Skype will no longer be free in North America.Â The NY Times reports this morning that as of January 1, the fee will be $30/year for annual calling.Â It’s a neat move.
The Times quoted Jeffrey Halpern at Sanford C. Bernstein, saying that Skype isn’t a threat to telephone companies.Â
â€œSkype requires a behavioral change. Consumers have grown quite comfortable using their telephones,â€ said Jeffrey Halpern, a telecommunications services industry analyst with Sanford C. Bernstein & Company. â€œI donâ€™t view Skype as a real threat to the telephone companies or even Vonage or the cable companies.â€
I must disagree.Â
The first generation Skype / WiFi phones are coming to market now, as Glenn Fleischman noted.Â By all accounts they’re very good, although not as roaming phones.Â What theyÂ are, however, are capable replacements for the home land line.Â Andy AbramsonÂ expects that people will use them that way, warning however that they don’t have 911 support.
Moreover, with yesterday’s announcement of Skype Mobile 2.2 on Windows Mobile handsets, there are now 120 handsets you can use Skype Mobile on.Â The argument that you must carry two handsets to be mobile with Skype is simply not true.Â You will, however, need an unlimited data plan, or a dual mode WiFi / cellular handset.Â
This is a one-two punch to all the alternative VoIP providers out there.Â A nice Skype handset, plus a phone number and unlimited calling is just about the same price as SunRocket, and a whole lot less money than Vonage.Â But unlike Vonage and SunRocket, Skype has the power of viral marketing propelling their subscriber base.Â There aren’t any $272 acquisition costs here.
Skype is clearly moving to become an alternate carrier.Â Jeffrey Halpern has his eyes firmly glued to the rear-view mirror.Â
Can they do it, profitably?
Some reportsÂ peg Skype usersÂ at 35.8% of all North American VoIP callers.Â Last week, it was widely reported that TeleGeography estimated 8.2 million VoIP subscribers in North America, which would put Skype usage at about 3 million (give or take a few).Â How many of those users would pay?Â It may be more than you might think.Â In September, Jajah CEO Roman Scharf told me that over 70% of hisÂ callers call non-Jajah users and thus pay for terminations, despite the fact that calls between Jajah users are free.Â If Skype could hit the same kind of home run with this offer, it would bump their revenues up by about 20% from where they are now.
Clearly Skype execs have modelled costs carefully, but it still gives pause.Â The average North American telephone user uses just 300 minutes of calling per month.Â VoIP users tend to be much higher, in the range of 600 minutes.Â Terminations, while cheap, are not that cheap.Â Â Skype must beÂ banking on:
a substantial number of their subscribers will buy the package, and simply not use all the minutes, perhaps because as the subscriber base grows, fewer people will need them.
the profitability of selling a DID for $30/year, when the actual cost is in the range of $1.50.
and… click to call?Â
As for me?Â Well, I’m heading over to the Skype site to buy $15 of unlimited North American calling.Â Oh, by the way… when will you be providing Canadian DID’s, Niklas?