Why Do Carriers Hate Skype? Let Me Count The Ways... (updated)

I meant to write this blog a while back but was just too busy before the summer vacations. So we heard that Microsoft bought Skype in May. I went on record saying that this is the death-nail to Microsoft's new smartphone operating system Windows Phone 7, because mobile operators/carriers hate Skype with a passion. Note, this is not necessarily a bad thing for Microsoft, as they get most of their business out of Windows OS for the PC and the Office Suite etc. Skype may well provide good synergies for various Microsoft properties - but not its mobile initiatives.


(UPDATE May 3, 2012 - Nokia's shareholder meeting has just ended. Nokia's CEO was asked directly about carriers refusing Lumia sales due to Skype. Elop answered that it is true some carriers/operators refuse Lumia but that Nokia hopes to use other arguments to win those carriers/operators over. The matter is now closed. It is a fact, admitted by Nokia's CEO himself, that some carriers are refusing Nokia Lumia and Microsoft Windows Phone sales, because of Microsoft's Skype purchase. Please take that in mind, as you read this blog I wrote half a year ago, and the insights in this blog - plus the severe arguments we have in the comments where many Microsoft fanboys try to defend the indefensible)


So Skype is hated by the mobile operators/carriers. And once Microsoft took ownership of Skype, that hatered was instantly transferred to Microsoft as well. If Nokia goes onto its misguided Microsoft 'strategy' with its smartphones, Nokia too will be victim of this hatered of Skype. So what is going on? Lets explore and explain why the carriers all around the world (with a few exceptions) hate Skype.

NOTHING WRONG WITH VOIP

First, lets be clear. Skype is a service that primarily allows us to make voice calls on the internet (it also does other things like instant messaging and video calls etc). That portion of Skype is delivered on a technology called VOIP (Voice Over Internet Protocol). VOIP is nothing new. Way back when, in the mid 1990s when I was still employed at Elisa Corporation and Finnet International, managing the international voice call services business, we saw the emergence of VOIP services as a new technology to compete against traditional 'circuit-switched' international voice minutes. VOIP has turned into a very reliable robust way to deliver more voice calls over the same telecommunications capacity, whether via wired lines or over the air in wireless solutions, like cellular telecoms. VOIP is good as a compression method (but sometimes it produces echos and distortions) to provide more efficient use of telecoms tech to give more people a chance to use the telecoms network capacity at the same time - hence it helps cut costs and those costs in a perfect world, will get transferred down to us consumers through competitive pressures.

Mobile operators and carriers like VOIP too. Most of them - most of them - have already deployed VOIP solutions into their networks to help drive down the costs of voice calls again often led by international calls. If you have a special discounted international call service from your provider, for example one that requires you to dial some special prefixes before you call your international calls to get the discounted international minutes, odds are, that the service (and your discount) is then delivered via VOIP technology. So to be very clear, mobile operators/carriers do not have any philosophical issue whatsoever with Skype because of VOIP the technology. Mobile operators/carriers themselves are deploying VOIP. So with that out of the way, lets get into this Skype matter.

MOBILE INDUSTRY STRUCTURE

The mobile telecoms industry is one of a rare few that generates more than a Trillion dollars (1,000 Billion) of revenues per year. So mobile is far bigger than the landline telecoms business, twice as big as the computer ie IT industry, three times as big as global TV business, four times bigger than the internet industry etc. Mobile was tiny twenty years ago and only mid-sized a decade ago but now towers as one of the biggest industries on the planet, on par with the total sales of all automobiles, or size of the global military spending annually etc. And mobile is by far the fastest-growing Trillion-dollar industry ever seen - generating new billionaires and the worlds' richest person too (Carlos Slim the Mexican mobile telecoms tycoon now for 2 years in a row been richest man, took that title from Bill Gates).

So how does this industry make its revenues? Most of the money is not in the smartphones or their apps, even as those are in the news a lot. Its not in the ringing tones or in mobile advertising or other content or media. The majority of the mobile industry's revenues is earned by the mobile operators/carriers - like Vodafone, China Mobile, AT&T, Telefonica etc. Last year 2010, a total of 79% of all revenues earned by the mobile industry were billed by the carriers/mobile operators - worth 928 Billion dollars (out of the total industry worth 1.18 Trillion dollars last year). Almost 4 out of every 5 dollars in this mobile telecoms industry, is money billed for by the carriers/mobile operators (and most of those, by the way, are through 'prepaid' accounts where the customer purchases a prepaid amount of voice minutes, SMS text messages etc).

