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« Nokia So Alarmed: Release Full Text and Video of Skype Comment by Elop, trying to spin the story | Main | Electronic Echoes and the Bizarre War Nokia Communications Director John Pope Now Waging With Me? »

May 10, 2012

Comments

DEKRA

Tomi, the start of this piece is something I've experienced first hand. You do tell the story of KPN and the turmoil it is in right now. However there are a few pieces missing AFAIK.

KPN has been seducing customers with unlimited mobile internet (FUP regulated) for 5-10 euros up to about a year ago when it just got out of hand. The totally underestimated the effect of mobile internet in Holland. They were selling the internet subscriptions so low becuase they could then sell an expensive phone with it. At that time internet usage was fairly small, yet it exploded within a year or so. Mainly because more capable phones came out. As you rightly point out, the iPhone uses more data because the experience is better.

Just a question Tomi, lets just assume the boycott is real. The reason being that telco's are fearing a purging of income because of it. Then what similar solution will be next or be an alternative? WhatsApp became what it is because it could offer what made Blackberry so popular (BBM). People wanted that on other platforms as well. WhatsApp killed sms income for KPN for one. (They jacked prices up for data like a bunch greedy pigs)

What we see now is, although it hasn't really taken off, that Facetime from Apple is getting popular. Soon people will also want that on Android, WP or even Symbian/Maemo. There will always be a developer that can satisfy the need for that. Yes, Skype will have far more impact if MS uses it on all platforms they have, although it could be debatable sue to regulations forbidding them to do it like with IE bundling on Windows in Europe. But pure income from voice will end for carriers/telco's. Yet most European carriers still need the income because they either have bad management or they spent far to much on aquiring 3G spectrum back in the 00's. Like KPN for instance, they almost went bankrupt on buying spectrum back then.

Owh, and as suggested above. MS is evil and can't be trusted? Perhaps, but why is there such a loving embrace for Apple? Just because that is the demanded product right now? Sprint even went so far to 'invest' billions in acquiring the iPhone. That seems far more bullish or evil or whatnot to me, especially when all other MFR's pay the carrier to get their devices sold.

Tomi T Ahonen

Hi Louis, At, Lasko and vladkr

Louis - good contribution yes, the market includes many other factors, that generally tend to help move the carriers towards better customer pricing etc. But that process is very slow.

At - agree with you totally yes, these are good developments BUT the reality today in 2012, is that the carriers still are mostly in control and then, their preferences of which OTT to block and which to reluctantly accept, will be much in line with this posting.

Lasko - haha, good points. The network operator business is very long term capital-intensive business. But, also to be fair, many of the investments are long since paid for and operators can use plenty of accounting gimmicks to hide their profits etc.. but good points, its not free to offer telecoms connectivity, on any technology including VOIP.

vladkr - good points and yes, the relative utility of Skype vs local operator calls/charges can ebb and flow, and operators can fight back with prices etc. Some very heavy users will tend to optimize and some very rare users can't be bothered. Most sit in the middle.

Thanks all!

Tomi Ahonen :-)

RyanZA

Firstly without major tech breakthroughs, carriers aren't going anywhere. Wifi is just too restricted to rely on. It will always be an optional extra until it can go 1km+ range. It probably will, but it will be years for that tech IMO. This is what carriers should really be worried about if I was them, because it's almost inevitable and they will crash and burn when it happens.

In the near term, I think carriers are going to freak out about OTT, but eventually will transition to a standard per-MB rate for data/text/voice/video, along with pushing devices that use a lot of data by default (automatic on-by-default background downloads of news videos, etc, with big data bundles for high cost). So I think this whole Skype thing may be less of an issue by even as early as mid 2013.

I don't really believe Nokia will be alive to see that come about though at the current rate, their momentum in failing is now simply too powerful to resist. Their shareprice drops alone make all of the backseat commentators sit up and write about Nokia's failings. And these writings in big newspapers / journals will taint the Nokia brand even further as engineers jump ship after reading it...

