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May 10, 2012


Sander van der Wal

While we are talking about The Netherlands, the Dutch First Chamber of Parliament has just ratified the new Network Neutrality Law. Which means that practices like throttling specific network traffic, like Skype, is now illegal in Holland, like it was in Chile before that.

Changes are other EU countries are likely to follow, and this will impact the possibilities of operators to charge Over The Top for their services.


I wonder why social networks like Facebook or Google+ are never seen as a threat, but Whatsapp and alike are. Facebook has a multiple of users and although I have no numbers on this, I do find that there is acutally a shift from 'traditional' communcation like text messages and phones calls to social networks.

One does no longer send out messages or calls his friends in certain situations, he just posts on Facebook. This is aggravated by the fact that social media is usually one-to-many, whereas messaging and phone calls are one-to-one. So a single message posted on Facebook is not a single text message lost, it is 10, 20, 30 messages lost.

With Facebook having an established base of nearly 900 million people and Google+ growing at fast rates as well - and both already having video calls and possibly integrating it into their mobile environment - they are for sure a threat as large as iMessage, BBM, Whatsapp, and possible Skype, too.


Tomi you an be such a 90's telco guy sometimes that it makes one wonder if you ever came to grips with the internet and all it entails. Here is a copy/paste comment for you taken from ZDNet:

"freakqnc 1 day ago
It should be clear by now that carriers are the problem not the solution or innovation. They are what's most hindering to mobile tech progress and all that it would go with it. With ever more powerful smartphones, with a growing infrastructure that could leverage many innovative ideas to lower the cost of wireless communication including what companies like republic wireless or Keywifi, and more, making those ideas non-profit driven, but partecipatory and shared. That way the community of wireless and wifi users would share their resources turning them into part of an infrastructure that will become the network itself.

Carriers are aware of alternatives and they know their unsustainable business model is absolutely atavistic and survives only becaise the majority of people are noe savvy enough to represent a massive market-hurting potential. Also they own still exclusivity on physical network both wired and wireless and wouldn't let any independent 3rd party enter the game to disrupt their thightly controlled highly profitable business model.

The current network service is pretty crappy when it comes to call quality... Skype could allow much higher quality and become a threat by making people realize how sub par their cell voice service is. Once subscribers will start to value voice quality on calls, then the cat will be out of the bag for all carriers who will have to start deliverying and will no longer be able to offer crappy service for top dollar figures.

When 3G came out all data were on 3G and voice was managed on older 2G etwork... this is still true since 4G is not deployed and available to the point that 3G can be dedicated to voice only. Even if that was the cases carriers would not use the larger bandwidth of 3G to offer HD voice services, but they will jam in 3G badwidth more voice users than they could do before and they'd start selling cellphones to toddlers if they'll be allowed to. I am not being harsh on carriers, I just know that's how they work. Also the low quality of voice is kept as is because according to studies people tend to talk longer when the signal quality is higher... that would increase network load for voice which represents a tiny fraction of profitability since now the name of the game is charging for data hogs. There's more money to be made on data than voice traffic. If it was the other way around you would see the raise of HS voice paired with unlimited data plans... that is not nor won't be the case

Then there is the insanity of pushing ever faster speeds where carriers make subscribers pay through their nose for handset with 4G capability (yes I am referring also to the expensive mandatory data plans too in the case of subsidized phones). The overcharging for 4G it's unjustified at the handset level other than it's priced like that because is a "novelty" in US and it's a mostly a marketing gimmick because when considering increased speed what's that good for when carriers will charge an arm and a leg for data usage and there are no longer unlimited data plans? All that's available are expensive few GB/mo plans which one can now burn through at faster rate to reach overages even faster than ever before! So where is the advantage driving a ferrari on the autobahn when all you're given is just a 2~4 gal. of gas and to drive further you'll need to sell your house? (so if you rent you are sheer out of luck ;P)

Not to mention that they continue to scam money out keeping voice, SMS, email and data as separate service... there is no such thing as a difference between voice and data service... it's all digital data! And they keep making a killing on that scam.

New smartphones can shoot at 1080p then if you want to upload your videos to any service where they can be stored or shared from, then you better wait to get back home and use your internet connection, because with the average 2~4 GB allowances on $50+/mo. that's barely enough to transfer 2~4 hours of HD recorded video at most... after which you would of course be left with no data service unless paying overages. That's a great business model for carriers, not wireless subscribers.

They will cry poverty each step of the way claiming they have invested so much in new infrastructure and service, where in reality it's been a fraction of what they've overcharged people for services that remain unjustifieably separated only for the purpose of create the perception that they actually are different and it's OK ti be charged for SMS voice and data service separately.

