Skype: The Whole World can Talk for Free


The Whole World can Talk for Free
It was late at night in February 2006, and Jonas Kjellberg, the Nordic Manager of Skype, along with Wilhelm Lundborg and Gustaf Kellner were busy preparing the marketing expansion strategy for Skype in the Nordic countries. Their key concern was how to adapt Skype’s global marketing strategy to target the local smaller markets in the Nordic Region. Skype was officially born in August 2003 with the release of the first beta version of the software. The founders Nicklas Zennstrom and Janus Friis [refer to exhibit 1 for information about the founders] built the software by leveraging two emerging technologies, namely: peer-to-peer (P2P) software technology, and the voice-overinternet-protocol (VOIP) technology. The marriage between these technologies resulted in the birth of a global communications company that promised free calls to anywhere in the world [1, 2]. With a customer base of 9.5 million users worldwide in only one year and 1.5 million users utilizing the software per day [3], Skype became the world’s fastest growing service for Internet communication in a very short time. This exponential growth attracted the attention of many established giants such as Yahoo, Google, and eBay, until finally it was announced in September 2005 that the latter had purchased Skype for the formidable amount of $2.6 billion in cash and stock. The deal also included another $1.5 billion to be given to Skype in 2009 if the company was able to deliver on key performance targets. This purchase gave the Skype Company a huge boost but at the same time there was more pressure to increase their market penetration all over the world. Jonas needed to apply the most efficient strategy possible to attain the ambitious goals that he had set for Skype in the Nordic market. Moreover, he was fully aware that the market in the USA was significantly different than that of the Nordic Region, and a marketing strategy that proved successful in the USA would probably not as be profitable in Sweden, Norway, Denmark, and Finland. The available market in the Nordic Region was smaller in size than its counterpart in the USA (population of approximately 25 Million as opposed to a population of approximately 296 million [4]), and even though some people in the four countries did speak multiple languages, there was essentially no common language as is the case in the latter. Another major difference was that companies and brand names, that Skype would need to partner with, existed with varying presence and market shares in the
This case was prepared by Chafic Nassif, Karol Ussher, and Susanna Leidegrant (Graduate students at The Royal Institute of Technology – KTH Sweden – and under the supervision of Professor Lena Ramfelt). The case was written as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. It was made possible in part through support from Skype Nordic.

Skype: The Whole World can Talk for Free


different countries of the Nordic Region. Hence, if Skype was to partner with a company that was well established in Sweden, then there could be a chance that this company would not have the same strong presence in Norway for example. These issues troubled the Skype Nordic management team and they knew that it was essential to move quickly because the communications and internet industries were developing at an incredible rate and competition would soon knock on the door. Jonas stood by his desk contemplating the best plan of action. He knew that vital decisions needed to be made, and these decisions would be based on the answers to two major questions. The first question was in terms of strategy: “Should we have a country-local approach or a whole Nordic area approach? Is it worthwhile in terms of time and effort to go too local in an area of total population around 25 million?” The second question was in terms of partnerships: “Which type of companies should we target in our search for partners? Should we target online, retail, or hardware (manufacturers) partners? And what would the consequences be for each approach in terms of branding and the Skype presence?” Both Gustaf and Wilhelm knew the importance of making the right decisions as fast as possible. There were many factors to consider in terms of market study, competition, and always keeping in mind the potential evolution of Skype into the mobile industry….

The Skype Phenomenon
With 75 million registered users and over 150,000 new users downloading the Skype program each day [5], Zennström’s vision of becoming “the largest and most successful online communications company worldwide” was close at hand. The eBay acquisition brought Skype an enormous momentum as well, but what was Skype really all about? The famous quote “Being at the right place at the right time” could very well be the answer to that question. Given the huge appetite among media and Web companies for an Internet-telephony play and the vast availability of broadband internet; they did it so well too, offering global telephony with great QoS (Quality of Service), and extraordinary ease of use. Of course the zero-cost, word-of-mouth marketing was the main catalyst for its proliferation [6]. The software mainly allowed the user to call up other users who were online or leave them a message if they were not [7]. Apart from the simplicity of use, the Skype software had many features ranging from the basic to the more advanced levels [the reader is advised to refer to exhibit 2 for more information about the Skype software]. It was clear that Skype dominated the PC to PC telephony market, but given it was a free service and promised to be so for ever; how was Skype going to ensure its financial fitness? Where would the profit come from? As Zennstrom had pointed out, the company had relatively zero costs for marketing and distribution.


Skype: The Whole World can Talk for Free
"Our software is spread virally. And when we have a new user, we have zero cost for serving that user, because they're using peer-topeer software and their own bandwidth. So we have zero costs of getting new users and zero costs of running traffic. This is why we are able to provide such a superior service for free to the world." [8]


This was great for the consumer but what about the new owner eBay, who now formed the “power of the three” with Paypal and their 4.1 billion dollar new Skype purchase? Where would their ROI come from? The answer was simple (only small percentage are paying customers and they know that), from the SkypeIn and SkypeOut premium services. SkypeIn and SkypeOut allowed the user to use the computer as a regular phone for a small fee. SkypeIn was launched in March 2005 and this service allowed Skype users to purchase a local phone number where he/she would be able to receive calls from regular or mobile phones. The caller would only pay local call fees, while the subscriber had to pay a fixed annual fee of approx $37. This service, multiplied by the 75 million users in tow, could just about match what eBay had forked out. With the combined Skype voicemail service, users were able to even take messages from any device when not online or otherwise indisposed [2, 7]. In addition to SkypeIn, the other service that was offered by Skype was called SkypeOut. This service facilitated calls to non-Skype users on regular devices such as standard land-line phones and mobile phones. Most of the first world countries operated at a fixed 1.7 Euro Cents per minute of talk. There were four ways to charge up credit for using the SkypeOut feature; on-line via credit card, personal check, or online services such as PayPal, or by buying it in a package from Skype’s retail partners [2, 7]. Another feature offered by Skype was the possibility of having conference calls, which meant that a user could talk to more than one person at the same time (with a maximum of 5 people in one conference). The users in a Skype conference call could be either online or offline (talking through their mobiles or regular phones). Skype allowed users to also interact in other ways beside voice conversations, namely through file transfers (with no size limitations), chatting, and video connections between peers [7]. The code used to program Skype was kept ‘closed source’ since the beginning, and the protocol was ‘proprietary’ which meant that there were restrictions on copying or modifying the code. This fact triggered quite a bit of suspicion from the open source community of programmers and drew broad criticism from software developers and the VoIP user communities. On the flip side of the coin, Skype’s client application programming interface did expose the network to the software developers and allowed them to get white pages information and manage calls [2]. As extended integration with other desktop applications was created, Skype became evermore present in daily activities in many firms across the globe. For example, Skype toolbars, for Outlook and Internet Explorer, enabled users to populate their Skype contact lists from other applications. . Hence, the Skype management did not only focus on the individual users, but also designed solutions for businesses. Early in 2005, Zennstrom stated that throughout the year, the company would introduce more enterprise-oriented services. Skype made


Skype: The Whole World can Talk for Free


good on this promise and became a hit with business users who obviously saw great attraction in cost savings [9]. Skype proved especially popular amongst small to medium sized businesses. It was an ideal solution for customer service departments who could cut land-line rental costs as well as cutting the actual cost of calling using SkypeOut. With proper configuration (meaning it was set up so that no personal details were published), training and monitoring, encrypted Skype Instant Messaging and voice connections added another low-cost tool to companies’ communications repertoire [10].