So the revenues earned by the mobile operators alone is more than twice that of all TV operators (broadcast, cable TV, satellite etc where nearly half is advertising) combined and three times more than all internet related revenues (most of which is advertising as we know). What is mobile telecoms revenue made of? You'd think much of it is advertising but no, advertising is a tiny tidbit of the mobile operator revenues, of the magnitude of 6% last year. What is most of the revenue for mobile operators?

VOICE CALLS AND MESSAGING

Voice calls. Voice services made up 628 Billion dollars of mobile operator revenues last year, ie exactly two thirds. 67%. And more importantly, how much of total mobile operator profit came from voice calls? In rough terms about 50%. So voice calls are what is called a 'cash cow' in management terminology, a product that is mature, is used by most customers and which generates a giant share of the total industry revenues and profits. Two thirds of total revenues and half of total profits come from voice calls. To say thats pretty important is an understatement. Without voice revenues, the mobile telecoms industry would collapse.

And to see where is the rest, the second biggest revenue generator for mobile operators is mobile messaging (mostly SMS and MMS) which generated 172 Billion dollars of revenues to the mobile operators last year. To understand how big this is - thats more than all handset sales (165 Billion dollars) last year, and handset sales includes both the smartphone we like and the cheaper 'dumbphones' that sell in the Emerging World markets to less affluent consumers. Mobile phone messaging earned more revenues last year than every single handset sold, out of a handset industry that sold 1.4 Billion handsets last year including almost 300 million smartphones. Mobile messaging is that big (yes with 4.2 Billion active users, mobile messaging user base is more than twice as big as the total internet, 3 times more people consume mobile messaging than own a TV set, more than 5 times more people use SMS text messaging than use Facebook etc).

So mobile messaging generated 19% of total mobile operator/carrier revenues and get this - generated 45% of total profits. Together, voice and messaging produced 86% of all mobile operator revenues and 95% of their profits! Because they deliver essentially all of the profits, hese two services are what keep the mobile industry alive. If either was to be threatened, that would be an instant threat to the very survival of the mobile operator/carrier community. An existential threat in fact.

All the other cool things we do, from our Angry Birds to our weather reports to search to maps to mobile money, all that fits into the last 14% of revenues and mere 5% of profits earned by the carriers/mobile operators. Yes, they do want us to surf on the 'mobile internet' but the money is not there. The profits for this industry (today) are generated by mobile voice, and mobile messaging. That is what keeps the carriers/mobile operators alive. That is why they are paranoid about anything threatening voice or messaging.

SKYPE IS NOT THREAT TO VOICE CALLS...

Skype has been around now for about a decade. It has grown tremendously and today has over 600 million users. To put that in context, it is the third biggest internet community behind only Facebook at 750 million and China's QQ/TenCent which has 675 million. If Skype was a country, it would be the third biggest nation on the planet behind only China and India, almost twice the size of the USA. If Skype was a telecoms operator, it would be second biggest, closing rapidly on the biggest, China Mobile which has 620 million subscribers.

To put Skype into another context, more relevant to the survival of the carriers - the fixed landline telecoms industry has passed its peak in users and is in gradual decline of users now, down to about 1.15 Billion subscribers. In many countries a third of households or more have abandoned the fixed landline phone already like the USA. (Finland was the first industrialized country where more than half of households that once had a fixed landline, had abandoned it). The primary driver killing the landline business is of course mobile telecoms. But of what remains, the entity that is devastating what remains, is Skype. In less than a decade, Skype has cannibalized 52% of the fixed landline voice connections, if counted as a percentage of Skype subscriptions vs total fixed landline subscriptions. I know thats not a fair comparison for many reasons, but it is illustrative. If we simply count Skype users and divide that number out of the total fixed landline subscriptions, the equivalent result is that 52% of fixed landline voice subscribers have migrated to Skype.

