Author: Elizabeth Paffenbarger

In part 2 of a two-part series on telecommunication, Paffenbarger discusses the successes and future of Skype.

Skype is highly recognized in the world of Voice over Internet Protocol (VoIP), the technology challenging telecommunication’s status quo. The company was first launched in 2003 in Luxembourg. Since the premiere of Skype, the company has grown to become the standard for all companies hoping to enter the field of online phone service. In 2009 it had 520 million registered users in almost every country with Internet connection. According to their website:

Skype is software that enables the world’s conversations. Millions of individuals and businesses use Skype to make free video and voice calls, send instant messages and share files with other Skype users. Every day, people everywhere also use Skype to make low-cost calls to landlines and mobiles.

The company itself brought in $185 million for Ebay in the last quarter of 2009 and was the fastest-growing part of Ebay’s business.

Although the cost to call PC-to-PC is completely free, Skype makes its money from international SMS (Short Message Service) and long-distance PC to fixed lines calls. Recently, EBay sold 56 percent of the company’s stock to bidders and left founders Niklas Zennström and Janus Friis with 13 percent of profits and two chairs on the Board of Directors. Although the founders are unhappy with EBay’s decision, the company’s CEO John J. Donahoe believes “Skype will be well positioned to move forward under new owners with ownership and control over its core technology.” Skype became a household name after the publicity of the arrangement.

Skype is recognized as the first VoIP, and media have been newly attracted to covering its story. New publicity has driven popularity and raised user numbers around the world. Recently, Oprah Winfrey Webcast has setup the Oprah Book Club over the service’s homepage. Oprah offered users the chance to view a webcast via Skype with famous authors reading through their novels. For ten weeks Oprah and Eckhart Tolle produced the show for Tolle’s book A New Earth: Get Ready to be Awakened. The publicity that was created by this event generated close to 750,000 viewers from around 139 different countries. New users logged on just to see the readings and enjoy Oprah’s Skype experience. Oprah has this to say about Skype: “With about half a million views this could possibly be the world’s largest classroom.” Evidently Oprah couldn’t get enough of the services, because last May she dedicated an entire show to Skype entitled “Where the Skype are you?” With Oprah’s support the company looks to pull in many tech savvy viewers.

Skype now accounts for eight percent of all outgoing global calls. The success of Skype has propelled the company to be recognized amongst the top global telecommunication services. Not only does Skype function as a social medium, it is also a money-saving tool for businesses of the future. With only five years of experience under the company’s belt, its projections for future growth in the marketplace look more than healthy. Skype has come to revolutionize phone bills and the way society is controlled by the industry. Say goodbye to costly long-distance phoning, and hello to an efficient Skype, or other VoIP solution.

Skype is not only beneficial to the daily activities of any business; it is specifically an influential tool of top entertainment industries. ESPN has adopted the use of Skype to engage in interviews that they would previously have not been able to do. With the fast-paced setup of Skype’s video conferencing, ESPN was able to interview the quarterback from Oregon during the always-busy Thanksgiving weekend. UCLA and Arizona State are both broadcasting through Skype. Skype’s ESPN partnership is bringing the public more information about the service, and increasing the awareness of VoIPs. Soon, Skype and other forms of video communication will be integrated into mainstream media.

Skype is looking ahead towards a future where all communication will go through Internet services. Josh Silverman recently stepped up to the plate as Skype’s new CEO. He hopes to better develop Skype’s popularity in the working world. Silverman promises improvements in technology and customer service. Jonathan Rosenberg has been hired as the new technologist to move Skype along further to match future competitors. Previously a “Cisco Fellow” working in the Voice Technology Group at Cisco System, he set strategies for their own business voice system. Skype’s tactical strategies for its technological advancements are riding on Rosenberg’s employment. On Rosenberg’s website, he explains his qualifications and hopes for a better Skype of the future.

Skype is preparing for competition that has already began to make its mark in the marketplace. While Skype has been a headline catcher, most people don’t recognize the variety of VoIP services available today. At voipreview.org you can find ratings and categorization of VoIPs to entice potential customers. The site provides information on top competitors of Skype and illustrates each VoIP’s unique niche in the market. One provider, JaJah, allows callers to type in their number and the number they wish to reach. The service calls both numbers and connects the lines. Jajah phone calls cost about 98% less than those of original long-distance rates. Open Wengo, Vbuzzer, Ichat, and ComBOTS are all different varieties of VoIP. Google Talk is beginning to gain recognition too, with its call options and instant messaging service. These companies have barely scratched the surface of what VoIP’s popularity will do in the market.

Skype’s most threatening emerging competitor is Ooma. Ooma offers a one-time installation of an Ooma hub which is then hooked up to any high-speed internet connection for an outright fee of 249.99. Once installed Ooma makes free international calls. Ooma promises in its mission statement to free consumers from the tyranny of phone companies: “We took into account everything that was wrong with phone service today – it’s pricey, limited, and inflexible – and we made it our mission to create a better customer phoning experience. So now, when you buy an Ooma system, you own your dial tone. This means free calls in the U.S., rock-bottom international calls, and no more mysterious surcharges for premium services.”. The Ooma Telo launched on October 1st 2009, and its popularity shocked the company, who was unsure about the initial reaction. Ooma now offers it service to Wi-Fi connected smart phones for low long-distance calling. The company has recently been featured on the Today show and won the Network Products Guide Production Innovation award for 2009. The company is working on developing a mobile device.