The Nordic Market
Skype had definitely entered the market at the right time and place; however, the right time differs according to the place, so what did the Nordic market look like?

Trends and developments on the Nordic markets for telecommunication and IT
Together with the East Asian Tigers (Hong Kong, Singapore, South Korea), the Nordic Countries1 topped the World Economic Forum’s competitiveness rankings in 2005. The Nordic Region, consisting of Denmark, Finland, Norway, and Sweden, was considered one of the most advanced and competitive ICT (Internet and Communication Technology) markets in Europe and even the world. Through similarities in terms of culture, technological development and language, these countries constituted a telecom market that was more heterogeneous than one would actually be led to believe. In the following is a brief overlook at these countries and their markets [11].

During the 90s all national Nordic telecommunication markets were liberalized in order to introduce competition. Due to the dissimilar starting points for deregulation for the fixed line, mobile telephony and Internet access, different results were yielded in the different countries. The main differences were seen in pricing and preferences. The fixed line penetration was already high prior to the introduction of the deregulation and it remained so. On the other hand, Competition in mobile telephony market contributed to its successful evolution and increased its penetration of the market. [Refer to exhibits 13, 14, 15, and 16 for information about fixed line and mobile penetrations and outgoing traffic]. The regulating authorities saw the legislation on competition as a tool to counteract dominant undertakings from abusing their market power, and promote competition. It remained to be seen if this would back-fire and worsen conditions for competition in the long-term, since interest in investing in new infrastructure and developing new services decreased.

Iceland is traditionally part of the Nordic Countries; however, it is not considered in the analysis of this case.



Norway’s topography on the other hand was well suited to wireless access. In the Nordic region. Jonas Kjellberg was determined to accomplish his vision of 100% market penetration by 2009. as mentioned earlier. 15. however. Even in countries bordering each other prices for calls from a border town to just the other side of the border. with the by far highest population density and relatively high degree of urbanization. 14. and introduced different legislations. yet what were the possibilities of accomplishing this high market penetration? The Nordic Region of four separate countries had a relatively modest population. These performance areas included amongst others. Skype in the Nordic Market Skype needed to deliver on key performance areas by 2009 in order to earn the extra $1. the prevalence of rural areas in the country had encouraged the wide use of cellular mobile systems instead of fixed-wire systems.Skype: The Whole World can Talk for Free STVxxx The countries within the region had developed at various rates. The Nordic countries were all providing services for lower than the European Average [refer to exhibit 12]. It was the different degrees of competition within the respective markets. and the country leads the EU with its wireless broadband market share. Looking at Denmark. higher market penetration and retention rates. a total of approximately 24. 16] were divided amongst the nations. far exceed prices for a national long-distance call. for a comparable consumption profile was almost 40 percent higher in Finland than in Sweden. the region was well renowned as a pioneer 5 .3 million people [13. presented a difficult market for the mobile operators. Demographic and Geographic Characteristics There were large differences in population density [refer to exhibits 6 through 9 for more details about population statistics] and degrees of urbanization across the Nordic countries. Furthermore. they were the only nation of the four that had some remaining regulations left in the form of a price limit on subscriptions. Average fixed line spending. had the best preconditions for roll-out of competing networks. In Finland for instance. a tough regulatory environment combined with fierce competition. while a Norwegian medium user of mobile telephone charges (makes 75 calls a month) was bound to spend almost 60 per cent more than his Danish counterpart with a comparable consumption profile. Denmark. including subscription and usage. more than the relative costs that were the cause of these regional price differences. price differences between the Nordic countries.5 billion from the eBay deal. Nonetheless. The same goes for Finland and Sweden even though the broadband penetrations were slightly less than Norway. Price Differences For the end user the opening of the telecom markets not only meant lower prices but also increased customer choice and services. were still relatively large. International calls had also seen dramatic price reductions but there were still significant differences in the pricing of national and international calls.

In Denmark the percentage of internet users that communicated over the internet was approximated to be 90%. as not every computer owner had an internet connection. In Norway and Finland the corresponding percentages were 86% and 87% respectively (refer to exhibit 10 for more detailed explanations). with the Denmark population having the highest percentage of personal computers at 84%. and the number of people who actually use the internet for communication such as voice calls. Sweden at 80%. Concerning enterprises in the Nordic Region. As for computers. the percentage of people who had access to broadband in Denmark was 51% of the whole population which was considered a good number. Sweden came in second at 73%. or transferring files. There were many competitors and the market was divided among all of them. In Denmark it was 97%. which were also a target sector for Skype. 6 . For Skype. In Norway the percentage was a little less at 41%. and Finland having the lowest percentage at 64% (refer to exhibit 3 for a more detailed representation of PC penetration in the Nordic countries). nevertheless. Norway at 74%. the latter was not the only company providing communication over the internet in the world. The internet penetration and distribution followed a similar curve to the PC penetration in the Nordic countries but the percentage was somewhat less. it is important to know also the demographic distribution (by age) of the four concerned countries (refer to exhibits 6 to 9). IT. Internet connections varied in speed and availability.Skype: The Whole World can Talk for Free STVxxx in terms of technology adoption and penetration (refer to the Appendix 1 for information about the communication. and finally Finland at 54% (refer to exhibit 3 for a more detailed representation of the internet penetration in the Nordic Region). The broadband penetration in enterprises was also quite high with Denmark leading at 82%. but as mentioned earlier the preferred connection type for Skype was broadband. In Sweden 85% of the internet users (by the end of 2005) communicated over the internet among the other activities that they performed. the internet penetrations were extremely high. according to SSB (The Swedish Statistics Bureau) “access to the PC is quite common in the Nordic countries”. followed closely by Sweden and Finland at 81%. and telephony markets in the Nordic Region). and Norway at 76% (refer to exhibit 5 for a more detailed internet penetration for the enterprises in the Nordic Region). then Norway at 64%. For a new technology such as Skype this provided an ideal environment in which to extend its reach having all the necessary requirements for its propagation. however. In 2005. These percentages were quite high and posed as positive indicators for companies such as Skype. these extremely high penetration rates. while in Sweden and Finland the percentages were 40% and 36% respectively (refer to exhibit 4 for a more detailed presentation of the broadband penetration in the Nordic Region). while in Sweden and Norway it was 95% and 91% respectively. were viewed quite positively since it could be inferred that the people living in the Nordic Region were willing to accept and adopt new technologies. These statistics are useful for describing the market size. Denmark had the highest percentage of internet penetration at 75%. In Finland 98% of enterprises had access to the internet in 2005. in order to have a better idea. chat.

