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September 13, 2011


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Your entire theory goes up in smoke as Skype is already a reality. I skype via my iPhone. I can also Google voice. ANY Android phone can do the same. So you have 60% of the smart phone market that ALREADY has built in voip for voice and video chat. (Probably more than 60%, as I'm sure Blackberry's can run Skype too).

The horse has left the barn.

Apple doesn't get enough credit for changing the telecom industry. Telecoms surely did resist being turned into "dumb pipes". Yet Apple was able to buy their way in by giving AT&T and many others long term exclusive access to the iPhone.

Then the iPhone was so PHENOMENALLY successful that carrier that didn't have the iPhone embraced Android as there "we have a phone just like the iPhone" solution.

With the iPhone and it's copycats has come the app phone standard with the telecoms NOT in control of the apps. And thus we ALREADY have skype (and other voip apps) on most all smartphones.

To say that NOW the telecoms are going to punish Microsoft/Nokia -- is ludicrous. HTC is launching several new Wp 7.5 (Mango) phones on AT&T this fall.


Øyvind Mo

Interesting article, Tomi. In particular the numbers giving some perspective as to how important revenue from voice and sms still are.
Lee - I see your point, but although you are right about there being existing options for installing and using Skype over most mobile networks, I feel you are missing Tomis point: the carriers do NOT wish to encourage nor accelerate any increase in the adoption of Skype. (There is a significant difference between: "pre-installed and actively encouraged" and "there's an app for that"). And the negative sentiment of the operators can be expected to translate into a less than preferential treatment of WP and of Nokia phones.
Even though "the horse has left the barn", as you say, the speed at which the horse is moving is highly relevant to carrier's profits over the next many years. The fall of the Roman Empire took more than 300 years. The Spanish Empire took slightly more than 70 years to tumble. Nokia seems to lose it's "empire" in less than one year... If you were managing a network carrier, why, oh why should you choose to accelerate the adoption of Skype, or support the organizations affiliated with it? Would you do "an Elop" because it's plain to see that your business model has no future, so better take all losses as quickly as possible, or would you tug it out like a roman and keep trying?


If this is true, it certainly isn't good for Windows Phone/Nokia, but it will be a short lived victory for the carriers. Defending a model of artificial scarcity is not viable long term. If it's not Skype, Google Voice will fill the void. The carriers should be doing two things: 1) Price data to benefit from VOIP, esp. video calling (we've had a couple of uh oh bills on our iPhone due to Skype usage on some long video calls). 2) Encourage and foster VOIP competition to prevent one system from being ubiquitous. IM could have superceded SMS for a lot of users if they wouldn't have spent so many years actively preventing compatibility. SMS (like regular voice) is universal.

Some Name

In addition to what Øyvind Mo said: maybe iOS and Android were gradually supporting Skype, but the carriers could not really hit these 2 rising stars, it's far more easy to hit Nokia when it's down.

James Barnes

Why didn't you mention the Verizon Skype business relationship? Verizon is the second largest mobile carrier in the USA, not an insignificant partner by any means.


All those reasons why carriers might hate Skype and maybe even hate Microsoft might be true. But as Lee just said - the horse has already left the barn. So they are already accepting Skype (it is available and working quite often via their 3G networks, and always via Wi-Fi) on every smartphone they sell. Everyone who wants it can easily get and use skype. And carriers will soon be embracing it and looking for way to make money with it. Just like the biggest U.S. network - Verizon - did years ago. With Verizon on board - is it really "the bigger you are the less appealing Skype is"?

Regarding Nokia and Skype - they had it available for older Symbian phones for years. Yes as a separate app, but anyone could get it. For its next generation devices - Nokia had the best native Skype integration of any smartphone in N900. It is the best Skype integration with phonebook and other functions I have ever seen and it is still better then anything Android or iOS have to offer today. That integration was architectural in Maemo and was most likely migrated to Meego. So that huge potential blockbuster phone N9 that Elop killed will probably come with the best Skype integration in the industry. Shouldn't that affect potential N9 future if carriers hate Skype so much?