(This is a provocative argument. The real percentage is lower for many reasons, such as one user may use both services in their home for example, and Skype is often used on broadband PC connections that are not delivered via the voice telecoms connection so the total count is bigger than 1.15 Billion)

BUT SKYPE IS A THREAT TO VOICE REVENUES

So then we get to the point. Skype has devastated voice revenues. Most Skype users pay for no Skype premium services like Skype local phone numbers or 'Skype Out' or other such services. Most users, most traffic, most voice calls on Skype are free. And who is most attracted to use Skype? Its where the price point for voice calls is the most painful - in international calls. And in traditional international voice calls, where we pay per minute usually quite large fees, we tend to be cautious of 'not talking too long' on an 'expensive' international voice calls. On Skype as the calls is free, we can talk for hours. So the really heavy usage, not just the heavy users, the heavy usage is shifting to more and more Skype.

The more expensive the connection, the more attractive is Skype. So where the big revenues are, Skype is cannibalizing it. Telegeography reported from 2008 that international voice call traffic revenues had stopped growing (while the number of minutes still grew strongly that year) and Telegeography said that was due to Skype.

Fixed telecoms operators/carriers had seen mobile phones steal most of their local call traffic in the 1990s. Now in the past decade, they saw that Skype came in and took most of their long distance and international call minutes. And as Skype offered it all for free - not at a discounted price, where perhaps the carriers could still compete (like against mobile minutes which mostly were not free a decade ago), but for free - that is devastating the voice call business of the fixed landline carriers today. And that is where most of the profits were in fixed landline telecoms, in long distance and international calls. Skype is wiping out most of their profits! So mobile operators/carriers hate Skype first of all, because they witnessed what Skype did to their siblings, the fixed landline operators/carriers, devastating their business.

MOBILE VOICE EVEN MORE DEPENDANT ON INTERNATIONAL

So lets move to voice on mobile networks. Most networks offer intra-network deals where calls to subscribers within the same network are cheaper. Then they offer 'buckets' of 'free minutes' that usually are mostly also within the same network. In some very competitive markets, such offers extend to all networks, so you get low-cost minute calls, and a generous 'bucket' of 'free' minutes to 'any network' as part of your contract or your prepaid top-up fee.

These almost as a rule do not apply for international calls (ie you are in your home country, but call someone in another country), or for international roaming calls (when you are visiting another country, and make or receive calls there). There are no formal numbers on the profits of international calls for mobile networks, but in rough terms, I've seen some analysis that says that about 3% of all mobile minutes are international or roaming calls - but they generate about 20% of all voice call profits.

These are by far the most lucrative minutes of the mobile operator voice services. Most fixed landline operators/carriers tend to have to offer competitive international call rates, against many other rivals like 'call back operators' and various discount international call operators. But most mobile operators/carriers do not even bother to advertise their international call rates and keep them very murky, hidden and confusing. You get different rates if you roam to a partner network in a given country (not all countries have partner networks) etc etc etc. So mobile operators/carriers hate Skype even more in the mobile space, because in voice calls, mobile operators make a lion's share of their voice call revenues and profits out of international calls, the very calls that Skype specifically targets.

SKYPE DOES IT WHILE GENERATING LOSSES ITSELF

What is even more infuriating to all telecoms operators/carriers, is that Skype had done its damage to the telecoms industry where most of the time, Skype has not been able to generate a profit. So they offer free services that kill off commercially viable giants, by giving away valuable service (telecoms) for free, and then do it 'unfairly' by attracting investors who pump into Skype more funds to keep it afloat, all while Skype itself continues to generate a loss or very modest profits.

Note, this is of course good for consumers and businesses who use Skype services. As long as some silly investors pump in millions to keep Skype afloat, while making losses, and Skype continues to provide free or ultra-low-cost telecoms services, that is of course good for hte end-user, in the short run. And please do not misunderstand me, I am not here to defend ridiculous punitive pricing plans that many operators/carriers have. I am all for open competition, transparent pricing and reasonable profits in the industry, as driven by open competition. The operators/carriers have abused the international calling regime for a long time (I should know, I was part of the system haha). But the answer is not to destroy the system, it is to fix the system. In the long run, if Skype destroys viable commercial companies that are able to provide telecoms services at reasonable costs - and Skype continues to make a loss - at some point Skype investors wise up and stop subsidising it. And if Skype free calls disappear, its not the same thing anymore. But as long as Skype doesn't need to operate on sound commercial basis, where its investors (Microsoft now as the latest to buy Skype to keep it afloat) keep subsidising the mostly loss-making business, and that kind of rival continues as a thorn in the side of telecoms operators/carriers both fixed and mobile - no wonder the carreirs/operators all hate Skype. If Skype was 'playing fairly' and judged by more-or-less the same rules as most other carriers/operators - quarterly profit and loss statements etc - that would be different. But now they see that Skype is actively destroying their business, without being built on sound business logic.