In addition. The distribution channels employed. such as their own retail stores and/or a sales force to acquire customers and initiate a relationship with them. their large presence in the press. and other Telco carriers. Looking at Customer relationships one could see that all of Skype's customer relationships were internet based. Contrasting the customer segments one could note that the most noticeable difference is that. Skype had the potential to addresses all individuals globally that possessed a broadband Internet connection. However. also differed. such as Plantronics and Logitech (which sold its headset devices bundled with Skype pre-paid call credit). as well as the delivery [17]. moved from the niche product it began its life as. On the other hand. magazines etc. one could see the pros and cons of both offerings. On the flip side of the coin. This forced the Telcos to re-think their product and service 7 . global. It hosted several forums on its website and closely followed the discussions and voiced opinions. Another main difference between the two business models was the way they handled customer payments. This growing presence was acknowledged as a pressing threat to the incumbent telecommunication companies (Telcos). the Telcos still had their nose in front when it came to value proposition. Skype. the product gradually improved and expanded into more mainstream market segments. while the Telcos had a larger scope. While Skype incurred zero costs when adding a new customer. Skype relied exclusively on prepaid systems using credit and debit cards and other online payment solutions such as for example PayPal (which belongs to eBay). in a very short time. Alternatively.e. They invested mainly on conventional advertising media (billboards. Telcos preferred and utilized common billing systems which allowed customers more transparency at the expense of increased flexibility. Skype almost entirely relied on low-cost viral marketing.Skype: The Whole World can Talk for Free STVxxx Competition Skype versus the incumbents: The Business models Initially. Skype’s value proposition was adopted only by marginal customer segments. the target customers were divided into three different segments: national private customers. national business customers. The Telcos generally preferred to maintain a call centre to respond to their customers' questions. Skype relied heavily on online user communities.). Their business and private value added services and solutions coupled with their enormous reference base.. For the Telcos. sponsorships. and co-branding with device manufacturers and vendors. 1 www. The Telcos most often relied on traditional channels. It maintained a “ticketing system” and an automatic frequently asked question (FAQ) system to reply to customer enquiries1. gave them the competitive edge. The company also increasingly aimed at bundling its product with software and products of other companies.. into the mainstream. Looking closer at the business model elements. to improve its value proposition. the latter had a larger scale.

This is due to high roaming charges within the European countries. These partnership agreements could be viewed as more strategic in nature. This was not possible for traditional Telcos. They also estimated that by 2008. customer care. unlike the Telcos. However in Skype’s case. The most imposing advantage that Skype had over the Telcos was the free Skypeto-Skype communication regardless of location. Finally. Conversely. Therefore the proliferation of Skype depended on the penetration of broadband internet. as opposed to the same local charge over different states within the USA. Similar to the Telcos. the incumbents could see their revenue falling by as much as 10 per cent because of the surge in demand for internet telephony with profit predicted to slide by at least 22-26 per cent. the European telecoms market was more vulnerable to VoIP disruption. How did the Telcos “view this upstart”? According to research done by Evalueserve. Firstly. like Telcos. In terms of activities. the business administration at Skype was much cheaper because most of its customer related tasks were automated. [18] 8 .” Niklas Zennström. Skype focused on developing and delivering value added services. and service provisioning. Skype did not have that option. In this case the supplier remained the direct seller to the customer. the Telcos were able to lease their free network capacity out to other carriers. This meant that they had to manage complex and costly supply chains to assure product availability. Additionally. Skype even had a strong advantage over most VoIP providers that had to increase their network capacity and hence infrastructure costs for every new customer. while the Telcos incurred high costs to maintain their network. the company did not have to maintain a proprietary network but had to take care of its software platform and manage the different versions. these services were mainly built into the software. The devices and accessories market had also been breached by the Telcos. Skype often entered into co-branding deals with other suppliers. Skype merely had to manage software development. In terms of cost structure. Skype had a strong emphasis on customer care related activities and it additionally focused intensely on growing its user base in order to increase network externalities. They procured the different items and sold them on as their own. it's the fast that beats the slow.Skype: The Whole World can Talk for Free STVxxx One important difference in terms of capabilities and resources was that many Telcos sold devices and other accessories. With respect to additional revenue sources. Skype was preoccupied by similar areas but with somewhat different activities. “We believe it's not the big that beats the small. Telcos were mainly preoccupied by three primary areas. These were the improvement and maintenance of their network. A major dependency that Skype had was the customer's need for an internet broadband connection from an Internet Service Provider (ISP) before the user could actually use Skype.

com 3 www. and Voipstunt4. 2 www. for instance Cable & Wireless and Hutchison Global Communications Ltd (HGC) in Hong Kong who both established partnerships with Skype. In some cases Telcos were actually in denial. the report said. In addition. For instance UAE’s Telecom monopoly ‘Etisalat’ had attempted to completely block the access to the Skype website in the whole country. France Telecom acquired Wanadoo and offered VoIP along with its regular lines. Sandvine (a broadband network-monitoring company) released a report stating that the Internet telephony products bundled with broadband services had become even more popular than third-party products. Thus. rather than partner with Skype. offered certain customers free call minutes to certain numbers. did they really have the urge to change? Skype in Europe Early in 2006. While some Telcos were already embracing VoIP1 with open arms.5% of all VoIP These software applications were offered by the same company.4% respectively. Telcos did not want to embrace VoIP. Voipcheap3. Nevertheless. In North America these figures stood at 54% and 14. functionality but the offerings were packaged slightly differently. The initial response had been focused more on exploiting Skype's weaknesses rather than on an actual counterattack. Wanadoo and America Online [20]. they devised their own models.voipcheap. While it was not Skype users making a 4 www. what they did was. This was in stark contrast to one year earlier when 90 percent of all VoIP minutes had been made using Skype. They shared the same user base. but most of them finally did. With this kind of service from their Telcos. while Skype accounted for 45 percent of all VoIP minutes. The report found that Skype's VOIP service had been overtaken in Europe by broadband subscription packages sold by vendors such as BT. it was also not always the least expensive for its toll services. it showed that new broadband subscribers were opting for the Broadband service providerbranded VoIP bundled package instead of the market leader. Bundled VoIP represented 51. Other companies had chosen to resist VoIP. and were competing with that. some users of both Voipbuster and Skype stated that Voipbuster has a better audio quality than SkypeOut for PC to landline calls.Skype: The Whole World can Talk for Free STVxxx The ever impending threat Skype posed globally had been received differently by the different Telcos around the world. Vonage took less than one percent of the market while other third-party VoIP providers represented 3. Similarly the Swedish giant teleco company Telia started offering VoIP along with its services. Other Competitors in Europe In the category of VOIP programs Skype was facing threats from three major players Voipbuster2. However they also agreed Skype had superior PC to PC quality [21]. until the numbers reached critical mass at least.2% of all VoIP calls in that same period.voipbuster. when the comparison was in 1 Initially. British Telecom for instance. [19] The two vulnerabilities that Skype had were that not only was it not always 9 . For instance.voipstunt.

