18 thoughts on “Telecom’s continuing death spiral”

  1. Om, On a different note… I’ve noticed that you’ve been picking up feeds about Nortel and Canadian Co’s in the Ottawa Business Journal, Globe and Mail, etc. It’s quite rare to come across a US-based tech writer that is current on the CDN telco landscape. Kudos.

  2. Skype has had over a million downloads and hundreds of thousands of people use it everyday. They did not spend any money at all acquiring customers. I use it everyday to talk to people in the US, India, New Zealand and Finland.

  3. EsmeV,

    Those are early adopters. To acquire, retain, care for, and up sell vast numbers of customers you need to spend $$$ to rope in Aunt Molly and Uncle Herb. Any large US telco could hoover up Skype in a heartbeat keep/discard their technology to acquire their CUSTOMERS.

  4. will there ever be a time where these phone companies ever offer unlimited long distance anywhere worldwide …for 1 low rate ?
    unlimited local is already here…

    there’s about 100 countries where long distance costs more than 10 cents a minute on most plans…. perhaps its local taxes that drive the prices up but overall – all those countries need to make it cheaper to
    call too…….

  5. Douglass, spending money on customer acquisition only makes sense if those customers will generate reasonable cash flow later. Roping in Molly and Herb makes sense only if they will be profitable over the life of their subscription. Skype and its ilk (EsmeV and I talk for free between San Francisco and Amsterdam using iChat Audio every few weeks) are getting early adopters used to having overseas and other formerly expensive calls be free. That expectation will carry over into Molly and Herb’s attitudes — there are very few cases where the masses pay more than the early adopters before them — and create a market situation where customer acquisition dollars are very hard to spend.

    A few of us touched on this debate a bit while dissecting Clearwire’s opportunity or lack thereof on AO. The companies who can profit from offering global VOIP as a $10 a month flat-fee service are Yahoo, MSN, and the like. Odds are, one of them acquires or re-markets Skype.

    [Esme- Skype’s homepage currently claims 14M downloads]

  6. Om,

    Are you lumping together mobile wireless carriers (Vodafone, T-Mobile) with landline carriers in this meltdown? If so, please explain to me what infrastucture will replace (as in disrupt) the current cellular infrastucture.

  7. mobile carriers are a bit different beast i agree. the problem is that they are all talking abouot 3G and how they can use that to roll out additional services. my suspicion is that they are going to be facing capacity constraints in the future and will have to constantly add new infrastructure to keep pace with the demand for high-end applications.

  8. I find it difficult to completely agree with the concept that the telecoms industry is in a death spiral. Rather I would look at what exactly a telecoms is and realize that there is much more to a telecoms than what Skype currently offers in its proprietary community. If you really look at the over cost of delivering quality voice across multiple lines or countries, the cost isn’t in the usage of copper per se. Rather, in addition to customer acquisition costs the bulk of a telcos cost is managing and maintaining an overall peering infrastructure so that I (on Verizon) can call my relatives (on France Telecom) across the ocean (on Global Crossing). So, ultimately, someone has to support & pay for those evolving relationships, intercarrier payments, switches, and directory services. Do you actually think that delivering and managing a phone call can ever be pervasively free? Doubtful, someone has to cover all these things and our government is going to make sure that it’s not them.

    Read this insightful commentary by Kevin Werbach in VON Magazine.

    Second, when speaking in prophetic sundries about telecoms, it is rather important to differentiate between local toll providers, business service providers, long haul carriers, and long-distance billing companies. I would venture to say that each of these is faced with different levels of competition and different levels of security in their business.

    Do you remember what a call from CA to NY cost in 1985? Do you recall what that same call cost in 2000? Have these companies not increased in value while their prices plummeted?

    Has Microsoft disappeared now that you have your pick of free operating systems anywhere or a plethora of (virtually) free competitors to Microsoft Office? Skype is fun toy, as is Hotmail – but people still spend quite a bit on Outlook and Notes.

    Mountains don’t get moved that easily.

    The commoditization of voice services is only a good thing for our economy… Such changes are catalysts for innovation… and, generally speaking, innovation is a significant driver of our economy.

  9. Comparing telco with microsoft is non sense !
    There are millions of people that got windows running without any licenses, but there are almost nobody that phone for free (i mean piracy).

    The telco landscape is about to blast. Here for instance in France, for than Ä29.99 i can get a DSL line “all include” ADSL settopbox : 5Mb/s internet access, wifi enabled, unlimited phone call to any landline in France, TV (more than 80 channels) ! Such offers are just amazing if you compare to what we just had 2 years back. I wish that GSM here could be the same but the oligocracy (3 operator are locking the market) goes on.

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