Did Samsung decide to push Bada at the expense of Windows Phone? Are you sure that was not at the expense of Android, because Google bought Motorola and Samsung decided to invest more into its own software? Or HTC considering WebOS is not because of Googolora, but because of something Microsoft did? Holding a worldwide product launch events, in 4 international locations at once, to announce the first WP Mango phones (on Sept 1 HTC Titan and Radar) does not really sound like HTC is cooling off towards Microsoft. Last year HTC used the similar early September launch event to announce 2010 Holiday Season Android flagships. This year they used it to announce their WP flagships.

And about that carrier boycott? According to Wikipedia - "A boycott is an act of voluntarily abstaining from using, buying, or dealing with a person, organization, or country as an expression of protest". Translated into current carrier/Microsoft relationship it should mean that carriers will not accept Widows Phones into their inventories, will not promote them and will certainly not subsidize them.

So how come AT&T announced 3 new subsidized Windows Phones yesterday? How come HTC Radar and Titan are already available or will soon be available (subsidized) for pre-order on Orange and T-Mobile in Europe? Are these really the signs of boycott?


Tomi is projecting Microkia to take 3% of the market and THAT's worth "boycotting" because of integrated Skype.

The iPhone, Android phones and Blackberry phones represent some 70+% and all have Skype apps and "that's different" somehow.

I don't buy it. Skype has 600 million users and there's just no way that the folks most LIKELY to use skype to avoid the highest long distance charges won't just download the Skype app.

And, we already have evidence of AT&T embracing the roll out of Mango handsets...even subsidizing them.



Just a though -- how many of the current 600 million Skype users had Skype come pre-installed on their computer/phone?

That would be NONE. Or close enough to none. So 600 million Skype users all had to locate and download Skype -- and DID so.

Now tell me again how 70% of smart phones with available Skype apps, easily downloaded for free is NOT something that would bother phone companies....but Microsoft pre installing Skype causes a boycott?


John Phamlore

The war between Intel and the US carriers started at least by 2002 as detailed in articles such as Businessweek's "The Road to WiMaX"

Something that should be emphasized is that with the United States almost non-existent regulation, the carriers are allowed to compete in both landline and wireless markets.

Intel with WiMaX attempted an end-run around the US carrier monopolies. This and not Skype is in my opinion what the carriers saw as their existential threat in the coming decade.

Observe the Businessweek article clearly articulates Qualcomm as the real threat to WiMaX and therefore the natural ally of the carriers who otherwise might not appreciate Qualcomm's IP tax.

What we appear to have currently is an alliance between the two largest US mobile carriers with Apple, Qualcomm, and yes Microsoft in some fashion. Obviously these companies interests do not completely overlap and they sometimes can still damage each other in other areas.

The fear of WiMaX explains why Apple has been able to negotiate deals with the US carriers, because Apple's mobile offerings, as distinguished from their Mac computers, are ARM-based. What Apple's iPhone and iPad have really done has been to totally kill off Intel's proposed "mid" mobile device category. (Observe that Intel has recently declared it is sinking $300 million into Macbook Air competitors but that the PC makers are saying they only plan to ship 50,000 units. The PC makers know who is going to win the struggle with the US carriers deliberately pricing tethering of Intel devices beyond the reach of consumers.)

Considering that Microsoft's Windows Phones 7 at first only ran on Qualcomm chips and that Microsoft is porting Windows 8 to ARM, I wouldn't count out the possibility that some surprise deals will be made putting Nokia Microsoft Windows Phones on US carriers are relatively attractive terms.


The problem for the carriers, of which Skype is just an example, is that everyone is figuring out just how out-dated and uncompetitive their pricing models are. Having networks that can now handle lots of data relatively cheaply is a game changer.

Take Skype and assume $0.05/MB. You can get 5-10 minutes of calling with 1 MB of data, which works out to 1/2 to 1 cents per minute. True, Skype/VoIP calling is not as reliable as regular wireless voice calling, but I do not think that justifies such high price differences. And as data rates go down, the difference will be more pronounced.

The numbers are worse for SMS. With a MB of data, I can send the equivalent of over 7000 SMS messages. No wonder BBM is never a cheap add-on. And if the carriers are so worried about Skype, how must they feel about iMessage?

John Phamlore

To see how the real cause of Nokia's downfall was their executives decisions to listen to fellow Finn Linus Torvalds in the early 2000s, simply read the following article "Android, forking, and control" at

Here are some choice quotes about the Linux developer community from the accompanying comments to the above article:

"Nokia did everything the community told them to, and lost big."