Again, I am not saying a 'loss leader' based or 'freemium' based business model is not sustainable, in some niches and some markets and some industries even (like gaming). But telecoms is 30 times bigger as an industry as all of videogaming, software and hardware all added together. So whether it is 'good for the consumer' or not, I am here to tell you why carriers/operators hate Skype, and this unfairness in how Skype competes in the telecoms industry is another reason why Skype is so hated.

SKYPE VS OTHER INDEPENDENT VOIP PROVIDERS

There are many VOIP based providers on fixed networks and increasingly also on mobile networks. But Skype is different because of its network. Most other VOIP services are modest in reach, some millions of users or dozens of millions perhaps. But Skype is a giant at over 600 million users. So Skype instantly is a threat because of its size. If you want to call your uncle who is living in Australia, odds are that your uncle also has Skype, but its far less likely he'd have the other VOIP service you may be using back home in Europe, etc. So if you can see any mobile operator/carrier 'embrace' any other VOIP based services, other than Skype - don't think they'd extend the same trust to Skype. Here is where Metcalfe's Law applies (the utility of any network increases in the square to the increase in its number of nodes; or in common speak, if you double a network, the utility to its users grows four times (ie two squared, two to the power of 2).) So a network of 100 million users is four times more 'dangerous' rival compared to a network with 50 million users etc. Metcalfe's Law is very crucial to all business in the networked industries, especially telecoms. Because of Metcalfe's Law, whoever is the biggest VOIP provider is far more dangerous than whoever is number 2 or 3. And thus operators/carriers hate Skype very passionately and curse every added million who join Skype swelling its numbers.

MICROSOFT MAKES SKYPE FAR MORE DANGEROUS

Today Skype reaches some 600 million people. Microsoft's Windows is on close to a Billion PCs. If we just add Windows (ignoring other Microsoft products like say Xbox) we potentially double - double - the reach of Skype! Remember what I said about Metcalfe's Law - it drives all telecoms operator/carrier business and Metcalfe's Law is for example a reason why low-income people who cannot themselves afford to place voice minutes (or text messages) onto the network, are still valuable additions to the network - their richer cousins, children etc will be able to call them and add paid traffic to the network! The carriers/operators know Metcalfe's Law. They would hate Skype to grow one million people bigger. Microsoft instantly makes Skype potentially one billion people bigger. The combined number of all existing Skype users, and all existing non-Skype users of Windows on their PCs, would make Microsoft-Skype bigger than the total existing fixed landline industry, by number of users! That is a huge, dangerous jump for Skype. The carriers/operators, both fixed and mobile, truly hate this development. Skype and Microsoft is instantly the biggest existential threat - survival threat - to the carriers just on voice calls.

SKYPE IS ALSO MESSAGING

So then Skype. Its not just voice calls. Its also instant messaging! And where was the remaining almost half of mobile operator profit - profit - after voice calls? In mobile messaging! Differing from our emails which in most cases are free, on most networks for most users, most of their mobile messaging traffic is individually charged by message sent (on some networks still today, like the USA, they are also charged for incoming messages too, ouch!). The international SMS average price last year was about 3 cents US, and in the industrialized world countries, that was about 10 cents per SMS text message sent.

Skype lets users send instant messaging text messages to each other between Skype users. Skype, not Blackberry Messenger, Skype is the biggest single threat to the whole 172 Billion dollar income stream for mobile operators/carriers that they derive from mobile messaging, mostly SMS text messaging. Blackberry messenger has about 100 million users. Skype today is 6 times bigger and with Microsoft Office integration could be easily more than ten times bigger than Blackberry's highly addictive mobile instant messaging service. Ten times bigger? Metcalfe's Law says a network that is 10 times bigger would be 100 times more valuable. Skype, when fortified by Microsoft becomes 100 times more dangerous to mobile operator SMS texting cash cow, than Blackberry Messenger! 100 times more dangerous! Do you understand now, why carriers/operators so deeply hate Skype.