Good luck Nokia, you're going to need it!

bjarneh

> 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

@Lasko

this is at best misleading, do you seriously think these operators use a
different network? here in Norway they use the same network at least; it's
actually the same company.

i.e. the only difference between traffic (SMS/Voice/Whatever) you get charged
for when you use your cellphone compared to your internet subscription is the
"added cost" of hooking you up to one of those cellphone antennas, which is
by far the cheapest infrastructure of the network. if you compare cost of
those antennas with the actual fiber dug into the ground (the backbone), it's
a complete joke.

phone traffic is preferred naturally, so it has better quality of service
than internet traffic, but i have never in my life heard of someone who
cannot get a usable internet because too many people were sending SMS or
calling in their area.

the fact is that the entire operator business is nothing more than an
out-dated ponze-scheme being kept alive by the business itself.

from time to time they come up with ludicrous statements like the ones you
gave here, with huge costs in terms of maintaining, not to mention upgrading
their network, it's all lies!

in Norway SMS was free (1994). after all you just send a control package to
the antenna and stuff some characters into an otherwise empty payload
section. when people really started to use SMS the operators said they had
"invested" in so much new equipment that they could no longer afford to have
free SMS, it went from 0 to 20 cents it's now down to 10 cents.

imagine what actual cost a company has for an item it gives away for free,
it's obviously quite close to 0. if you turn your phone on and off, you send
tons of control packages, (to say that you are switched on, your IMEI etc).
it does not cost $ 100 to turn on a cellphone. SMS is a scam, voice-calls is
another scam, it will fall apart sooner or later it's just a matter of time.

Dan

I'm in the US, and pretty much only contact folks in the Philippines. They’re not on data plans, and prefer texting, so that counts out Skype and other OTT’s. They text me to my Philippine Smart SIM phone number, roaming T-Mobile or AT&T, lodged in a Nokia 3110c, and I text them back using Rebtel.

I’ve been giving out my Google Voice number since I got it, instead of my Verizon Wireless number. I've dropped my text plan, and get charged by text. At $.20 / per text incoming/outgoing, the most I’ve paid for texts is like a dollar for the month. I’m grandfathered into unlimited LTE on my Nexus, so it's Google Voice all the time. I even use GV to call the Philippines.

Now, I'm on a 700 minute family plan with my son, we've never exceeded 200 minutes. He's got an LG featurephone, and $10 texting plan. I'm looking in getting him a used T-Mobile Galaxy S and get him on the $30/month no-contract plan. That way, he gets web access, and starts to give out his Google Voice number. Who knows, we may drop his Verizon text plan later. Carriers should just admit that they're going to be dumb pipes, lower their data prices, and that may get more people to sign up for data.

About the carrier hate for Windows Phone, apparently AT&T is doing a major marketing push for it, so maybe it's an exception.

joel

@Tomi,

“What I AM saying, is that the carriers have power to pick one over another”
=> I agree and it should be until MS establish network in global for their Skype.

By the way, if we consider VoLTE against this Skype thing, then what can be appeared?

When I give my mind to VoLTE by simple, then other things could be appeared from the comments of Elop although the conclusion is same so far.

“The feedback from operators is they don’t like Skype, of course, because for those operators who have a traditional wire-line business, traditional telephone business, it could take away from revenues”
=> In my opinion, this comment of Elop is still wrong. All operators, not some, don’t like Skype of MS due to it will be disaster for them by extorting money from them absolutely or letting them be left at mercy of Microsoft.

“ok there, is this Skype thing, is there a different type of partnership we can do that recognizes that voice over IP like Skype is coming no matter what, but maybe we can do something creative that generates incremental revenue for you.”
=> Yes. The VoIP apps/services are coming no matter what. It’s also true. By the way, we need to know that it doesn’t mean that it can be a reason why operators will accept the pre-installed Skype on windows phoned devices because accepting pre-installed Skype on WP and promoting it will let them be left at the mercy of the Microsoft.
Anyway, let’s see Elop’ comment more to know how Skype can be handled creatively for operators.

“Some operators are looking at bundling Lumia, Skype and their own services with higher-bandwidth allotments to actually charge the consumer more and generate more revenue for them. So by actually controlling the Skype asset, we can begin a conversation about how we can have a better Skype-based relationship, which was impossible for operators to do before. So it’s actually quite a bit more advanced than whether operators like or don’t like Skype”
=> Some operators are already providing their VoIP services for balancing and other operators will try to provide those things. But important thing what operators should trying is finding a way how they can keep balance by preventing VoIP services are extorting money from them because absolutely, the networks what we are using have been established by operators and network development and deployment will also has to be done continuously by them.

