To Skype or not to Skype: Nokia vs Carriers

The most excellent German blog Mobile Zeitgeist alerted me (in German) to a little battle that illustrates the pitfalls of creating the seamless user experience: Nokia appears to being in a tussle with (at least) the German arms of Vodafone and T-Mobile over the pre-installation of Skype clients on some of its forthcoming handset models (including the long-awaited iPhone competitor, N97).

Vodafone and T-Mobile Germany (who have a combined subscriber base of close to 80m) have now publicly stated that they will not include any Nokia models into their catalogues, which will have Skype installed. Now, there's a market gone dead then... For other models, look to 3 in the UK (and my post on the Skypephone there...).

T-Mobile said that they "would not let their business be destroyed" by this. Their terms and conditions prohibited VoIP clients already but the carriers did anecdotally turn a blind eye towards this in the past. Nokia's push however now is apparently too much for the carriers who fear network issues. Interestingly, this surfaces on the same day where, in anther part of the world, some queried the sustainability of free data plans for the iPhone (namely the Wall Street Journal on AT&T's policies in respect of the iPhone). Predictably, Skype lambasted the move as "unfair practice".

The name of the game is - of course - the pipe (not new: see e.g. here and here): the WSJ quotes from an Alcatel-Lucent analysis of North American networks during the midday hour of one day, which apparently shows that web browsing consumed 32% of data-related airtime but 69% of bandwidth whereas e-mail used 30% of data airtime but only 4% of bandwidth. The reasoning goes that increased data traffic impacts the networks' capex whilst remaining - at best - ARPU-neutral (AT&T ponders to drop its data plan for the iPhone by $10), cutting down margins and hurting the carrier more than is healthy. Voice and SMS services are - on a bit for bit basis - very, very profitable as they use very little bandwidth.

To conclude though - as the WSJ does - that unlimited data plans should be abandoned "in the short term", pours the baby out with the bathwater: smartphones are paving the way into the wireless future (20% of US households are completely wirefree already!) and it is a space where the carriers have great gains to make; maybe not on the sumptuous margins they were used to but healthy and viable nonetheless. To do as the WSJ asks would be as if one would have asked ISPs to please stop flat-rate plans for Internet access; and look what has become of the Internet!

Accordingly, other voices argue that a) slowing voice ARPU is at least being part set-off by increasing data ARPU (which grew a healthy 32% year-on-year in Q1 and saw more than $10bn in wireless data plans being sold in the US for the first time), and b) that the carriers actually know this for a while now and, accordingly, upgrade their networks to better cope with higher bandwidth demands in order to make the move to data pipes; the fight is arguably now "only" about whether these would be dumb or smart: with app stores, VAS and business-to-business (and machine-to-machine) solutions opening up vast new segments that have been completely unexploited to date, one should think that there is room for the smart pipe operator. So fear not!

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