AND THEN VIDEO CALLS

And then we get video calls. The Apple iPhone 4 with its inward-facing camera and the Facetime videocalling service re-ignited mobile phone handset interest in video calls. What most recent converts to mobile telecoms do not know, is that video calling was one of the big early promises of 3G, literally ten years ago (nine years before the iPhone 4 was launched). And I've had 3G videocalling ability in my pocket on at least one of my phones ever since 2004. I was even flown into South Africa to celebrate the first 3G network to go into commercial production on the continent of Africa, to make the first public video call on that network at a Vodacom event in November of 2004. So videocalling is nothing new.

Now, while the 3G industry enthusiastically preached the promise of video calls back ten years ago, the reality we soon saw, was that video calls were not eagerly embraced by most users. They fizzled out very quickly in the early shake-up of 3G service portfolios and far better success was found in mobile music, mobile gaming, mobile social networking, picture messaging etc. But videocalls did grow. Do you know where videocalls now are most used? On Skype! Yes, on Skype half of the traffic is videocalling traffic. Hundreds of millions of people are very happily connecting with family and friends on distant shores, via videocalls, on Skype and for free.

This was 'supposed' to be the next big thing in 3G networks on mobile, after voice from 1G and SMS text messaging from 2G. It did happen in the past decade, but who hijacked the videocalling traffic and torpedoed its revenues - Skype! The operators/carriers hate Skype for stealing part of their future and turning a clearly highly used service into being economically unviable. Nobody would be using videocalls even on Skype if they had to pay even average voice minute charges for it, far less what mobile operators/carriers were charging for 3G videocalls.

BUT SKYPE EXISTS ON SOME NETWORKS

Yes. Skype has been available on mobile phones since 2006. Skype first came on E-Plus network in Germany, and then onto the Three networks of Hutchison Group which provide only 3G services in the UK, Italy, Austria etc of the Three empire. Note, that Skype calls from those phones were free not to other mobile phones, but only to Skype on PCs and only a few select countries also Skype on mobile phones. But yes, Skype already exists on some networks and some phones, and on some price plans.

Note, nobody offers free unlimited Skype calls and messages and videocalls from mobile phones to any Skype users for free. It is either a premium service that is separately priced, or it is part of a special priced data bundle that is clearly then pricing the Skype portion into that price package. And even then, on most mobile networks, the Skype offering is not the same we get online. It is a 'crippled' variation. And separate from that, most networks have 'fair use' rules that limit the total amount of data traffic you can put onto the network, and real time services like Skype, especially its videocalling, will produce a lot of data traffic. So Skype users on those price plans may find that their Skype use is causing them to go over their limit.

Note, Skype is used usually by smaller networks in some countries - like the Three networks who tend to be the smallest in most of their markets like the UK, Italy, Austria, etc - and they are using Skype as a tool to fight against their bigger rivals. The bigger you are, the less appealing Skype becomes. But yes, Skype does exist in some forms on some networks.

NOKIA WOULD MAKE SKYPE EVEN MORE DANGEROUS

So now, to the ultimate threat. Today Skype alone would be the second biggest telecoms operator in the world, and the active user base of Skype alone accounts for about 10% of all telecoms voice communication capable connections in the world, adding fixed and mobile telecoms together. Skype messenger alone reaches about 14% of all messaging users on the planet (not all of them use Skype as a messenger yet). With Microsoft Windows, if we say removing overlap, that the Skype+Microsoft Windows combination would roughly produce 1 Billion users for Skype, that would be 17% of all telecoms voice connections and 24% of all messaging users.

Now add in Nokia to the mix. Nokia branded phones are used by about 1.4 Billion people on the planet. Nokia alone, more than doubles the threat posed by a Skype fortified by Microsoft. Yes, Skype+Microsoft+Nokia would be more than twice as big, and thus four times as dangerous than Skype alone, Microsoft alone or Nokia alone! If we say Nokia users, after we remove overlap, adds another Billion, we are at 2 Billion potential users for the unholy alliance of Skype, Microsoft and Nokia. Thats a third of all voice call connections and 48% of all messaging users on the planet! Yes, the Nokia phones would not start off all capable of supporting Skype, but if that dam is broken, you don't need a 'smartphone' to do Skype on a phone. Nokia could easily bring Skype also to its older Symbian phones - just last week we heard Nokia was bringing several Microsoft applications (for free) to new Symbian phones. Nokia could also do a Java based Skype client and deploy it to its 'featurephones' running S40. Easily. If one Nokia smartphone running Windows has Skype on it, soon that will be on every Nokia phone. Not because Microsoft or Skype would want that - and they would - it is because the consumers would love it.