But this is no news, we've known for a while already that overcharging for data and pushing to consume data even faster it was where it was heading Does anyone really thinks that 4G LTE was pushed because the carriers wanted to give faster service to the subscibers so they would have a higher quality of service? LOL! Sure that would be a side effect, but the real reason was to set a low threshold and have subscribers eat through data allowances quickly so carriers can either hit them with overages or make them move to more expensive data plans."


Thank you, Tomi!
I really enjoyed reading this blog (again) and learned a lot of about OTT.

Nifty Future

if you want to upload your videos to any service where they can be stored or shared from, then you better wait to get back home and use your internet connection


@Lasko: Good question, seeing as Facebook actually has a purpose-built texting App for the iPhone.

@Tomifan: Missing here is ten macro picture, especially in Europe. Operators have two sources of competition that are new: from the Internet, as described here, but also from each other. The EU forces them to be compatible, to port numbers, and soon, not to discriminate by traffic type. Combined with improved Internet-based apps, this will force network traffic to be sold at the market clearing price.

Of course, missing from the picture is that this will be very very profitable (like selling petrol), but the days of charging thousands of euro per megabyte of SMS traffic are over. (And, because of the many options for consumers in the EU, this is independent of the winning app for voice or messaging.)


I think the carriers are the ones who are stuck in the 90s and while technology have moved on. It's called globalization and people no longer accepts being ruthlessly robbed just because they make toll calls over country borders. All recent companies I've worked at urges they workers to use Skype instead of traditional phone calls in order to cut costs. It is the price of the international toll calls that are the problem, not Skype. Skype is an invention to overcome the high costs of global communication.

We have another example, where EU put a limit on how much cell phone calls can cost if you call from abroad. This price is still ridiculously expensive and a cash cow for the operators. It's like if you call from Texas to California, the operator would charge you $1 per minute.

Basically, Skype is an invention that prevents you from getting robbed by operators and the operators can dislike Skype all they want but since the price for international calls are that high, people will figure out ways to overcome it.


It is actually quite funny that almost everyone seems to have the inevitable feeling that they are beeing 'robbed' by their operators and that it is their god-given right to call and message practically for free, because almost noone seems to understand that
- creating and maintaining a network costs money, a huge amount of
- providing bandwith and peering with other operators and the internet costs money, a huge amount of
- subsidizing your phones costs money, a huge amount of

Where does your internet connection come from you are VoIP'ing and texting over when you've stopped your operators 'robbing' you?
There is no such thing as free beer.


There is actually quite a huge difference between an OTT app and the tight integration of Skype as planned by Microsoft: convenience.

I also have a Skype app installed on my phone, but I barely use it. Why? Because opening the app, connecting to the Skype network, digging through the contact list, and having the application opened for the remaining day just to be able to call and to be able to be contacted is just not as convenient as just pressing the green button.

A tight integration into the operating system and native applications and Skype beeing possibly completely transparent to the user is a huge mutliplier for its use and it clearly distincts Windows Phone 8 Skype from any Skype for iOS app or Skype for Android app.


I would like to share a personal experience about using Skype for international calls.
I live in Canada, where international calls (any calls actually) are stupidly expensive if compared to other countries.

Skype is a good alternative to call my family, my friends who live in Europe, but the fact is that Skype on Canadian 3.5G networks is just rubbish!

I don't know if my operator (Rogers) voluntarily limits rates for Skype, or if its network is originally slow, but it's almost impossible to make proper VOIP. As a result, if I have to call, I use my operators voice network; it's expensive, but at least, I can hear the person I'm calling and (s)he can hear me.

In another hand, my family enjoys unlimited plans for quite a reasonable price (20 Euros/month unlimited calls to 40 countries, unlimited SMS, MMS...)
That's actually Bouygues Telecom's answer to Free Telecom's offer.

So, we use Skype less and less now.

Can these kinds of offer reduce OTT's attraction? I think so, as I think it's easier to just dial a number than create an account, activate 3G/4G, connect, and make a call through OTT...

But that's my point of view. OTT are cars, networks are roads. You can use your own car instead of operator's buses, but If operator decide to raise toll prices on their road, what can you do against it?

So to me are a threat, but operators will always have the last word. MS took a great risk buying Skype.

Tomi T Ahonen

Hi Sander, Lasko, Bill, JJ and Tomifan

Sander - very good news, thanks and yes, that will impact the operators, and I'm pretty sure similar legislation will spread all over

Lasko - good point and actually yes they are. And a social network like Twitter in particular is seen as a threat like this, but again, these are at a lower level of threat for many reasons, but you are right, they too are a threat.

