March 11, 2006
hapless telco employee
[Inspired by Om Malik's post here.]
Posted by hugh macleod at March 11, 2006 2:55 PM | TrackBackI work for a B2B Telco/ISP. Skype is not a threat at all. There are Quality Of Service problems with it, relative to enterprise-level VoIP services. The sort of problems that get people fired.
In putting your telephony over internet pipes, you're making them dependent on less reliable circuits. You'd better have a backup circuit with automatic fail-over, else your MD is going to fire you when no-one can phone your company, and everyone is forced to make expensive calls on their mobiles, for the second time in a week.
Even if you decide to have people using Skype, who will ensure they have access their files from wherever they are, or that their corporate data is backed up securely, or that their computers are patched, or any one of a million things? Phone services are just part of the picture. More companies are demanding fatter internet pipes linking more locations. They don't necessarily take the price decreases. Many upgrade their services, so they're spending the same amounts but getting more for their money. And with falling wholesale prices, that upgrade doesn't necessarily cost the provider any profit.
You're also assuming that price decreases are passed on to customers. Not necessarily. As VoIP gains market share, and Voice and Data run over the same corporate network, the Voice purchase decision shifts into the IT department. Many IT decision makers will be open to leaving voice rates unchanged (i.e above the now-fallen market price), or locking them into competitive rates that will be uncompetitive by the end of the contract, if the provider will subsidise other higher-margin services such as internet access, email hosting, data backup etc. Do you think IT Managers would prefer an easier life and better IT support services, or cheap phone calls? In my experience, they're more than willing to take the cross-subsidy. A cross-subsidy that Skype can't offer. It may offer marginal savings, but they the IT guy has to make a business case for spending those on the other serivces.
Skype rates may be low for consumers, but business customers are already used to getting free internal calls, and low rates.
Even if a customer signs up at the cheapest rates in the market, it's not the end of the world for the Telco. If the customer can be persuaded to sign up for several years, they may find that whilst their rates may fall, the telecoms providers own costs (the wholesale rates they pay) will often fall faster.
In the B2B market, Skype is nowhere. Skilled staff retention and recruitment is a far, far bigger problems. 1000 times more significant, at least.
Even in the consumer-space, BT (which surely has the most to lose of all the UK telcos) is showing that up-selling and cross-selling can make up for the falls in revenue that come from VoIP (of which Skype will be a minor player) and being resident in Commodity hell.
Skype gets glowing coverage in Wired / Slashdot / trendy geek world. But its poster-child profile is disproportionate to its tiny market impact.
On a cynical note, if you want to draw a cartoon about the Telecoms industry, may I suggest you consider Cable & 'Let's fire 90% of our customers' Wireless.
karim, 'i work for skype' sounds sexier than 'i work for the phone company' ;-)
Posted by: Hugh MacLeod at March 12, 2006 7:50 AMHope more telco employees sweat bullets.
Posted by: Mike at March 12, 2006 11:23 AM