WHAT IS BEST FOR CARRIER

Here once again we see the clash of what is in the best interest of the consumer, vs what is in the best interest of the mobile operator/carrier. Nokia had its nose bloodied very badly last decade, when it launched the N-Gage, and attempted to have games for N-Gage sold bypassing the carriers/operators (much like how Apple now does with the iPhone App Store). The operators/carriers boycotted globally, and in the next 18 months, Nokia sales fell by 20%. This by the way, coincided with the Razr. Many pundits of the industry fell for the nonsense that the Razr was killing Nokia (we still hear that said today). The Razr only sold about 50 million units in that time. Nokia sales fell by more than 200 million. No, it was not due to the Razr and Nokia 'missing the flip phone trend' haha - as many wrote back then. No, it was because the carriers/operators boycotted against Nokia, simply punished all Nokia sales until Nokia withdrew the N-Gage and its offensive gaming apps store.

Nokia witnessed this also in the US market. Early Nokia premium smartphones had really cool user-friendly features such as WiFi and Bluetooth and removable memory card slots. The US based carriers hated those, thinking they are ways that the consumer will bypass expensive carrier-based over-the-air services delivered via the cellular network. They asked Nokia to cripple those features. Nokia had a strong brand at the time, it felt the Nokia brand would be damaged if the globally advertised features were not offered in the USA and refused. The carriers boycotted Nokia premium phones, for several years, with the end-result that in the USA, long before a guy named Stephen Elop came along as CEO, the Nokia brands stood for bargain-basement cheapo cellphones in the USA (while Nokia made some of the most highly desired superphones for the rest of the world, such as the N93 and E90 Communicator etc).

Google witnessed this same phenomenon with the first Nexus One 'superphone' that many thought was a highly rated competitor to the iPhone 3GS of the time. Originally the Nexus One was to be sold on several US carriers, but they decided not to sell it. The Nexus One died in a few months. Microsoft has seen this too. They released two highly desirable youth-phones, the Kin line. This was to be sold on several networks who decided not to do it, and the Kin was killed in six weeks, I believe a world record for how quickly a new line of phones was pulled off the market. Its not whether you make the most desirable phones, in mobile telecoms, the control is with the carriers. And if you upset the carriers, you are dead.

So. Microsoft. In May they bought Skype. Already in June we heard from San Francisco and from Boston, that US retailers were boycotting Microsoft phone sales. We saw the disasterous results in Microsoft Q2 when Microsoft itself refused to tell us how badly they were selling their brand new smartphone OS Windows Phone. We have since seen that the total sales had fallen by about half, to about 1.1 Million units, down from about 1.7 Million units in Q1. Even when we add the older Microsoft smartphone OS based phones running Windows Mobile, Microsoft's total smarpthone sales in Q2 were well below 2% of the global sales - and declining.

Since then we have heard that HTC is migrating more of its handsets away from Microsoft Windows Phone and older Windows Mobile to Android, and HTC is now considering buying the Palm WebOS from Hewlett-Packard. Meanwhile Samsung is said to put added effort into pushing its own bada, at the expense of Microsoft Windows Phone and Windows Mobile. Meanwhile Nokia, the big producer of handsets for Microsoft, is said to be delaying its Windows Phone launches, we just heard today from Australia that they won't be seeing first Nokia Windows Phone based handsets until early next year, not this year as previously promised.

AN EVIL EMPIRE, SQUARED

So, Microsoft the Empire known as Evil. It already is on a mission to undermine the carrier business in so many ways. The Microsoft Windows Phone OS is loaded with spyware and Microsoft's advertising engine and Microsoft's messaging etc and all sorts of sneaky ways to get into the moneys earned by the mobile operators/carriers. Look at Microsoft's greedy approach to its IP, it is the only OS platform out there that supports more than one handset maker, that forces its handset makers to pay a royalty for every handset sold. Android doesn't do that, Symbian doesn't do that, MeeGo doesn't do that. But Microsoft greedily watches after every penny.

