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iPhone Skype may be tip of the iceberg for carriers

By Stephen Lawson
April 8, 2009 12:00 PM ET

IDG News Service - Though mobile operators say they want more open phone platforms and are moving toward packet-based 4G networks, they are stuck between a future of being "dumb pipes" like DSL or cable operators and a present in which the bulk of their revenue still comes from the sale of voice minutes.

The arrival of Skype for the iPhone and BlackBerry platforms at last week's CTIA trade show brought the issue to a head. The most popular VoIP (voice over Internet Protocol) platform, which claims more than 405 million users, has now made it on to two of the hottest smartphone lines. A free Skype application is available now from Apple's App Store, and software for two BlackBerry models is set to become available next month in beta testing. Skype lets users make free calls to other Skype customers and inexpensive ones to traditional phones.

The announcements were met with mixed reactions from these carriers in transition. The future 4G technologies LTE (Long-Term Evolution) and WiMax are data networks, where everything is transported as a packet. Technically, that will make any pure 4G carrier with voice service into a VoIP provider. But operators are still trying to figure out how to shift their business models to that environment, as most of their money today comes from voice services that are vulnerable to competition from Skype and others. In 2008, data services still generated only 22 percent of U.S. mobile carrier revenue, according to the CTIA trade association, which sponsored last week's show.

T-Mobile USA's CTO, Cole Brodman, pointed out the carriers' dilemma last month at the Dow Jones Wireless Ventures conference.

"By no means can we sit here and talk about an open platform ... if I don't also look at VoIP," Brodman said. There are already VoIP applications available for T-Mobile's G1 handset, which uses Google's Android open-source operating system. But that capability raises concerns about T-Mobile's business model, he said.

"How we make money, which today is voice plans, combined with data and messaging plans ... has to evolve," Brodman said.

Though AT&T is allowing subscribers to download and use the iPhone Skype application, it says the software is only for use on Wi-Fi networks and not on the much more widely available 3G system. (Deutsche Telekom went further, banning use of the application altogether for its subscribers.) Though AT&T iPhone users are required to sign up for a combination voice and data plan, carriers' general fear is that subscribers could use Skype instead of paying for minutes. Asked about its policy, AT&T has said it expects its vendors, such as Apple, not to promote the services of a rival.

Reprinted with permission from IDG.net. Story copyright 2014 International Data Group. All rights reserved.
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