These services had an added advantage that they did not require the user to be tethered to their PC or even to have access to the internet via a “hot zone” in order to use the service. Even in functionality Voipbuster providers had decided to concentrate solely on call related functions including call-forwarding and a free inbound number. and it encouraged the use of clients other than their own in connecting to the Google Talk service. and the beta version of the Yahoo IM 7. and that’s just within the US. Skype for dialing friends that are online and Voipbuster for all PC to landline calls. Both services claimed to allow users to call Up to 65% cheaper than other Telecom Carriers to International numbers. The simple fact was that he needed to make everyday decisions in the blink of an eye. Their reply to Skype came in the form of “Google Talk”.Skype: The Whole World can Talk for Free STVxxx terms of cost it was evident that these alternative VoIP products were cheaper. This innovation had great appeal for those who didn’t want to change their behavior in order to benefit from the increased savings. Skype outshined the above three rivals. which could determine whether 10 . allowing free unlimited calls to a number of countries and a flat rate of 0. XMPP (Extensible Messaging and Presence Protocol). They didn’t provide any chat or file sending interface.01 Euro to those others (refer to exhibit 11). on any phone. No subscription was needed and there were no extra fees. In many cases there appeared a trend for users who opted to use both applications. The Yahoo messenger did allow this option but the prices were similar or even higher than those that Skype offered. released August 2005. These applications offered users VoIP and instant messaging services. Decisions. online or traditional retail? Jonas was aware of the competition and all the factors surrounding and influencing the road upon which Skype was traversing. Other competitors also worth noting were produced by the kings of internet search Google and Yahoo. A new market entry: local or Nordic. which on the flip side of the coin. Google Talk’s functionality was limited and until early 2006 it did not yet allow the user to make PC to phone calls. richer functionality and a better customer service. unlike Skype to use an open protocol. released in early 2006. For example.0 with VoIP to land lines added option. They allowed users to call right away. Plus according to user feedback. Skype also faced different types of competition from services other than VOIP and traditional Telcos. This was hard to ignore given that unlimited calls to conventional telephones with companies such as the US company Vonage cost $25 USD per month. where it was literally nonexistent. for the IM part. Skype had superior audio quality. may have actually increased their attraction to the less technical savvy user. In terms of customer services. Finally. Google have chosen. in Sweden Skype faced threats from Sveritel and in Norway from Telespare.

if I may cut in Jonas and as you very well know. Jonas: “Is it really justifiable in terms of available resources and limited staff that we have. Who do we want to associate our brand with is a very important issue. One of these partners was Motorola which is a hardware manufacturer [22]. so maybe focusing on one main sector to partner with might be the better option. And given that we 11 . Recently. while destroying it could be done in one slip up. with our limited resources. effort and money.such as partners and customers . Earlier. and time invested? Should we go very local – country by country – and focus on partnering with companies that are perceived as country specific. it’s not feasible to form too many partnerships. but in many. Two decades ago the idea was simple – consumers from neighboring countries fell into the same category in company strategies. Together the Nordic management team sat in the meeting room discussing. we should be on the look out for similar partnerships all the time.” Gustaf: “I agree with you Wilhelm there are quite a number of differences between the different Nordic countries and zooming into each local country definitely had its advantages. but now it is becoming more evident that there is a need for localizing them to fit in different communities. so we need to choose our partners strategically and carefully. Co-operations like this extended Skype’s customer reach as well as increase customer benefits.. The global management of Skype had already decided how to proceed.” Jonas: “Which brings up our second dilemma. The new way to go was through local market entries. The dilemma. that Skype’s marketing strategy has been and still is to allow others . it was possible to have standardized strategies. or should we address the Nordic Region as one and partner with companies present in all the Nordic Area – which might have varying penetrations in the local markets. or loose ground. The question for Jonas and his team was if the Nordic Region should be addressed as a local market or should the approach to locality be more specific narrowing down to each country. but if we look at the consumer trends we will find that it might be worth it to go local. ” Wilhelm: “However. I understand where you are coming from Jonas. however.. everywhere. Their cell phones are now equipped with our Skype software and Wi-Fi support could enable the users to use Skype from all locations with access to wireless Internet.Skype: The Whole World can Talk for Free STVxxx Skype Nordic would be able to thrive and expand. Consumers don’t live in one world anymore. however. And even though Skype had so far been one of the biggest news. creating an image takes time.” Wilhelm: “Keep in mind Gustaf. namely what type of companies to partner with? Skype has so far partnered with several companies to create an increased customer value. would the projected penetration be worth the extra effort. our product. keeping in mind that. Partnering with everyone might simply dilute our brand. is that given the size of these markets and the fact that there are a lot of similarities as well between them. to go too local for relatively small population countries?” Wilhelm: “Well. more and more companies started recognizing large differences in consumer behavior and taste depending on more than their general geographical belonging. money. there still was a long way to go until their goals could be reached – to be recognized by everyone.

For example. it is also about the thinking and reaction process of the customer. In different contexts. it is rather natural for the user to recognize the need for purchasing an update and completing the transaction over the internet as opposed to using an alternative source. 1 12 . This approach allows the customer the choice in order to expand the total available market of the store. such as when realizing that the virus protection program is out-of date. When considering the corporate market. For example a lot of older people would rather buy credit for Skype from a retailer rather than use their credit cards online.and a strong retail partner might be just what we need. the approaches that we have been discussing concern mainly private consumers.Skype: The Whole World can Talk for Free STVxxx are a software company would it not be logical to partner with online companies which are available anytime the consumer wishes to process business with or through them?” Jonas: “Yes.” Wilhelm: “Well there is another alternative which we should also not neglect and that is the combination of retail and online in one company. partnering with hardware manufacturers and/or retail stores might be what we need. We should however be aware that if we are to reach maximum penetration in less than 4 years we need to be able to reach the potential customers that do not rely or trust the internet so much. could become more strategic partners when Skype is used on a wireless devices in the future [refer to Appendix 2 for more information about the future of Skype on the mobile]. Examples are stores like Siba. OnOff. but the larger ones are still quite hesitant – mainly due to security issues . nevertheless.” Jonas: “True. The use of Skype on a computer advocates in a larger extent on-line partnerships. and as you mentioned we should not forget the potential future of our product when making these decisions. Hence. OnOff.” Gustaf: “The issue in my opinion is not only about trust in the internet. Teknikmagasinet and Power” were all electronic product retailers who had complemented their business with online sales. The trend for the major technical stores recently has been to compliment the conventional retail store with an on-line version. The trend is towards making calling on Skype as easy as literally picking up the phone and dialing. we have to be aware that Skype has grown increasingly popular with smaller companies. El Giganten. could Skype consider partnerships in the form of licensing agreements with companies that would customize Skype to match a company’s security requirements? Could this be the door opener to “Siba. El Giganten. these types of companies are pretty attractive yet it is nearly always the case that purely online companies have stronger presence around the internet than those that have their website as a compliment to their retail business. “ Jonas: “A very good point Gustaf. a thought like ‘I am hungry and the fridge is empty’ creates an urge to go to the corner store to do some grocery shopping. Skype’s decision whether to partner with on-line or traditional retailers would therefore be tightly connected with the customer’s way of using Skype.” Gustaf: “Taking this last angle into consideration. it would definitely be very logical. in which case. the conventional retailers. In addition. Given the context we should use the most logical and efficient medium. Teknikmagasinet and Power1. such as Pressbyrån for example.