Bill - I hear you, I really do. I started my career on the internet side, at the first ISP of the East Coast USA, so I really saw the internet from its birth. And then I was in Finland where our operator/carrier did some of earliest internet premium services and then my first job over at Nokia was dealing with the internet on mobile. I do understand fully what you talk about and I do believe in that vision. The difference with that text and my day job, is that I don't live in a fantasy world where money is magical. I live in the real world, where money needs to be made now. So that is, in mobile telecoms still today, in 2012, mostly SMS and voice. Then its MMS. Your vision is relevant perhaps 5 or 10 years from now and I hear you laughing, you say its in 2 years - I mean globally and no, in 2 years Africa will not be all internet...

So I don't disagree with that at all. But my job here is not to peddle fantasies about what the future might look like. I help people make money now, today, in May 2012. I deal in hyper-reality and am driven slavishly by the numbers. That means voice, SMS, MMS today (in mobile). In the near future it means ads, some media content etc, and later in the decade, even apps will be a healthy revenue and profit-generating slice of the industry.

JJ - thanks! Happy you enjoyed it.

Tomifan - haha, well, maybe that can soon be over. I may be deluded, and if Nokia Lumia sales take off well into the Christmas season, I might be forced to change my mind, right? Or else, maybe inspite of being paranoid, someone might still be after you. Maybe inspite of it all, I am right. Then Nokia will die or split up or transform soon anyway, and you and I can move to more productive discussion when Lumia boycott is only a distant hazy memory on some cool night over a nice glass of whisky haha..

Keep the comments coming, I'll return with more replies soon

Tomi Ahonen :-)

Bob Shaw


I don't know where you stand on the following with regards to the carriers:

1. Disproportionate charging by the carriers for use of voice and SMS service compared to the use of bandwith.

2. Obstructing the evolution of VoIP technologies by the carriers.

3. Bundling of handsets with data plans thus discriminating against the users who bring their own unlocked devices.


Wasn't the operator boycott against Club Nokia rather than N-Gage? N-Gage saw such modest commercial success in the beginning that it was hardly worth a boycott.

Walt French

Those of us who followed the Danger/Kin story a bit closer would NEVER have said that the carriers killed it.

It was dead before it was offered to the public.

Microsoft utterly mismanaged the project. Took a viable product OFF the market, spent two years Microsoftizing it. They denied one of the basic tenets of software — the lessons from “The Mythical Man-Month” — and let it get ground into mush by turf wars, etc. Finally, in desperation it was re-released as a buggy, incomplete mess, to a public that had long since moved on from the idea that a feature-phone was cool.

Carriers in the United States *DO* have lots of power, thanks to their government-sponsored oligopolies. And yes, they *DO* like the profits from SMS and any other way they can get them. But they also know they are fighting a derrière guard battle. Probably first in the EU thanks to a Competition Commission with some teeth, and eventually elsewhere due to capitalistic opportunism of the WhatsApp/KakaoTalk/iMessage/Skype sort, SMS profitability will shrink.

PS: one very user-friendly feature of iMessage is that the user needn't know whether the recipient is on the network or not; it'll bypass SMS if the recipient is on iOS (or soon, logged in over the web on OSX and maybe other platforms?). Built-in notifications, too; an iOS user needn't, as Skype stunningly requires, to be running the app.


@Lasko (and by extension @Tomi): It is almost like the operators are robots who never interacted with people.

"It is actually quite funny that almost everyone seems to have the inevitable feeling that they are beeing 'robbed' by their operators"

Several obvious responses:

1. In the US, AT&T is reporting 40% margins, so this is consistent with lack of competition.

2. Let's assume that elsewhere, competition has brought the TOTAL cost of using a smartphone to the market clearing price. (Not sure I believe, but whatever.) Fix it to be 1.

Now, there are two extreme ways to possibly ask for this: (A) a predictable amount of money based on total bandwidth usage, which is 1/12 every month; (B) 0 cost for 11 months of the year and 1 in a randomly chosen month.

You and I know these are exactly the same, but (B) makes any normal person really angry. The point here is that the operators basically use a variant of (B), with different scenarios for calling and messaging billed wildly different prices.

What the OTT services are providing is not free-ness, but cost certainty.

So to address "[Skype] is just not as convenient as just pressing the green button"

Maybe maybe not (on my phone it integrates with the address book and runs in the background), but even taken as read, the operators trained frequent travelers and expats to use it with their wacky pricing scheme. The way to kill Skype is either: embrace it; copy it; or just rationalize pricing. Done!