"... over five or six years ... They gave the GTK/Gnome world a long enough chance to produce something decent ..."

"At a certain point, it's easy to get the impression that your time is intentionally being wasted by people who have no interest in ever accepting your work."

In my opinion, Nokia allied with Intel only because Linux was born on Intel and a Finn started Linux. Intel never delivered the mobile chips with a small enough power draw. Nokia set their own house on fire by obsoleting what was to become Symbian and declaring they were moving to Linux, for which there was no reason to transition since Intel simply cannot produce x86 mobile phone chips. Nokia angered the US carriers by three times allying with Intel over mobile television and over WiMaX.


One of the main reason why Nokia starts Meemo/Meego was only a trend. In fact that they want to have a second foundation similar to Symbian in the beginning of smartphone business.

But Intel was a totally wrong partner since they don't care at all about mobile devices and in addition with that, no one interested in Meego which makes it as "no future" mobile OS compared to Android.

Meego, sad but true...

And Skype, who doesn't use Skype? Soon or later voip will be a standard in mobile phone.

Mikko Martikainen


Very interesting numbers, and the only conclusion I can draw is that the Microsoft + Nokia + Skype strategy is going to be a tremendous success in the long run. Your own numbers prove it: no carrier stands a chance against potential 2 billion users. The iPhone started the disruption of the carrier business, one could argue, and it is only accelerating: iMessage, Google Voice, and now the ultimate blow, Skype. No amount of boycotting is going to change the end result, and one by one the carriers will come to the same conclusion and cave in.



Where I live in the Netherlands. T-mobile charges 1 euro per 1 MB of data on prepaid plans so you might want to multiply your assumption by a factor 20. For postpaid plans they have a different trick, they give you 'units' that can be used to either use up a Minute/sms/mms/MB.

And don't think the other Dutch carriers (Voda & KPN) are different because they've all changed their subscription plans this summer in *lockstep* to mitigate the loss of revenue from Skype and Whatsapp.

An executive from KPN (the market leader) said the migration to smartphones in the Netherlands outpaced e.g. Germany and therefore they had to change their subscription model here and not *yet* in Germany.

As Tomi illustrated this is about BIG money. The companies raking in these big buck are NOT STUPID. Don't be fooled they will let themselves be marginalized by some nifty workarounds circumventing their pricing plans (e.g. 1MB = 10min). In the Netherlands they effectively form a cartel of 3, prepaid you pay about 10c per voice minute: they have pricing power. This price is not determined by the 'real' costs of carrying those voice bits over the network but by their pricing power.

Tomi's argument basically boils down to: Skype threatens the pricing power of the carriers hence they will oppose Skype every way they possibly can and get away with.

As a consumer I might not like this but from a business perspective this is a perfectly logical reaction from the carriers. Don't let your preferences as a consumer cloud your analysis of the situation. As a consumer one might perceive the carriers as 'the bad guys' so instinctively one tries to come up with arguments leading to the bad guys losing. This is bad science, just imagining arguments leading to your preferred outcome.

If you want to refute Tomi's argument come up with reasons why the carriers would want to embrace Skype, i.e. show how Skype will make them more money instead of cannibalizing their revenue streams.


@Steve -- what are those Dutch cartels doing about the more than 70% of Smartphones (Apple, Android, Blackberry) that ALREADY have Skype?



This is a ridiculous "excuse" as to why Nokia will be uncompetitive. There is nothing new here. Carriers have been "hating" consumer-friendly innovation for decades.

They hated when you could send faxes via email or fax services and dropped the second fax line. They hated when iPhone users started saturating their network with Web traffic and exposed their unlimited/large data plan carrot as a bait and switch to metered plans - which is failing. Then they hated music streaming to mobile. Then they hated Netflix and other video streaming (mobile and fixed alike). They hated Vonage and other VoIP-based primary line providers. They hated truly liberated content/app stores (iTunes/AppStore).

But Apple has proved that if you focus on the user needs, not the operator's, the users and profits will flow to you, and sooner or later operators will be on board.

It is indisputable, that if Nokia made mobile phones and tablets as desirable TO CONSUMERS as the iPhone/iPad, operators would line up and to want to carry them in their stores. They would not even remember Skype.