However, what I can see in here is that Elop is saying about controlling Skype asset. Why? Can Elop and Nokia control the Skype asset?

Absolutely, Skype is good entry point to start conversation with operators for MS but not sure for Nokia because MS can take some advantage because it(Skype + MS) is survival threat to the carriers as Tomi wrote before.

Then what Elop is doing?

Anyway, just keep going on.


“they actually want to engage in a conversation about what does this mean and how could we do something that we couldn’t do before.”
=> Ah….Elop mentioned that they are trying to lure operators by into the conversation entry point what MS, not Nokia, can take an advantage and Elop is saying some operators also want to engage in the conversation now.

And, about the how, maybe, in my opinion, the one chance what MS has, not Nokia, is VoLTE but WiFi related things will has to be resolved in a case what MS really want to make a win-win solution with operators and remove the survival threat against their customer (operators).
(Tomi. You already point it out via your blog “Why Do Carriers Hate Skype? …” that it(Skype + MS) is survival threat to the carriers. Thanks for that.)

Questions what we can have are ….

Will Skype of MS be the only way to handle VoIP things?
If a wood gives its branch to woodcutter, then what will be happened in the end?

Even if MS provide a good way to let their Skype is not extort money from operators, then will it be enough to accept pre-installed Skype although it is being controlled by Microsoft, not operators even if, eventually, it will let the operator be left at the mercy of the Microsoft.


So, in my opinion, even if we consider VoLTE and accept that the VoIP apps/services is coming no matter what, then still Skype of MS will be a bad solution for operators and their industry because MS will or can try to monopolize the entire operators without installing any networks.

Believing that all operators want to provide their own VoIP services based on their plan and schedule or by making requirements to keep themselves by letting OEM/3rd party provide VoIP app as default if need arise based on user’ demand and their requirement is more makes sense.

Then what will be next step of Microsoft? Will they just see it?
Maybe, in that case, Microsoft is willing to take a threatening attitude like a footpad with their Skype and their power over PCs market share, Xbox, Windows Live, offices, and so on, to push operators support their Windows Phone platform against that case.

And at this point, I would like to point one wired thing amid Elop’ comment out, again. The word “we” in “we can begin a conversation about ….” and “they actually want to engage in a conversation …” bring me some questions.

Can Nokia control the Skype to let user use it via only mobile operator networks instead of WiFi?
It couldn’t. However, Elop said “we” and didn’t hesitate to make a comment which operators can consider it as threat.

It told me that two possibilities are there.

One is Nokia and Elop are trying to be S/W platform company what can earn money like Microsoft’ business model by riding Microsoft’ platform. Maybe, through uses Map service? Or put their software solutions into Microsoft platform?

Another one is Elop misunderstood his position or he is working for Microsoft, instead of Nokia.

My opinion is that Elop and Nokia want to be S/W Platform Company by riding Microsoft’ platform and it makes sense. However, it was quite devastating to know that Elop did it without plan B, though.
And, still some questions are being there.

With assumption that Elop and Nokia could be, then can Nokia control MS platform for guaranteeing their profit continuously as the company concerned? -> I believe the answer is No.

Was it valuable to dump Meego and all others at once even if those can bring money to Nokia for a while and still some possibility is in there? -> May be not and absolutely not for doing it without plan B.

Do they have some evidences or well-grounded information that becoming slaves of Microsoft by dumping Meego and all others at once is the only way for Nokia? -> I don’t know it.

In my opinion, Microsoft will lose nothing through the deal with Nokia but Nokia won’t, absolutely.
And I can’t sure that Nokia will has to get high return in proportion to this high risk even if Nokia can be survived in later. Wow.

So..my conclusion is about Elop……….... Hum....

Greg vP

@DEKRA

Perhaps you missed it in Tomi's post - he didn't talk about it in great detail - but besides international calls and messages, carriers make a lot of profit from their corporate accounts. It's their other big profit centre.

Now, a role-playing mini-game: you are the telecommunications manager in a Fortune 1000 company. You have been told to cut costs. You consider Skype, Facetime, and Whatsapp. You know that Skype is owned by Microsoft, and Whatsapp doesn't appear to have any big backers.

Do you opt for Whatsapp (and, e.g. Viber), and present to senior management a recommendation that the company transition its telecommunications to Whatsapp?