You should create Tomi Virtual University.... LOL
Thank you for this article and all other article.
I learn a lot from Tomi Virtual University.

@Bill, @TheBottomOfHilton, @Lasko

Do you know how complex and expensive running a carrier.
You need to get the license (expensive, time consuming, and also difficult)
You need a technical support within a couple of hour drive to the most remote area (expensive)
You need another technical support to handle chaos such as broken fiber optic link (expensive)
You need a backup route (redundant) to the same site.


That because the one who control the last mile always win... lol....
In Indonesia, in around 1999 - 2002, there were a surge of VoIP company. I believe it's around 60+ selling cheap voip card. The phone company seems struggle at first, but suddenly, the fix line phone company announce they have special number, and you don't have to buy the prepaid card, it will included in the bill (easy of use), and all other phone carrier also do the same. and all CHEAP VOIP card die miserably.... Moral of the story... if the OOT can offer cheaper product, why the one that have the infrastructure and more money can't???

Another thing I observe is BBM. When BBM start to eat carrier profit, the carrier fight the BBM with the CHEAP SMS for the mass. Of course it's still more expensive than BBM, but all the BB user still need to send SMS to non-bb user, so making the use of BBM not really cheap, since it would be cheaper for them to use all SMS instead.

I also know in Singapore, the free minute from carrier in post-paid account is for the whole world. You can use it to call local singapore number and all the world. I don't know the detail on which country is included, but because carrier is the last mile, they kill the cheap VoIP when trying OOT on them.

One more thing. In carrier, there were a PRIORITY when handling the traffic. Voice is the first, SMS the second, data the third. So, when in dense area, if the voice traffic is high, data might be suffering, and carrier can say "maybe the traffic in that area is high at the time you were skyping". The thing is, the best voice quality is always the one from the carrier. the voice quality from OOT is unpredictable. So it's not good for business people.

As for me, I also use skype when traveling aboard, and mostly use the public wifi (in hotel) to call home freely. I know the carrier and hotel hate me :).

Bob Shaw

Tomi_ There is a general feeling that consumers are getting ripped off by carriers on voice and SMS charges. The charges for voice and SMS are dispropionate to the use of bandwith. It is not surprising that the carriers are making upto 95% of their profits from voice and SMS.

The beneficiary of the Skype + Microsoft+ Nokia are the consumers. I hope you also lend your voice on the side of consumers who are getting ripped off by the carriers and support Skype + Microsoft + Nokia.


@Bob Shaw

You don't go to a five star hotel and arguing that the cost the burger is only a bread and a beef, and it's ridicules to charge it 10 times the price of mc donald.

I also use skype, but I think tomi got a point here, that even though voip can't be avoided, the carrier will fight it until the last moment. It's like when you own a restaurant, and someone using a cart sell the same food, same taste as your restaurant but only 1/10 the price. will you fight, or jump from the bridge? (in analogy that carrier have expensive equipment, maintenance, etc, but skype only create a tool gate in front of their infrastructure).

Bob Shaw


I am not sure that your example of burger is quite appropriate here. What we are seeing here is the carriers misusing their power to suppress the use of new technology that would benefit the consumers. The carriers need to adopt their business model to take advantage of the evolving technology.

Technology is like flowing water that is eventually going to find its way to the consumers despite all the resistance. The current business model of the carriers whereby charging the consumer ridiculously high amount for use of voice and messaging that use only a very small amount of bandwith is not sustainable. It is going to get disrupted by VoIP technology with or without Skype.


@Bob Shaw

I understand you clearly. If you read my reply to vladkr, you'll know that in Indonesia the carrier already evolve past the US, the SMS is cheap, and the phone call rates is one of the cheapest in the world because they fight against VoIP provider. I'm just saying that carrier will fight against it with teeth and claw.

And please also remember that Microsoft is the evil empire. I know this, microsoft have ruin my fun... I love OS/2, microsoft destroy OS/2. I like Netscape, and don't like IE, microsoft destroy Netscape (the company), I like Nokia phone, microsoft destroy Nokia.

Just as tomi said, microsoft is not someone to be trusted. They evil, they liar, and they bully, watch sendo, motorola, sony-ericson.

So, it's natural the rejection against microsoft is high. and btw, tomi just writing what he believe it is. and it turn out to be true, that elop admit it. if you were in carrier business and almost fall for Nokia-MS (almost sign the deal), you should stop and think before sign any agreement with Nokia-MS.

What I'm saying is, it turn out tomi is right about this. This is not just a pure luck guess. Tomi is showing his talent, and we all should be grateful that we got all this information for free.

The comments to this entry are closed.

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