Now, when Nokia produces phones that suck (slow CPU, low res screens, incompatible OSes, etc), that consumers don't care for, Operators can come up with all sort of reasons to extract punitive terms/price.

Operators can tell RIM, your BBM is a pain, you need to discount your Blackberries 15% for me to carry it. They can tell Nokia Skype is a pain you need to discount it 25% for me to carry.

They would not be able to do the same to Apple. FaceTime is a huge pain for carriers. So are all the apps that turn the 3G connection into a WiFi hot spot. But they have no choice. If they don't carry the iPhone they see their best customers migrate to their competitor's service.

So it is irrelevant if Operators hate skype or Nokia or MIcrosoft or Apple. What is relevant is if the product is compelling enough for them to need it. You can say that the PC Manufacturers hated Microsoft. But they gladly did business and prospered bundling Windows and Office and IE into their products. The likes of DELL and ACER would not exist without Microsoft (good or bad).

Similarly, Verizon hated Apple and the iPhone. Spent $200M advertising against it. Only to run to Apple and promote the phone as soon as the AT&T exclusivity deal ended.

If Nokia makes phones that users "must have" they will sell - with or without Skype. If they don't (the most likely scenario) they will continue to decline into oblivion. Just like RIM.

RIM's decline will not be because Operators hate BBM. And Nokia's decline will not be because Operators hate Skype. It will be because their phones and tablets are not as desirable as Apple and Android-powered Samsung/Moto/LG/SE.

Simple as that.


the Carriers could hate skype, but they can't stop consumer using it.

There is no reason Carriers hate Nokia for Skype, on youtube there was a lot videos Android phone showing using skype -- even at that time they didn't really work well with skype. Iphone user also use skype.

Looking forward Nokia bring Skype function, it is a pity Nokia couldn't work with skype well.



Originally they wanted to throttle or block apps like whatsapp (bbm clone) and skype and charge for allowing the use of these services. This ran into legal issues and caused political controversy. It turned out the carriers were packet sniffing customer data traffic to keep an eye on the usage of these apps.

The current approach by e.g. KPN the market leader is to just bundle voice, sms/mms and data into fixed ratio subscriptions where you cannot choose a separate amount of voice minutes and data. So it's either few voice minutes and few MBs of data per month or mucho voice minutes and mucho MBs per month:
- 100 min/sms & 100 MB = 30 euro p/m
- 1000 min/sms & 1500 MB = 100 euro p/m

So if you want a lot of data you get lots of voice minutes & sms messages if you use them or not. You cannot just get cheap data MBs alone. So if you get these voice minutes and sms messages anyway it obviously negates the need to use Skype.

Like I said mobile internet has boomed big in the Netherlands in the last two years and carriers offered cheap unlimited smartphone data subscriptions. T-Mobile even had network capacity issues due to their iPhone succes and monopoly at first.

But now the carriers have openly stated apps like whatsapp and Skype are eating into their revenue and that the age of unlimited internet subscriptions is over since it's just costing them too much. Playtime is over.

So in short the carriers just make the value proposition of using Skype less attractive negating the need to use it. It might still be attractive for e.g. calling abroad but not for calling nationally.

I still have read no arguments on how the carriers would make money from Skype, i.e. on why they would love it.


@Steve - sorry, those mechanisms don't work.

1 - Users just enable WiFi on their Smartphones and do most of their browsing, messaging, Skype calling off-net. This conditions users to realize that the cell/mobile networks only have emergency/occasional use value (the rare occasions when there is no other data connection).

Virtually every cable/broadband provider in the US for example offers free WiFi access across restaurants, airports, parks, etc, etc, etc. And for $9.99/month you can sign up to services like Boingo that let you WiFi roam virtually everywhere.

So KPN will just be accelerating their users moving to the cheapest plan, and become avid WiFi hunters. Eventually they'll go WiFi/Skype only.

2 - Sooner or later a KPN competitor will offer unbundled data plan and it all collapses. If all operators collude to restrict options, that is illegal since the mobile business is a monopoly or oligopoly in all jurisdictions.

The Operators can ONLY compete long term on price and quality of dumb data pipes. All else is just slowing down the inevitable.


