Ruminations on Russia

VOIP Business Models
Om Malik reports here on Skype’s funding by DFJ and Index.  To quote; “Despite whatever the press might say, and how much fans of Skype might rave about the company, I still don’t see a business model.”

He’s right for two reasons; firstly because it’s voice over IP – not a new way of communicating, in the same way that the Internet spawned new ways of delivering content, but it was the same content – until blogging came along.  Secondly, because it’s a closed format.

The first is the most challengeable assumption.  In the case of VOIP the IP bit does not add much value to the voice; it just changes the way that the data (your voice) is carried.  IP networks allow end user services to be rolled out more quickly and cheaply.  (There are any number of forums over on Slashdot on building your own IP PBX.)  So “follow-me” or PAM services aren’t premium priced elite services only for Fortune 100 companies, they can be made available to everyone.  This has little to do with “voice over” and all to do with IP which is intelligence moving to the edge of the network.  However, I am willing to accept the charge that different delivery methods open up new business models that may not have been available previously.  It’s just that in this case I cannot see what they are. 

To my mind the greater reason for Skype to fail is that it is a closed format.  A not great analogy would be running fixed line networks next to mobile networks and not allowing for any interconnect.  Actually it’s worse than that; it’s running two GSM networks next to each other and not allowing any interconnect.  I understand that the plan is to allow connection to physical networks, for a price, along with plenty of other premium services.  For anyone born and brought up in the IT world go have a look at what it takes to build a SS7 stack, put it alongside a SIP stack, H523, MGCP (and the other 100 that I forget about just now) which is what it takes to make this service ubiquitous.  

All of the above notwithstanding, there is a reasonable chance that Skype will make its founders and investors money.  Someone will buy it and be left with financial egg on their face.