but the bottom line is that there needs to be fast and decisive resolutions. Gentlemen. hence. We are rapidly loosing our first-mover advantage to the very low prices offered by some of our competitors. the need for a differentiation strategy and for making crucial decisions.” 13 . it is time to make these decisions now….Skype: The Whole World can Talk for Free STVxxx the big Nordic companies? And what kind of brands would Skype want to be associated with?” Jonas: “All these possibilities and questions have to be measured carefully.

net/2004/bio302. and payment of digital content. where he met Niklas. has a dual degree in business and MSc Engineering Physics. He has no formal higher education since he dropped out of high-school before starting the job at CyberCity. Later he worked at Tele2. Ann Arbor. the world’s most downloaded Internet software to date with more than 350 millions downloads. Now the company is the leading consumer oriented pan-European telecom operator present in 23 countries. when there were only 23 employees. After that Niklas founded and served as CEO at Joltid. and the portal. Niklas also co-founded Altnet. After this. the peer-to-peer telephony application. everyday. including being the worlds largest issuer of DRM licenses. the global internet telephony company based on peer-to-peer principles.wikipedia. The FastTrack protocol itself is also codesigned by a network that sells commercial music to Kazaa users. Niklas’ newest venture was Skype. Niklas later co-founded and served as CEO of KaZaA. Janus Friis2 Janus Friis is a Danish entrepreneur best known for co-founding the filesharing application KaZaA and Skype. a Swedish 14 . Janus worked at the help desk of CyberCity. another Danish ISP. Janus is also co-founder of Altnet. the partners decided to leave Tele2 and co-founded Kazaa. Janus and Niklas worked together at Tele2 to launch get2net.html Biography adopted from http://en. From the success of KaZaA’s P2P technology the duo co-founded Joltid. the world’s first secure p2p network promoting commercial content to millions of consumers and integrating the full value chain of promotion. distribution.wtn. He started his professional career at Tele2. He spent his final year at University of Michigan. 1 2 Biography adopted from http://www. one of Denmark’s first ISPs. Niklas served in various business development roles including launching and being responsible for European Internet Service Provider business get2net and as CEO of the portal.Skype: The Whole World can Talk for Free STVxxx Exhibit 1: Biography of Skype People Nicklas Zennstrom1 Niklas Zennström. a software company developing and marketing P2P solutions and P2P traffic optimization technologies to companies. Before embarking on his entrepreneurial career with Niklas. computer science from Uppsala University in Sweden. the leading alternative consumer oriented pan-European telecom operator. the company responsible for the most popular software for use with the FastTrack file sharing network protocol. a software company developing and marketing p2p solutions and p2p traffic optimization technologies to companies.

php#Kjellberg 15 . having previously held such posts as Vice President Lycos Europe. Lundborg has previously worked for the Bertelsmann owned. 1 Biography adopted from http://globalsummit. Mr. Managing Director Campuz Mobile AB. Wilhelm Lundborg Wilhelm Lundborg has been the Online Marketing Manager for Skype Nordic since 1 November 2005. and Managing Director Optimal Telecom. an established mobile service provider.mobilemonday. Mr. European internet portal Lycos Europe as European Sales Manager for Online Communities. Kjellberg has extensive management experience. 2005. Kjellberg is also one of the founders of Mobyson.Skype: The Whole World can Talk for Free Jonas Kjellberg1 STVxxx Jonas Kjellberg has been the Market Development Manager of Skype Nordic since June Mr. Managing Director Communities.

com 16 . each new user added to the network does not merely add load on the network. by decentralizing resources. hence.and bandwidth intensive tasks that would otherwise be handled by central servers. Global Decentralized user directory: The conventional way of building networks involves the deployment and setting up of an extremely costly and centralized directory for the purpose of establishing a connection between end users in order to associate a static username and identity with an IP number that is likely to change. only proxies with available spare resources are used so that the performance for these users is not affected. www. 3. Thus. Moreover. the P2P networks can scale indefinitely without increasing search time due to the fact that they make use of the processing and networking power of the end-users’ machines. Skype also implements several new techniques in order to avoid end-user configuration of gateways and firewalls. 1. is one where all nodes in a network join together dynamically to participate in traffic routing-. On the other hand.” There are a number of advantages gained through using decentralized P2P networks rather than having the traditional client-server networks. The security is still protected since the calls are always encrypted end-toend. P2P: Skype’s definition of P2P might vary from other definitions and it is stated as follows: “A true P2P system. First of all. in our opinion. The implementation of the 3GP2P or Global Index (GI) was necessary and represents a major 1 Exhibit 2 Information is mainly adopted from the Skype website. and the use of proxies limits the security or privacy risk. Firewall and NAT (Network Address Translation) Traversal: Skype has the ability to work behind most firewalls and gateways without the need for any special configurations. “whose non-intuitive configuration settings typically prohibit the majority of users from communicating successfully”. second generation (2G) P2P networks have been able to virtually eliminate costs associated with a large centralized infrastructure. Another great advantage of implementing P2P is the reduction in the cost of setting up the network since there is no need for the costly centralized resources. This is possible through the use of non-firewalled clients and clients on publicly routable IP addresses that are able to help NAT’ed nodes to communicate by routing calls.Skype: The Whole World can Talk for Free STVxxx Exhibit 2: The Skype Software1 The following competencies characterize the Skype experience for the users and the market and set the software in the lead within the VOIP domain. 2. saving up on the costs. Skype relies on a ‘third generation’ P2P network technology to decentralize this process. instead this user adds more processing potential and bandwidth. processing. making the network self sustainable.

