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Summary:

Skype is the largest international voice provider in the world, and this year saw it continue to steal minutes away from carriers. Skype calls accounted for 167 billion minutes in 2012.

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The popularity of Skype and other IP-based international calling options has continued to take market share away from the international minutes, according to research from Telegeography. The analysis firm reports that while telco voice minutes increased in 2012 to 490 billion in total — or by 5 percent — Skype saw its share of Skype-to-Skype calls grow by 44 percent to 167 billion minutes.

Skype’s increase of nearly 51 billion minutes in 2012 is more than twice that achieved by all international carriers in the world, combined. This is not a new story. As far back as 2009 Skype became the largest carrier of international voice traffic worldwide.

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Now clearly telcos still have plenty of international voice minutes, but with Skype and others chipping away at the growth the future is clear. Phone companies need traffic to grow to offset the falling prices of long-distance minutes, and this isn’t happening. From the report:

International migration, the rapid uptake of mobile phones in developing countries, and steady reductions in international call prices—especially in the form of flat-rate (and even free) calling plans—have contributed to traffic increases. Nevertheless, recent growth rates are well below the 13% average that carriers could count on to offset price declines over much of the past 20 years.

The regulatory regimes that make telco voice calls so high must be adjusted and carriers must seek other avenues for revenue. Both of these things are happening. The disparity in pricing between telcos and Skype’s calling is brought in part by the different ways governments regulate the telco voice network and how it regulates IP. Skype can avoid many of the fees associated with calling overseas because it only has to pay to reach a number at the end point if it’s not a Skype to-Skype call.

It may seem academic, but those regulatory regimes are a big topic of discussion both in the controversial ITU telecoms regulation attempts internationally as well as AT&T’s attempts to dump its TDM network here in the U.S. As the world switches to IP, regulators and telcos are leery of leaving IP unregulated, although many a proponent argues that’s what they should do to encourage the continuations of lower-cost calling options like Skype.

  1. When will telcos get it?

    The world is changing, and the network isn’t enough to sell by itself. They should begin competing with Skype directly by creating their own IP voice service, cannibalizing their own land line services. Just move it all to the cloud: data, voice, mobile. Focus on new services on top and using a Skype-like service to enhance brand loyalty.

    The network is a commodity made valuable by the services and applications you put over it. I think it there is still a ton of margin potential in selling services over the network, just not network services and voice services alone.

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    1. Sure, except that the LAST thing I want from a network provider is any of that stuff. Whether it’s fiber or copper, I want a big, fat, dumb pipe. I’ll handle everything else myself, thanks.

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  2. My wife and I used Skype all the time when we were long distance. Go Skype!

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  3. Ken Westmoreland Wednesday, February 20, 2013

    Telcos may not get it, but they have to pay to be licensed. Skype is parasitic, and as it uses its own protocol instead of one like SIP it’s closed off to rival VoIP services. Skype is as self-serving and as monopolistic as any telco.

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  4. As long as VoIP services close themselves off from each other, traditional telco’s aren’t in any real danger. Skype to Skype doesn’t make them any real money. They make it from gateway services into the PSTN just like any other VoIP provider. They just do it in bulk because they have more users.

    If VoIP providers don’t cooperate or get more creative with how they make money, they’re going to be selling minutes to the PSTN forever.

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