As of late, Skype has introduced Skype for SIP and Skype for Asterisk. “These solutions enable your PBX to be configured so your employees will be able to make Skype calls directly from their existing desk phones, without needing any new training. And with click-to-call buttons on your website and emails customers can reach you for free when they use Skype.” These configurations make calls completely free after an initial setup, and long-distance phone conversations become unbelievably inexpensive. Skype will soon be the new standard for small businesses who can’t afford large phone bills but are still involved in global growth.

Skype is an intangible asset that businesses are actively pursuing, and employees are beginning to recognize the benefits of telecommuting through Skype and other VoIP services. It is predicted that by the year 2016 some 43% of the American working class will occasionally telecommute. Skype’s persistent leadership in the field and the companies likely to compete with it make this figure a strong possibility.

Elizabeth Paffenbarger is a student at Chapman University.

In Part 1 of a two-part series, Elizabeth Paffenbarger discusses the paradigm shift VoIPs are causing in the telecommunication industry.

In today’s multi-tasking global world, telecommunication has become essential to the health of businesses and society at large. Our “network” of colleagues, friends, and family is constantly expanding with the growth of the technologies that keep us connected. Although rarely acknowledged, the telecommunication industry drives individuals’ hectic lifestyles with social networking, video chats, and text messaging. As businesses increasingly rely on such technologies, they become ever more subject to developments in the telecom industry.

In the 27 years since the first commercial cellular phone service was made available in Chicago, cell phone companies have come to dominate communications in America. Today, six year olds tote cell phones on the school bus and send “text” to neighbors in class. Businesses use telephones to conference with partners in other countries. Society blatantly relies on the cellular industry for entertainment, business and the comforts of life.

Businesses rely on the use of telecommunication for their partnerships and general operations. When interviewed, an owner of the bond insurance company Paffenbarger and Walden had this to say about the effect of telecommunication on his business: “One of the largest costs to any business is the time and money put into telecommunication. The prices I pay in order to contact partners when I am away from the country really takes a toll on my operational expenses.”

According to Mike Gikas, Senior Editor of electronics at Consumer Reports, phone companies make their money three different ways: “One, you pay for minutes you don’t use. Two, they make money when you underestimate the number of minutes you use, and you pay extra [for minutes exceeding the contractual allotment]. Three, they make money when you break the contract.” In addition, companies charge high premiums for long distance calls that don’t actually cost much more to connect. With companies charging outrageous roaming fees and creating an oligopoly of cellular services, it is easy to see the control they possess.

Yet new technological developments – on course to disrupt the dominance of cell phone companies – provide hope for small businesses. The internet has forced the reconfiguration of commercial institutions from record companies to newspapers. Mobile and landline phone companies may now enter their own business model crises in the face of Voice over Internet Protocol (VoIP) systems.

VoIPs offer free online communication and international calling at a minimal price. Companies that offer VoIP use three different methods of online communication to satisfy their customers. The first method is PC-to-PC communication, which allows customers to chat, videoconference, and communicate between two separate computers. The second method involves PC to fixed network lines. Through this method users are able to connect with mobile phones or landlines from a PC. The final method that is available to online users is phone-to-phone calls that are implemented through an Internet intermediary. Leading VoIP Skype focuses their business on the use of the first two forms, but other companies specialize in different areas. It will only be a matter of time until major companies switch to VoIP’s affordable strategies.

While there is a fear that the telecommunication industry will suffer against VoIPs and services like Skype there is also the possibility of Skype’s low costs increasing productivity for small and large businesses alike. The new generation is soon to be comprised of telecommuting workers and Internet efficient businesses.

Although VoIP’s future is looking bright in America, other countries have realized the potential threat it poses for local phone services. Traditional phone services’ large profits often line the pockets of local governments who choose to “protect” national companies. Recently congressmen of Russia have begun to draft legislation to ban the use of sites such as Skype that offer free PC to landline calling. VoIP’s cheap prices compete with long-established companies of Russia that are not ready to lose market power. According to the New York Times, business lobbyists want to protect telephone companies from VoIP globalization that would damage the Russian economy. Russia’s reactions have raised questions as to whether the use of VoIPs could negatively affect the world economy. Other countries are watching Russia to observe how its plans to restrict the telecommunication market pan out. Soon, Russia may not stand alone in banning these types of services

The future of telecommunication resembles many other industries that are succumbing to the power of the World Wide Web. Nevertheless, the dwindling prices for communication offered on the Internet do not so much pose a threat to business as they do a possibility for relieving high priced phone bills. It will soon no longer be acceptable for companies to charge the high rates for long distance communication that have become the norm. These excessive charges are unnecessary when long distance calls are not much costlier to provide. As long as government allows the operations of VoIPs, the services have a positive future ahead of them, as well as the businesses that use them.

Part 2 in Paffenberger’s series focuses on the success and future of Skype.

Elizabeth Paffenbarger is a student at Chapman University.