The GI technology allows networks to communicate through the existing supernodes in a way that enables all nodes in a network to have information about all available users and resources with minimum delay. so that anyone who knows how to use a Windows and telephone will feel quite comfortable with the program. thus. 5. Simple User Interface (UI): The Skype interface design is made so that it is very user friendly. Skype’s algorithm enables multiple connections to be open at the same time and dynamically chooses the one that is best suited at the time. Security: As was mentioned before all calls made through Skype are encrypted to ensure security since everything is routed via the public internet. increasing quality and decreasing the delay in calls.Skype: The Whole World can Talk for Free STVxxx paradigm shift in the understanding of scalable networks. 17 . 4. 6. Intelligent Routing: Skype implements a very intelligent routing algorithm that serves to find the most effective path possible through utilizing all available resources in the network. and Mac OS X. Skype has also been configured to run on the following operating systems: Pocket PC. Linux.

Skype: The Whole World can Talk for Free STVxxx Exhibit 3: PC Penetration in the Nordic Countries [12] 18 .

Skype: The Whole World can Talk for Free STVxxx Exhibit 4: Broadband penetration in the Nordic Region [12] Exhibit 5: Internet penetration for the enterprises in the Nordic Region [12] 19 .

Skype: The Whole World can Talk for Free STVxxx Exhibit 6: Sweden's Population by sex and age on 31/12/2005 [13] 20 .

Skype: The Whole World can Talk for Free STVxxx Exhibit 7: Finland's Population by sex and age on 31/12/2005 [14] 21 .

Skype: The Whole World can Talk for Free STVxxx Exhibit 8: Norway’s Population on 01/01/2005 [15] Sex and 1971 1976 1981 1986 1991 1996 2001 2002 2003 2004 2005 age Males 1 933 700 1 994 867 2 027 580 2 056 399 2 100 994 2 160 745 2 231 301 2 241 934 2 256 107 2 269 049 2 284 070 0.9 10-19 20-29 30-39 40-49 50-59 60-69 70-79 800.5 6-15 16-66 67- 1 954 605 2 022 234 2 064 760 2 102 788 2 148 836 2 209 212 2 272 135 2 282 132 2 296 145 2 308 408 2 322 293 312 472 297 776 278 080 198 353 232 685 242 947 203 539 136 150 52 603 191 490 301 276 245 063 310 584 303 814 299 506 228 598 204 096 245 874 215 027 152 003 62 732 180 782 312 643 273 700 276 569 315 746 299 463 279 741 197 684 226 506 226 447 165 017 77 587 153 612 316 528 305 966 251 005 314 311 308 340 302 501 228 069 198 944 229 470 177 023 93 125 148 827 285 210 336 255 264 394 280 768 322 426 304 591 278 665 192 794 211 164 187 866 106 168 164 064 256 636 361 944 288 472 257 635 323 760 316 736 302 648 223 307 186 432 192 224 117 998 177 539 263 837 368 322 296 209 272 644 296 025 334 727 306 698 273 531 182 277 178 832 131 192 176 404 288 691 362 524 294 076 277 491 290 245 338 189 309 574 281 006 182 610 174 799 134 142 174 647 293 114 359 828 293 023 282 735 286 348 341 925 311 807 287 288 185 777 170 953 136 289 172 676 298 246 356 918 291 730 288 084 282 270 342 824 314 186 292 487 191 876 166 390 138 561 171 265 301 306 354 979 290 750 293 013 279 099 342 723 317 464 294 987 200 936 162 654 140 667 170 877 302 212 354 338 1 216 776 1 255 109 1 288 654 1 332 496 1 366 192 1 399 514 1 444 516 1 454 543 1 468 305 1 480 858 1 494 866 22 .9 10-19 20-29 30-39 40-49 50-59 60-69 70-79 800.5 6-15 16-66 67330 212 326 014 289 763 264 061 278 040 304 291 312 893 310 374 308 096 306 773 305 334 312 189 319 321 333 203 329 464 293 913 270 386 286 645 292 562 298 554 303 769 309 273 296 164 318 569 314 241 322 985 340 039 336 350 305 233 298 216 293 331 288 619 285 102 204 268 240 068 297 841 321 036 320 164 332 071 350 392 352 832 355 430 355 589 353 830 236 782 208 241 201 852 237 278 294 193 317 607 318 438 320 646 322 749 324 867 328 810 236 962 240 067 223 291 196 824 191 300 226 393 282 894 291 402 298 193 302 936 304 650 179 167 192 533 202 749 205 786 191 507 171 328 170 838 172 165 176 130 183 099 193 678 103 836 111 430 120 558 130 402 138 581 143 814 138 259 136 420 134 850 132 772 130 905 34 120 38 624 44 082 48 563 53 257 58 505 65 709 67 317 68 774 70 625 72 488 202 632 316 492 1 229 571 185 005 189 168 329 671 1 276 474 199 554 161 295 333 032 1 314 183 219 070 156 842 298 603 1 366 536 234 418 172 584 269 602 1 409 033 249 775 187 606 277 609 1 442 319 253 211 186 054 304 568 1 489 503 251 176 183 916 309 419 1 498 820 249 779 181 054 314 718 1 512 110 248 225 179 291 318 411 1 522 996 248 351 178 749 319 188 1 536 537 249 596 Females 0.

Skype: The Whole World can Talk for Free STVxxx Exhibit 9: Denmark’s Population Statistics [16] 23 .

Skype: The Whole World can Talk for Free STVxxx Exhibit 10: Internet usage trends [12] 24 .

1612 0.0170 0.0600 * VoIPBuster: free means.010 free* free* free* 0.: These Prices were presented in Feb 2006.0920 0.010 free* 0.0170 0.0170 0. 0.if you don't pay this Euro you'll be interrupted after one minute! N. excl.0550 VoIPBuster free* free* 0. Euro Country USA Canada Brazil Argentina Great Britain France Spain Italy Austria Germany Poland Russia China Japan Australia Thailand India Egypt South-Africa Skype 0.0170 0.0170 0.0390 0.010 0. VAT.010 0.0170 0.0170 25 .0192 0.1500 0. . France. ..0170 0.0170 0.0440 0.0260 0.Skype: The Whole World can Talk for Free STVxxx Exhibit 11: Skype versus VoIPBuster for calling landline phones in a random sample of countries.B.00 or more to get free access to specific countries like USA. and www.0600 0. that you've to pay EUR 1.010 0.010 free* free* 0. Spain. The information was gathered from the official company websites (www.300 0. They might have been changed since then.0170 0.0170 0.

Skype: The Whole World can Talk for Free STVxxx Exhibit 12: Telephone charges in Comparison with European average [12] 26 .

Skype: The Whole World can Talk for Free STVxxx Exhibit 13: Fixed line and mobile networks penetrations [12] 27 .

Skype: The Whole World can Talk for Free STVxxx Exhibit 14: Fixed line and mobile networks outgoing traffic [12] 28 .

Skype: The Whole World can Talk for Free STVxxx Exhibit 15: Fixed line outgoing traffic in detail [12] 29 .

Skype: The Whole World can Talk for Free STVxxx Exhibit 16: Mobile Network outgoing traffic in detail [12] 30 .

