Skype continues with mobile twists: iPhone 3G calls, for a price

smartdudeEarlier this year, Skype detailed its plans to work with Verizon on a Skype Mobile application with quite a few twists: While users would need to buy a voice and data plan to use the app, Skype-to-Skype calls would be free and carried over the carrier’s voice network, not over the top via 3G. Now Skype has unveiled its long-awaited app/plan for AT&T and the iPhone, and the way it works is different but just as surprising: iPhone users can make free Skype-to-Skype calls for the rest of the year but after that will have to pay a small, monthly subscription fee. Perhaps even more disconcerting for Skype users, the app — at least initially — apparently does not support background push notifications, meaning users must have the app up and running to receive incoming Skype calls.

Not surprisingly, Skype users were less than happy with the solution, with Skype Journal flatly stating that Skype lied about always keeping Skype-to-Skype calls free:

This breaks Skype’s promise that Skype-to-Skype calls will always be free. The pledge is fundamental to Skype’s brand, to Skype’s freemium model, to the simplicity of trying Skype before buying premium services. No longer can you say “Skype-to-Skype is free.” Now add “except when…” and hope you get it right.

I appreciate Skype’s need to drive new subscriptions.

Breaking faith with your core brand promise is not the way.

Meanwhile, CNET takes a stab at the competitive landscape:

…pushing callers to subscribe for Skype’s service may encourage callers to use other services, like Fring, which uses Skype’s service, along with others, as part of its multinetwork chat and VoIP app. Not only has Fring already allowed callers to tap Skype’s services for 3G calling on iPhone for the past six months, it also has two-way video calling–a feature Skype for iPhone does not.

fitchardiconConnected Planet’s take,
Kevin Fitchard:

Skype users may not be happy about how AT&T and Apple are changing up the business model for their beloved calling service, but they’d probably better get used to it. We’re going to see more arrangements like this for VoIP service providers rather than less, as operators seek to define a clear line between how applications are used on the wired Internet versus the wireless one. Operators have two incentives here: They want to protect their voice revenues, and they want to protect their 3G network investments. Giving Skype a free ride to use the mobile data network would have been a double blow for AT&T.

Sure VZW is offering the service free of charge to customers, but make no mistake it’s getting something out of the deal. As VZW’s John Stratton said at Mobile World Congress, Skype has some kind of business deal in place with the operator — whether that’s a revenue-share agreement on Skype Out calls or a flat client download fee, we don’t know. Regardless of what incremental revenue is coming in, VZW is primarily looking to catch up to AT&T in the smartphone market, which it has been forced to cede since the launch of the iPhone. Having a “free” Skype service gives it an edge over AT&T and incentive for its customers to invest in VZW’s growing portfolio of Android devices rather than in the iPhone. Don’t forget all of those Skype users have to invest in a data plan, even though the Skype service uses the CDMA 1X voice channel.

AT&T looks to be putting its foot down, saying that VoIP may be free on the cheap bandwidth of DSL and cable broadband links, but it comes with a toll on the much more scarce bandwidth of the wide-area mobile data network. AT&T is definitely setting a precedent. The question is whether it’s a good precedent. If carriers are going to charge for an application customers are accustomed to using for free, they probably should ensure that their customers are getting something better, or at least equal to, the free service. In this case, AT&T and Skype seem to be offering an inferior service to Skype for the PC. The big justification for charging for Skype is that they’re offering something of value over a bulky PC, true mobility — you can make and receive Skype calls anywhere there’s a 3G connection. For the iPhone app that’s only half true. Because the iPhone doesn’t yet support background apps, it looks like you can’t receive Skype calls unless the app is actively running, meaning the mobility argument goes out the window. Sure, opening Skype on your iPhone to await a call is a lot faster than finding a hotspot and booting up your laptop, but who actually waits around for a incoming call in the era of mobile communications?

You can bet VZW is going to have a field day with this announcement, but I don’t think that means this kind of subscription VoIP model will disappear. Rather I expect AT&T to work the kinks out, taking advantage of later iPhone OS upgrades to support an always-on Skype app. Eventually it might use its policy management and IMS resources to start prioritizing Skype VoIP packets over its networks, allowing it to claim it delivers a much better quality 3G VoIP experience than other best-effort solutions. Either way, it will still have to do a lot of convincing to win over disgruntled Skype users who will still be galled they’re paying extra to make a VoIP call while the iPad user next to them watches a Netflix movie, consuming gobs of capacity for no additional monthly charge.

That’s our take on this. Let us know what you think in the comments section below:

3 Responses to “Skype continues with mobile twists: iPhone 3G calls, for a price”

  1. Nice analysis, Kevin. I don’t know much about mobile SKYPE feature must-haves beyond voice, but don’t PIN-less calling cards offer pretty cheap calling rates with a lot less hassle?

  2. pc repair says:

    I didn’t know anything about mobile SKYPE. Kevin’s right: I’m tired of Apple messing with the way we do business.

  3. Breitling says:

    I know that when Skype announced the update, they also said that they would start charging users a small monthly fee for the service from August 2010, but they\\\\\\\’ve chang their mind and Skype to Skype calls on the iPhone over 3G will continued to be free until the end of 2010. Any updates,anyone??

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