Yes? OK - you are laughed at a lot, and you are not a telecommunications manager at a Fortune 1000 company any more.

Do you present a recommendation in favour of Facetime + iMessage?

Yes? The marketing manager loves this but the chief financial officer points out that maybe one-sixth of your suppliers and customers have Apple hardware. (Really, he just hates Excel on the Mac.) Oh, there's a Facetime app for Android? Made by Apple? Oh, it's made by three teenagers in a garage in Chennai. Are you seriously promoting that as something we can run the company on?

You come out red in the face and are sidelined from the promotion track.

Do you present Skype?

Everyone understands Microsoft (or so they think). And Microsoft understands your business (or so they think). Support and training will be there. And two clinchers: you don't have to spend endless hours working out how to fit Skype into the ICT infrastructure - all you have to do is wait for Windows 8, which is coming in a few months. Microsoft has done all the hard work (or so you and they think).

But, most important of all, Microsoft is a big strong company that will still be there in 20 years, still supporting its products (or so you and they think). It's someone to sue if things go wrong.

The answer comes back: OK, give us some detailed numbers and if the savings are there, we'll try it out. Good work!

Mobile vendors can play this role-playing game, because they understand their customers the Fortune 1000 companies.

Now, Sprint.

Consumers? Who cares about them? Well, we do, says Sprint, if they start spending more, and spending it with us. They're not as profitable as the big corporate accounts, but if we can't get those, we'll take try to take high-spending consumers from other carriers. (It's called cherry-picking.)

That's why Sprint "bought" Apple's phones. They bought cherries.

---

If corporations move to Skype, and it cuts into profit as much as Tomi suggests, operators won't be able to afford deluxe network maintenance. Costs will be cut wherever they don't affect the most important customers. That means worse service for most of us. And it means a longer service life for network equipment: think forty-year-old rusty cell towers with dead batteries and corroded wires, that stop working in the rain.

Cost competition can be a good thing in a mature industry. In an evolving one like mobile, each company lies awake at night worrying *not* about what its competitors are doing, but about what they might do next year. They need high profits so they can reinvest, reinvest, reinvest. That's what forces them to get better. That's what we stand to lose with Microsoft Skype. Maybe the industry has matured, but it seems very soon to be making that call.

Maybe the coming decline in mobile service won't be a problem: we'll just use VOIP and IM via wifi instead. After all, open wifi access points are everywhere, right? And it's no hassle to create an account with each and every one on the fly, right? And they're just so reliable, right? And having eight messaging apps on your was-a-phone and remembering who uses what is effortless, right? Yeah - no problem.

Louis

@Greg: AT&T's 40% margins aren't enough to fund caper, I'm sure. Also, too, it is the union's fault. It always is. Time to fire up the government lobbyists.

Sufficice it to say I am confident that somebody (maybe Carlos Slim) has figured out how to make money in that space without pricing gimmicks.

@Tomi: The process of competition rationalizing prices may be slow, but it can have jumps too. It only takes one desperate "defector", which will be the first carrier where the bottom falls out of texting. I think we know who this is http://www.forbes.com/sites/terokuittinen/2012/05/11/coming-attractions-telefonica-is-a-dark-mirror-of-europe/ and why they launched TU ME yesterday.

William D.

Great blog entry, as usual.
A comment or two about iMessage & OTTs, if you please. I work very closely with the Mobile Messaging industry, so I can report, that in the US, SMS traffic rates have only declined very, very slightly - essentially are flat.

Now, with iMessage, I have a reliable source that has direct contact with someone in Apple and they have revealed to me that iMessage is generating about 2 billion messages per day (no geo breakout provided). OK, so that's a data point.

Remember, the iMessage sends a message as an SMS, if the other party is not iOS 5.x. Globally, iPhone sales were 19.4% of all smartphone sales in 2011 (according to data from Informa Telecoms & Media) with projections of 18.9% for 2012, 18.2% for 2013, 17.4% for 2014 and 16.2% for 2015. As you can see the percentage of iPhone share of the smartphone sales drops (even though Informa does show iPhone sales overall increasing for the same period). Now that means, that the percentage of iPhones on the street among all smartphones will drop -- which means that iMessage (iOS to iOS) will likely slowly decline. So, I'm not so sure that iMessage has not peaked or will peak soon - at least the data may support it.