Then their history of broken promises and lawsuits. The mobile industry remembers well the lessons from Microsoft royally screwing UK smartphone start-up Sendo, which resulted in a long lawsuit that ended up killing Sendo. The mobile operators/carriers are used to collaboration while competing, and they do not look kindly upon evil empires crushing players, like Microsoft did with Sendo (incidentially, they settled, in ways that were reported that Sendo was found to be almost completely right and Microsoft almost completely at fault, but by then Sendo was broke). The Windows Mobile OS has been such a comedy of errors by Microsoft, so badly broken promises of updates and bug-fixes, that HTC, who had made more than 60% of all Windows Mobile phones ever made, said they would not even make phones for the last version of Windows Mobile. Talk about your own troops shooting you in the back. This is the kind of support that Microsoft engenders from its own.

Nokia was seen as a gentle giant, who mostly collaborated closely with its ecosystem, such as offering the Ovi store and Nokia assets to the carriers, helping with language editions, local content - and with that, building a carrier network of over 130 carriers who provided 'carrier billing' - the preferred way to pay for content by any content providers in the app space. After all, when Symbian needed a total update, Nokia paid its partners, turned Symbian into a foundation, and made it open source. Then Nokia added a migration path from Symbian to MeeGo. Nothing like that at Microsoft, god forbid. When Microsoft saw that Windows Mobile needed a total update, they just ended it, no migration path and screw the developers. So now headed by a Microsoft dude, the attitude of Nokia is completely changed. They screw their partners (Intel at Meego and NTT DoCoMo, Sharp, Fujitsu, Panasonic at Symbian for example) and break promises (migration path for developers from Symbian to MeeGo) and will sue you if you complain. Just like Microsoft. Nokia is learning how to become the 'New Microsoft' or to be 'the Microsoft of Mobile'. Maybe their motto should now be, 'Connecting Evil People'.

If PC makers grew to hate and despise and fear Microsoft, I mean 'Evil Empire' is not my invention haha, it is commonly the name used about Microsoft, for more than a decade - imagine how much more damaging a Microsoft could be with Skype and Nokia, in the mobile space. This is Evil Empire, squared.

IN SUM

So, for Microsoft overall, time will tell. I am not enough of an expert on the main businesses of Microsoft, its Windows for PC business, the Office Suite, and its cloud migration strategy etc. Skype looks like a good fit in many ways to the current main businesses of Microsoft. But for Microsoft's mobile business, acquiring Skype is a death-nail to carrier relationships.

For Skype, the Microsoft owner is exactly what they needed, to be able to continue to grow without worrying too much about 'making profits' and continuing to disintermediate the telecoms industries.

For Nokia, the Skype acquisition is the worst possible step its new partner Microsoft could possibly do with Windows Phone. Nokia is now committed to Windows Phone, and is gearing up to launch a series of new smartphones next year - and by end of year 2012, essentially all smartphones made by Nokia will be running Windows Phone. Nokia suffered a far bigger carrier/operator boycott this year due to the Elop Effect (Nokia CEO Stephen Elop massive communication blunders that combine the Osborne Effect and Ratner Effect have caused Nokia handset sales to plummet by half already in only 6 months, and will be down to one quarter of what they were, in less than 12 months). What Nokia desperately needs, is for mobile operators/carriers to lift their current Nokia sales boycott, and to sell new Nokia Microsoft Windows Phone based smartphones eagerly. But from June, Microsoft's smartphones are also under boycott.

And when all is said and done, the effect of Microsoft buying Skype is actually even worse for the carriers, than the Elop Effect was for Nokia. So in a very real sense, Nokia's smartphone strategy under the Elop Effect has gone from falling into a ditch, and now under the Microsoft Skype partnership, running into a minefield. The world of 2012 for Nokia, Microsoft (and Skype) will be worse than it was in 2011. And for this, I predict, the mobile operators/carriers are far too smart to fall for any Microsoft Steve Ballmer/Nokia Stephen Elop promises. As long as Microsoft owns any part of Skype, the Microsoft Windows Phone based smarpthones will be boycotted globally. They will never thrive to achieve that promise of a 'third ecosystem' and wont' come anywhere near 20% market share, not in 2012, not in 2014, not in 2020.. Microsoft has a reputation of breaking promises and putting its own interest ahead of any partners. And as long as Nokia is led by a Microsoft-dude, Nokia will suffer the same fate. Yes, Microsoft has deep pockets, yes Nokia has wide reach, yes some millions of Nokia-Microsoft phones will be sold, but after some years of this, even Steve Ballmer will see this adventure as more of a Zune than an Xbox, and quitely, Microsoft's Windows Phone project will be killed. What killed it? Not Nokia. Skype.