In Finland the percentage of these households reached 33%. [12] Almost every household had at least one fixed telephone subscription. Not surprisingly. 1 31 . In some countries. voice communication had to a large extent moved to mobile networks. reached their peak first in Finland (1997) and last in Norway (2002). However. Available online. the gap between fixed and mobile prices had shrunk considerably. As prices for mobile services were dramatically dropping all across the Nordic region due to major competition in the mobile sector.itu. [12] The mobile competitor Mobile phone penetration and growth in Sweden. www. Norway. EUROPE & CIS’S TELECOMMUNICATION/ICT MARKETS AND TRENDS 2003/2004. This trend can also be supported by the dramatic increase of outgoing traffic in mobile networks. and Telephony Market and Trends Fixed line stagnation In the last years there had been an evident stagnation of the fixed subscriber lines both due to saturation as well as increased competition from new market entrants. including both ordinary telephone lines and ISDN subscriber lines.Skype: The Whole World can Talk for Free STVxxx Appendix 1 Information about the Nordic Communication. such as Denmark and Finland. [12] According to a survey conducted in 2004 by the International Telecommunication Union “an increasing number of households had one or more mobile phones without owning any fixed line”1. despite significant price reductions on mobile telephony not all consumers could gain from giving up their fixed accessed February 2006. Finland together with Denmark and Luxemburg were the countries with the lowest mobile call charges in Europe. The fixed subscriber lines. Finland and Denmark far exceeded the EU average. this decline in new fixed network subscriber lines resulted in a significant decline in outgoing traffic from fixed networks1. IT. there were customers that started considering giving up their fixed line telephone and relying completely on mobile telephony. Mobile penetration was close to one hundred per cent and Sweden and Norway had even surpassed the theoretical saturation point of 100% by having users with more than just one subscription. Finland is at the same time the most expensive when it comes to fixed telephony with charges well above the other Nordic countries. but the situation in the past few years was changing. mobile networks and broadband. Substituting fixed line telephony with mobile telephony was a good alternative only if you were a customer with modest fixed line usage or with high demand for calls to mobile phones.

Prepaid cards made it even easier for an individual user to have more than one mobile service account. reached a mature penetration level mid-2005. 1 32 . had resulted in a significant rise in xDSL2 based Internet connections. Sweden’s price fell by almost 100 percent in just one year. Digital Subscriber Line. While many mobile operators have focused increasingly on non-voice services to enhance their revenue. In Denmark the competition had driven growth. 3 ADSL. mobile Internet services over 3G. In 2005 the Danish mobile market was characterized by not only high penetration levels in voice service. At time of writing the major part of broadband Internet connections relied on cable modem or ADSL3 that used existing fixed lines. voice services still account for the lion’s share of revenues.itu. Another important factor is the ability of mobile networks to provide high-speed Internet access to a comparable price and quality1. future developments in the sector will depend on a number of factors. [12] And with competition comes lower prices and higher access speeds. such as TV over ADSL. and it was growing. WAP and GPRS have had a slow take-up. such as converged fixed-mobile products or other bundled services. TeliaSonera and Tele2 being present in more than one of the countries in question. All these made it difficult to estimate a saturation limit for mobile subscriptions. www. but also data services including WAP and GPRS. In this way it enables the user to use the higher speed direction for the "download" from the Internet but not needing to run servers that would require bandwidth in the other direction. the phone companies could increase their revenue and in that way make up for the increased competition and lower mark-ups. including the development of new technologies. Finland and Norway were already among the top ten countries with the highest percentage of the population using a mobile phone to access the Internet. [12] Internet and Broadband In the last years active promotions of broadband connections in the Nordic countries. Upload speed is lower than download speed for ADSL and symmetrical for SDSL. DSL. The high prices could possibly be explained by the fact that the users with a shared telephone and EUROPE & CIS’S TELECOMMUNICATION/ICT MARKETS AND TRENDS 2003/2004. Available online. Sweden. 2 DSL technologies are sometimes referred to as xDSL. the wires of the local telephone network).int. Even though available in Sweden and in Finland since the millennium. users have encountered a number of barriers such as non userfriendly devices. [12] With fixed line operators struggling for market shares and revenues. However. in 2003. By taking advantage of broadband and combining it with constant fixed line phone calls. While the technology is already available. accessed February 2006. the mobile phone growth and penetration was largely driven by prepaid cards which represented nearly half of all customers. Cross border competition had also largely increased with operators and companies such as Telenor. is a family of technologies that provide digital data transmission over fixed lines (i. as the broadband prices were relatively high in the country. and had during that year a yearly growth rate that was amongst the highest in Europe. complicated billing systems and limited network coverage amongst others. Asymmetric Digital Subscriber Line (ADSL) is a form of DSL that has an upload speed that is lower than the download speed. In Sweden.e.Skype: The Whole World can Talk for Free STVxxx Norway.

the use of newer broadband technologies such as wireless networks. Norway was similar to Sweden in this respect. cable modem and satellite. [12] 33 . The Swedish households with broadband as well as the Norwegian reached 41% and 40% respectively in 2005.000 Finnish households had broadband connection in 2003 increased to over 2 100 000 households in 2004. of these 5 to 10 were to be Swedish based. 6 million Swedes. The aim was to have Wi-Max coverage in 100 of the largest cities. from 2003 to 2005. Sweden and Finland had one of the most developed Internet and broadband markets in the EU.Skype: The Whole World can Talk for Free STVxxx broadband connection pay twice at the margin to rent the raw copper. making the country one of the most ‘online nations’ in Europe. The same picture applies to all the other Nordic countries. In 2007 it was predicted that Wi-Max would have a strong presence in Europe. had similar to its neighbor Denmark. which was twice the EU average. In Finland WLAN had limited presence. Sweden’s Internet market is migrating rapidly from dialup to various modes of broadband access. Even Finland. one of the highest broadband penetration rates in Europe. In Sweden however. the share of the Danish households having broadband increased from 25 to 51 per cent. In the two years. [12] Although given an increased promotion in most countries in the last couple of years. or 80% of the population. but also fixed wireless adoption. A change in price regulations would avoid this. despite the country’s fragmented take-up of new fixed-line technologies such as DSL and regional variation. the broadband market was not only characterized by high levels of DSL. A number of WLAN hotspots were launched in 2002. were still quite insignificant. The country had nevertheless an extensive cable network in urban areas and approximately 63. the levels of broadband penetration were amongst the highest in Europe. 34 times high as in 2003. Norway. In Sweden the number of regular Internet users was edging towards 6. Denmark.