While all of the OTT messaging services are free and all that; however, they are NOT unbiquitous nor interoperable with each other. SMS, despite its limitations is still extremely interoperable across the globe.

In the US, the biggest OTT players don't work against the SMS ecosystem, they actually work with it by interworking with mobile operators' SMS (and each other). This is NOT WhatsApp, Kik and Skype, but Pinger (TextFree), Gogii (TextPlus), Google Voice and quite a few more. Of course, they extend SMS to non-phone devices as well such as iPod Touches, Tables and even other devices. Of course, "subscrbers" get a new identity in terms of a new telephone number, but for many that's a good thing - a small inconvenience for reaching others through SMS. But, that's one of the reasons the US market has not declined to the extent as some others have around the world. These OTT players actually expand the universe of addressable devices. The US operators are warming to these companies and their are guidelines in place to govern everyone's behavior. In Europe and elsewhere, it is more difficult to obtain phone numbers for these inter-operable OTTs to assign to their subscribers, so consequently, the gap is filled with the likes of WhatsApp, etc.

Something to think about.

cycnus

@Dan

Here is why OTT services will fail.

First my analogy of OTT is like this:
Carrier build a Highway. If you want to enter the highway you must pay certain rates.
The OTT build a truck that carry car. They park in front of tool gate, and after paying the rates, youre car go out of the truck again.

Carrier know that VoIP can ruin their business, but in mobile carrier as the person moves around it, the quality of internet would differ from time to time and also place to place. This is where the OTT voice service is harder to become defacto service, because voice is always the number 1 priority, the voice quality using non-OTT is always better.

People were tempted to use OTT right now because there were big different in price while using OTT. but if skype comming, the carrier could set the price of their service around 30%-50% above the skype, and providing ALWAYS better quality than skype no matter what. Microsoft will lost, but the carrier will take a big hit.

Therefore, right now, their slapping microsoft face because they already see the future that they're income gonna be down. so, they were boycotting microsoft first (per-empetetive strike) to let microsoft know, their skype is not welcome.

When skype or other voice OTT come, carrier would still win at the end (see BBM vs. unlimited SMS), and the OTT will be gone, but carrier won't be happy.

Louis

@Tomifan: The ongoing theme in this blog, and also many of the comments (waves to @cycnus, @William, @Greg, and others) is that market disruptions that change the entire basis of competition can't happen, don't happen, and a symmetric response always works.

Facebook isn't better email, Skype isn't a better phone number, iOS isn't a better S40, and, in the EU, vastly more open competition isn't a different kind of local monopoly. The analysis here seems to preclude the idea that all these factors (which pull in different directions sometimes) could possibly combine in unpredictable ways. Which is why Facebook wasn't in the discussion.

Olivier Barthelemy

I'm kinda wondering
1- where you get your revenue breakdown from. I'm paying 16euros per month for unlimited data, SMS and voice calls to most countries' landlines, and a few for mobile.
2- how long you think my operator's model will take to spread.
3- why on earth you feel operator are so threated by Skype and such, but not by competition from other operators, or new entrants operators.

Spawn

@Sander van der Wal

> All their friends bough an iPhone or an Android two years ago

Maybe your friends. Remember in which markets Symbian was and still is strong. Asia, africa, latin america, russia, europe.
Symbian was not only selling well till Elop burned it but it also was growing!

AndThisWillBeToo

This comment was apparently off-topic in the other post so I'll comment here instead:
You Tomi explain here how Skype is 36 times more dangerous than iMessage. Fine.
Skype has 280 million active users each month, according to Skype itself (data from April this year). You Tomi listed 900 million registered users but it’s not the same thing. Now compare that to WhatsApp that just reported it has 300M monthly active users. ALL of them on mobile (unlike Skype). Already clearly bigger threat than Skype but not mentioned by you.
And then we have Facebook. FB reported they have 1.11 billion people using the site each month (once again, not just registered to service). By offering free messaging and Internet calls Facebook is – by you your own math Tomi – over 15 times bigger OTT threat than Skype!
While you repeat that operators boycott Microsoft/Nokia because of Skype, how come these even bigger threats never triggered a boycott anywhere?

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Write more, thats all I have to say. Literally, it seems as though you relied on the video to make your point. You obviously know what youre talking about, why waste your intelligence on just posting videos to your blog when you could be giving us something enlightening to read?

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