Skype Takes VoIP on the Road

Article ImagePromising to free users from the bondage of PCs and clunky headsets, Skype is bringing its signature voice over IP (VoIP) services—which let individuals and companies make cheap or free phone calls over the Internet—to the mobile space. To this end, Skype has teamed up with Netgear, a provider of networking products, to develop a family of new products, including the world's first Skype wireless mobile phone.

However, mobile may be a slight misnomer, as the Netgear WiFi phone only allows users to make calls from wireless Internet access points, or so-called hotspots. The locations are primarily limited to airports, hotels, universities, coffee shops, and office buildings. Notably, several cities including Philadelphia and San Francisco have plans to install citywide networks. According to Informa Telecoms & Media, there were just over 84,000 hotspots worldwide in Q2 2005, with most of the growth concentrated in the Asia Pacific region. The research firm concludes that the number of hotspots is unlikely to reach critical mass "until three to five years from now."

The Netgear/Skype WiFi phone leads the pack of VoIP devices expected to make their market debut in the near future. Vonage, a VoIP services provider, and Linksys, a division of Cisco, have also revealed plans to launch a mobile VoIP phone later this year.

It isn't surprising that VoIP is moving into the mobile market. The advance of VoIP has forced many fixed-line network operators into a corner, with Skype alone reaching between 140 and 245 million subscribers by 2008, according to Evalueserve, a European telecoms research and consultancy. Evalueserve forecasts that the overall surge in worldwide demand for VoIP Internet telephony services could push incumbents' revenues to fall by as much as 10%, with profits plummeting by at least 22% to 26%. Granted, the Netgear WiFi phone cannot make calls over mobile networks, but it is only a matter of time before mobile carriers are beset upon by VoIP options.

"Mobile call costs are much higher, creating a much greater economic incentive for users to find an alternative," according to James Enck, European Telecom analyst/global telecom strategist at Daiwa Securities Investment Bank in London. Growing smartphone penetration and the advance of lower data tariffs as well as flat-rate data offers, create an environment for "slow price erosion and opportunities for substitution," he says.

The arrival of mobile VoIP that uses ordinary mobile networks and the "widespread adoption of parasitic VoIP applications on those networks" would significantly threaten mobile operators' profitability, Enck says. "VoIP is about more than cheap calls; it enables a slew of context, presence, and personalization features and services."

There is even growing evidence that mobile VoIP could provide the foundation for a new breed of peer-to-peer content-sharing services. A vision of capabilities to come is a freeware software product called SplitCam, which lets Skype users stream pre-recorded video and share it with peers in real time. This enables content-sharing over a Skype connection without the need to send an email or upload a file.

"As more of these desktop-sharing, screen-capture, and streaming apps come into the market, the potential is for Skype and other voice and video IM applications to be massive conduits for P2P narrowcasting," Enck says.