instant messaging. It also boasts some attractive 1 This Appendix is written based on the events occurring in the first quarter of 2006. It connects to any wireless network. Skype has plans for a giant leap. from PC and beyond. in order to use Skype. which has launched a dongle that runs Skype on Siemens' DECT phones. customers had to remain tethered to their PC. It is reaching out to the familiar using phone equipment such as personal devices and mobile phones. Also last year Skype entered an agreement with RTX Telecom to develop a line of cordless phones that allow users to connect the cordless phone to a normal socket and use it as a normal phone. This is a 2-in-1 cordless telephone that can be connected to a normal telephone socket and a USB port on a PC. 34 . which runs Skype. In addition. Furthermore. It also has a USB connection to the computer. It can work on the regular PSTN or the Skype network. The Gigaset M34 USB adapter allows the Siemens phones to access features such as free calls to Skype users. Netgear has created what has been dubbed as “basically a Skype cell phone”. access to a global decentralized directory. you can use Skype to make a VOIP call. communicates with the DECT base station and routes Skype calls over the Internet instead of the phone system. Also PocketSkype [24] has been launched allowing users to make voice calls using a Wi-Fi-enabled Microsoft PocketPC handheld computer. letting users make Skype calls completely unconnected to a PC or phone line.. online presence and contact lists. expanding its catchments to encompass mobile devices too. there exists a global network of agents selling SkypeOut ‘top-up’ cards and hardware. the ability to participate in free Skype conference calling.Skype: The Whole World can Talk for Free STVxxx Appendix 2 The Future1 of Skype. Initially.. One example is the dualphone [25]. freeing itself from a niche category. The device plugs into a PC. However this is no longer the case. buddy lists and conference calling [23]. When you push a designated button on the handset. In order to expedite the process Skype has published a set of technical instructions that allow phone manufacturers to build the service into their devices that will enable the phones to work on Skype's inexpensive online network. The program allows all of the benefits available to PC users including free Skype-to-Skype worldwide calling to any Skype user. One of the world’s leading mobile phone providers Motorola has entered a deal with Skype to create Internet phone software to allow users to use high speed Wi-Fi networks to utilize Skype’s service. Another big-name manufacturer on the list is Siemens.

and credibility that extends far beyond teenagers and hackers". none of that is manifesting any airtime for the carriers. These further services and advancements help Skype look more and more like “the most successful communication company worldwide” they want to be. users can save about “24% on their total mobile bills by switching to VoIP in locations covered by Wi-Fi. It automatically forwards Internet phone calls from a user’s PC to any phone and vice versa.Skype: The Whole World can Talk for Free STVxxx features which allow you to see who’s online with one push of a button and set your profile to busy.iskoot.000 last year. No special hardware is required because you use your mobile phone.27% of revenues. It answers the critics that say it is no more than an international phone card replacement and brings Skype further into the mainstream. iSkoot extends the reach of PC Calling by allowing users to make and receive PC Calls using only their regular cell phones. you can call your Skype contacts at the push of a button. But the real pain will be in the business segment. You don't need a broadband connection or WiFi. Buvat says that if 35% of an estimated 35 million wireless LAN users in 2008 get into the VoIP habit. then that will cost mobile operators 1. It is "The kind of stuff (that) tends to generate some extreme buzz . where Capgemini estimates operators could lose as much as €4. Buvat also points out. 100 million WiFi-enabled mobile handsets will be sold worldwide in 2008. Through this service a minute of PC to PC connectivity that would go on between two PCs all of a sudden now turns into airtime minutes for the carriers.52% of their revenues in the consumer sector. “out to lunch” etc. a consultant in Capgemini's C4 research unit suggests that "VoIP over WiFi poses a significant threat to traditional mobile revenues in the coming years” [27]. or make low-cost long distance and international calls using SkypeOut™ – all on your mobile phone. or 5. That is close to 5% of the expected 2 billion global mobile subs base. 1 http://www. VOIP Threat to the mobile industry Jerome Buvat. up from just 113. Currently. Skype doing their part There is a company in the US called iSkoot1 which is using Skype to work with carriers not around them. away. after accounting for the additional cost of the VoIP subscription". All you need is the free iSkoot software.286 million. a mobile calling plan with a data service subscription and a valid Skype login.471 million. Even with conservative estimates. He is quoted as saying. However Zenstrom has pointed out that they had no intention of completely replacing the traditional telephone system Alexander Graham Bell had conceived two centuries earlier. amounting to € 35 . Currently billions of minutes are taking place on the PC to PC network. ”Just as e-mail is free but people still pay for (and use) the fax we believe that voice calls using Skype's peer-to peer software is an enhanced complement to other ordinary telephones” [26].

its zero-cost.verso. They justify the blocking of services like Skype.Skype: The Whole World can Talk for Free STVxxx "We've gotten some very strong encouragement from the carriers. and a way for them to go after a target audience with a differentiated product. who see Skypetype services as a very strong value-added for their customers. for being susceptible to denial of service attacks and also generally being prone to virus attack. 1 http://www.S." Not all are happy with Skype Despite the reams of positive hype Skype has its doubters. Inc. are being led by research firm InfoTech. “The bottom line is that even a mediocre hacker could take advantage of Skype’s vulnerability. Their system enables blocking of Skype or other peer-to-peer traffic from a service provider’s network. which is calling for businesses to impose an outright ban of Skype. slamming it for offering weak defenses against hackers and bypassing corporate firewalls. This could be the cause of great pain to the service that was built on. There is a welter of opinion warning users against Skype.1. for one part. The attacks on Skype and VoIP in general. because they take up so much bandwidth without providing benefits to the providers. service provider adopting new technology touted by Verso 36 . as a “Skype-blocking” system.” says Info-Tech’s senior research analyst Ross Armstrong [28] There is also a U. Alternatively it can be used to monitor traffic if the service provider would like to charge for use of their network by Skype users.

Espoo.2%).865 sq mi (307. Turku. Malmö.600 (city proper).300 (metro. Ålborg. 1.): Stockholm. 178.359 sq mi (42. Bergen.): 9.774 (growth rate: 0. 1.200.): Copenhagen.251. Tampere.200. 144.860 sq km) Population: (2006 est. 229.Skype: The Whole World can Talk for Free STVxxx Appendix 3 Geographical map of Sweden. 220. 144.700.661 (growth rate: 0.094.900 (city proper).300.600. 127.500. density per sq mi: 52 Largest cities: (2003 est. http://www.600 Source: infoplease.450. 37 .600. 120.964 sq km) Population: (2005 est.470 sq km) Population: (2006 est. 201.820 (growth rate: 0. Århus. 168. Norway. 1. 211.1%).): 4. density per sq mi: 44 Largest cities: (2003 est.942 sq mi (305.000 SWEDEN Area: 173. 1.600.372 (growth rate: 0.): Helsinki.231.): Oslo. Stavanger. Vantaa. 506. 245.200. 189. density per sq mi: 39 Largest cities: (2003 est.162.100 DENMARK Area: 16.500.400. 582.): 5.731 sq mi (449. area).900 (metro. density per sq mi: 333 Largest cities: (2003 est.infoplease.610. Odense.4%). Göteborg. Denmark and Finland and statistical country facts NORWAY Area: 118.622.370 sq km) Population: 5. Uppsala.001. Trondheim.3%). area).300 FINLAND Area: 117.

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