@Steve. - apparently there was no boycott of Skype,,,,just a changing of the pricing structure. The same pricing structure that will not need to end up in Boycotting Nokia now.


Mikko Martikainen


I agree. It will take years, but the carrier business model has been disrupted and it is apparent the carriers won't disrupt themselves. In time, as has been the case nearly always with disruption, the carriers will lose revenue, profits and influence. In the meantime, they will do their utmost to try to slow down the disruption and preserve their current business model.

In this regard, Microsofts purchase of Skype was a great disruptive move. Coming from a company that has spent the last couple of decades defending it's business model from the open source disruption, I think it's pretty remarkable that they are now embarking on a disruption of another industry altogether.


You don't seem to acknowledge how fundamentally the mobile industry is changing. Sure, the change is slow and easily hidden behind the incredible growth and transition from dumb/featurephones to smartphones, but the days of glory for the carriers are already numbered. Unless you acknowledge all the disruptive forces at play, your analysis will miss critical elements. You have a great understanding of the "traditional" carrier business, yet you don't really report anything about how that side of business is changing. This post, and your previous mentions about Skype and how much carriers hate it, is pretty much the only thing you've said related to that. Do you honestly believe that carriers will be able to stop Skype and other VOIP apps altogether (and mobile TV, and streaming music, and instant messengers, and the ever growing number of other things that threaten the existing carrier business model)? Or do you agree with me that the future business of carriers is simply to provide the infrastructure to move data?

pay for essay

Skype is a useful, free, and well-made piece of software. You have much to gain from trying it.



I am not trying to refute anything Tomi said. As I wrote, Skype is the best example of the problem faced by the carriers. The reality is that the carriers have increased the capacity and performance of their networks by many orders of magnitude. When you sell data by the KB, voice and SMS rates seem reasonable. They now sell by the GB, which changes everything.

As Tomi keeps saying, this is an enormous industry where huge amounts of money are in play. This is drawing a lot players into the game, many who see pricing distortions created by the carriers and hope to capitalize on them. I do not think the carriers can control pricing as they have in the past.

By the way, my $0.05/MB figure was based on rates in Canada, one of the worst markets for consumers in the developed world. Our market is controlled by a powerful three company oligopoly who, still force feed us 3 year contracts and charge $25/MB when roaming. Obviously they are very, very reluctant to compromise the higher margin side of their business. However, even in this environment data rates have come down and will likely continue to.


Disruption hasn't even started in earnest yet. Just think about scenarios such as Apple, Google and Microsoft form a consortium to buy LTE/WiFi capacity and offer their iDevices, AndroidDevices and WindowsDevices direct to consumers, subsidized with $30/month unlimited data plans.

These sort of scenarios can cause crater a bunch of large operators overnight. I'm not saying this will happen soon or ever, but Mobile operators are very much open to this sort of disruption. Think about a well funded global Clearwire type disruption.


@Baron95 & Darwinphish

In the Netherlands we also have a 3 party oligopoly. At the start of this year we *had* reasonable priced unlimited data plans. But now the carriers are losing too much revenue and have reversed that in lockstep.

Are they playing nice? Hell no, it's not in their interest. We used to have 5 carriers but 2 got acquired. The carriers argued the market was too small for 5 carriers. Of course this is BS but remember this is about big money. The carriers just buy their competitors, the politicians or engage in all kind off stalling strategies.

Just look at Microsoft with their endless bag of anti competitive tricks, technologically, commercially, politically, etc.

Just for fun I checked how many Windows Phone handsets are offered at the 3 Dutch carriers' websites:
KPN: 1 WP phone (
T-Mobile: 1 WP phone (
Vodaphone: 0 WP phone (

And those 2 lonely Win Phones at KPN and T-Mobile's site are show below the middle of very long pages buried between dozens of other phones. All Nokia phones are also shown below the middle of these page at *all* 3 carriers.

So at least in the Netherlands WinPhone and Nokia are clearly getting the cold shoulder from the carriers. It for all to see just check their sites. And make no mistake the vast majority of phones are bought through the carriers over here. People get a new phone when they renew their subscription (typically 2 yr) and can get a new subsidized handset.

Btw. Wifi is not mobile, there's no handover between cells. It might be a stopgap alternative e.g. when on vacation, but it just does not offer the same convenience: moving while calling.

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