James Siminoff

Is Skype “stealing” minutes?

The blogoshere was busy today reporting on Skype’s 2009 minute numbers.  In TechCrunch, Report: Skype Now Accounts For 12% Of All International Calling Minutes and GigaOm, Skype Steals Even More Minutes From Phone Companies.

While Skype is doing some pretty amazing things, killing the international market for telephony traffic is not one of them.  Telephony traffic on “old networks” actually grew 8 percent last year over 2008.

How did it grow when Skype’s traffic grew by 63% over the same period?  Because a large percentage of Skype’s traffic is additional minutes, minutes that without Skype never would have happened.  The numbers since Skype came out prove this fact.

When Skype came out in 2003 I was in the international phone business.  I remember going to the annual calling card/VOIP show that year and based on the atmosphere you would have thought that Skype was carrying 100% of the traffic day one, people were just giving up.  We made a lot of money by continuing to invest in the business in the post-Skype world.

So why is Skype not touching the “old network” traffic as much as most would think?  For two reasons, international minutes have reached a price point where the difference between free and paid is so close that the average customer does not care.  Secondly in order for Skype to be free both people have to be on the Skype application, a major point of friction.  People are fairly mobile around the world and Skype still does not have a solid ubiquitous mobile solution.  So when you want to call your mother in India or friend in Romania, the first thing you usually do is grab your mobile and call theirs.  Scheduling time to both be on Skype is just too difficult compared to the savings.

Until Skype can more deeply intergrate into the mobile networks around the world their traffic will continue to be additional and not cannibalistic to the old telephone business.