It's Time for Skype to Spring for Its Own Infrastructure

15 Comments

Tom Keating reports that the owners of Skype Wi-Fi phones and other standalone devices have been experiencing excruciating network problems, and points to the vitriol flowing freely on the Skype forums.

[qi:___wifi] This raises the question: Why are these outages happening? And should Skype (EBAY) start to build its own network of super peers? After all, their big plan is to drive Skype’s non-PC usage, as indicated by their recent expansion into the mobile market. They have also been aggressively pushing the Skype brand, making money by licensing it to hardware makers who build devices like Wi-Fi phones and then sell them at mass-market retailers such as Wal-Mart.

Skype benefits from the increased footprint that comes from expanding into the non-geek markets. The problem is that many of these new buyers are using Skype over Wi-Fi and don’t contribute as much to the overall P2P network placing an extra load on some and letting others leech off the platform.

I think it is time for Skype to start buildinga network of company-owned supernodes to take the load off the consumer network. They have in the past built infrastructure to support expansion into the PSTN-connect business. However, the reason the company resisted expansion into the mobile domain was purely because it didn’t want to build its own supernode infrastructure, instead choosing to partner with startups like iSkoot.

Of course, such infrastructure comes with big bills, and one can understand Skype’s reticence. Some, like our good friend Aswath Rao suggested that the whole Skype economic model will break down if that it wouldn’t cost the company that much to build dedicated supernodes, but it would take away some of the P2P cachet. And while that might be, I think that when you pay for a device, you expect a higher quality of service, unlike us PC-people who settle for poor quality because it doesn’t cost us anything.

Maybe it is time for Skype to pony up!

15 Comments

davidphile

I don’t know what’s wrong with their stuff, but my Skype phone has been working so poorly lately that I’m forced to leave them. I already put the phone up for sale — it does other things that I don’t use it for so someone else might keep it out of the landfill.

Bill

You don’t understand anything about how Skype works, yet you make technical recommendations on what they should do? Why do you think this has anything to do with supernodes?

Ike Elliott

I agree with you margueriteanne, and with Sam, that more bandwidth would help. Another solution is greater control of the customer’s Internet connection, and I have posted more on that topic on my blog at http://ikeelliott.typepad.com/telecosm/2007/11/why-skype-fails.html

Skype currenly makes about 40 cents per month per subscriber, on average, and it is mostly on their Skype Out and Skype In services, where they give Skype subscribers access to the PSTN. Their challenge is to try to grow this meager ARPU into something more like $5 per subscriber per month, over time, and their wi-fi phone efforts are a first step in this direction. They need to get a lot more Skype In and Skype Out usage, and they need to sell other service add-ons more consistently, too.

margueriteanne

Interesting, I was just discussing a similar idea with Sam (mozilla) the other day and he mentioned that the hype won’t really matter unless there is great bandwidth, and an infrastructure that attracts functionality – such as if skype were to own a network of its own. I think it still can be free, they will have to find a way to monetize on internet ads though and build its own network somehow.
Not sure how that would be possible.
How are they making money now?

Ike Elliott

If Skype is sure that building out their own supernode network would solve the problems, then it would probably make sense to do so. However, it could be that the problems have at least as much to do with the WiFi network in the home, and the potential for low signal level in parts of the home, or interference on the public spectrum from neighboring homes and businesses. These are problems that will be harder for Skype to solve.

Ian

Seems like they could accomplish the same thing with smarter devices that give more back to the network. Problem solved without a penny spent by Ebay/Skype.

Rick

Chic is great until things don’t work. Mainstream folks don’t give a dime about some p2p technology.

Aswath

A small correction: In that post, I had argued that it doesn’t cost that much to build the whole set of supernodes and the operational cost is not much either.

My circumspect point in that post was that Skype is getting the chic factor because it uses a P2P technology. A secondary point was that SIP providers can use that architecture instead of deploying big iron boxes. But alas, they were all PSTN emulators in more ways than one.

Jason G.

I own one of the Philips VOIP841 phones and, while I haven’t been hit with any of these outages, I have to support the build-out idea. These standalone devices make Skype a MUCH more useful service, if only because you aren’t tethered to your PC, and you don’t have to worry about whether your PC is on and stable. (I also own a Philips VOIP321, which is PC connected, and that is a constant concern.) I’d also bet that Ebay is seeing higher ARPUs for users with these devices, so they may be able to justify some buildout, if not a major one. I know I’m spending a lot more with Skype now than when I was just using the PC client.

Pierre Col - UbicMedia

Skype is already dead : in Europe, every mass-market ISP provides “triple play” subscriptions including
– free unlimited local + national calls
– very low cost continental calls
– low intercontinental costs

We, in Western Europe, continue to use Skype only for free video conferencing, point.

No way to make money for Skype / Ebay, that’s why Skype is simply dead.

Om Malik

I totally agree. There is no way this free ride is going to continue. The word of mouth negative publicity is going to cause problems with the mainstream buyers of Skype-branded gear.

Rick

Aswath has a good point. Skype is banking on low costs. The problem with low cost is low quality and you know where that will take you.

I really thought they would utilize EBays data farm when they got bought. They really do need to spend some money on their infastructure if they ever want to become a real phone service.

Comments are closed.