huge investment in 3G network and license. Staff churn at their HO so fast it is difficult to keep track.
    This is just another marketing gimmick. How many INQ phones did they sell?
    Their competitors offer simillar incentives such as free on network calls and unlimited texts for min top ups.
    The previous comment re. Network quality is a reality. I believe they will struggle to survive the squeeze in a sauturated market.

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  6. I think its not long before a breakthrough comes that would enable smart phone users to call anywhere in the world for free.

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    1. Well, using 3 UK and Skype and two or three other providers together, that would be possible now to plenty of countries.

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  7. My T-mobile Win Mobile phone came with wi-fi Skype *two years ago.* That’s not an opinion, it’s a simple fact. I then used it to call #’s in the US and China every day while travelling overseas, using the world’s other worldwide service provider: Starbuck’s.

    The new developments may make more cash than ever before, but it’s unfair to declare them either revolutionary (Apple) or to denigrate providers that follow their own course (T-Mobile).

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  8. [...] by GigaOm, 3’s Frank Meehan, Director & GM, 3G Handset and Application Group, stated (hat tip to Om for the reminder): The Skype phone makes us more margin than any other phone in pre-paid with the exception of the [...]

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  9. as a recent switcher to ThreeUk from the boring and increasingly overpriced virgin mobile (esp. data tariffs) i welcome the move

    btw, i found 3′s cust service was qt reasonable and informed, maybe things have improved since first poster had problems? my switch was early april 2009

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    1. Paul – the people you speak to when signing up are not the same people you are transferred to when you have problems or want to cancel.

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  10. [...] embracing the VoIP service. We (and Nokia) can only hope this move is somehow contagious.[Via GigaOM]Filed under: Cellphones3 UK promises free mobile Skype calls until the end of time originally [...]

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