Comments

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[mike]

What a load of crap. Telecom companies will adjust. They've already started adjusting. The biggest carrier in the US has Skype on their blackberry phones. Carriers will just have to move towards selling data instead of voice minutes which they're raping us with anyways.

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thanks very much for sharing! it make us in deep thinking! The way you have “blended” (hehe) it all together makes this look like a solid, whole product, as good as any Pixar short. Probably better. But then again: That’s my opinion.http://www.downjacket2011.com/

[Joe]

This article is a bunch of rambling bullshit. Besides, at the end of the day, Microsoft could ream carriers with Lync, Messenger, Skype, and Windows Phone. Microsoft could essentially put out a phone that doesn't need a carrier or expensive ass data plans, and they could threaten carriers with that, if they refuse to play ball. That's not to mention how Microsoft could screw carriers with Windows 8.

[VogueBagSale.com]

I just required some information and was searching on Google for it. I visited each page that came on first page and didn’t got any relevant result then I thought to check out the second one and got your blog. This is what I wanted!

[landy bridal]

My best friend picked this bridesmaid dress for her August wedding.

[Doug]

So... is this why you can't change the Skype ringtone on android devices, because the carriers mandated the feature loss?

[Pandora Charm Beads]

Those are super cute. I like you on Facebook.

[Alexandre Strube]

So let them (the carriers) die. ALL of them. At once.

Someone will come from their ashes and create data networks that does what people need at prices where everybody is happy, including the customers. When they have one of the biggest business of the planet and providing so little, it is time to let them burn to the past they represent.

[Tomi T Ahonen]

To everyone in this thread

Today May 3, at the Nokia annual shareholder event, CEO Stephen Elop was asked directly about the carriers/operators rejecting Lumia because of Skype. He admitted this problem exists with some carriers/operators.

This matter has now been PROVEN to be true, by Nokia's CEO. I rest my case. I would ask all who commented on this thread, whether agreeing with me, or disagreeing with me, to go re-read the article I wrote for you in September, then go read the rest of published materials in the mobile industry, and consider, did I bring value to you, my readers. I took the heat here by all the Microsoft fanboys who tried to argue this is not happening. I know the carrier community. I think now with hindsight, this article was incredibly insightful in providing underestanding of Nokia and Microsoft relationships with carriers and why they have grown so poisoned during 2011 and into 2012. Also, obviously, Windows 8 will make this matter only worse

BTW, I will no longer tolerate any comments posted that suggest there is no resistance by carriers about Lumia or Windows Phone or Windows 8, because of Skype. Once the Nokia CEO has openly admitted this problem exists, the matter is now closed. I will delete any comments that waste the time of my readers, that suggest this is not happening.

Tomi Ahonen :-)

[David McCarthy]

I have been following you closely over the last few months. I own not one but two Lumia 900a's, and have proved everything you say correct to my dismay.

Nevertheless, don't you think that if Microsoft/Nokia can get into the carrier industry it is the only thing left to take over the smartphone world?

Doesn't it make sense the horse has left the barn as somebody else pointed out, and the carriers are irredemably doomed, and will over the next couple of years be forced to sell off their 4G/LTE services to Microsoft/Nokia?

If there is one thing th Lumia does well is replace my cell through skype, even though the version of skype is totally crippled.

[Skype Spanish lessons]

You share very good information. I really like the news you share with us. The content is unique you share with us is excellent.

[Rob]

Your session has expired refresh the page and start again - No thanks couldn't be bothered

[фотошоп скачать]

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.

[acai di&]

It's enormous that you are getting thoughts from this paragraph as well as from our dialogue made at this place.

[che]

ios and android is great for skype maybbe because of its 3g capaility?