Where is Microsoft going with Skype?

'Protect and Serve' - at least for the time being - might cover it.  This is arguably what Microsoft and Nokia (Noksoft?) are telling network operators about why Microsoft bought Skype. And, on the basis that actions speak louder than words, they will be pointing to two recent Skype moves to illustrate their approach.

Last month Microsoft came out with Skype for Windows Phone. It disappointed the techies as it couldn't work on low-spec Windows phones and it couldn't work in background. This was interpreted as  a half-arsed version of the Skype client and a work in progress. The appropriate teams, it was thought, would buckle down and produce a 'better' piece of software in good time. Maybe.

Then last week Comcast, the big US Cableco, announced that it was launching a Skype experience on its set-top as an additional service. For $10 extra per month, Comcast bundle owners (cable and Internet) would be able to do lean back, living room-style Skyping on their TVs.


Both these moves give us a hint as to the way Microsoft intends to edge Skype into the carrier mainstream, hopefully with carrier help. And both moves support the narrative the two companies are no doubt spinning furiously to the carrier community.

And that narrative is... ?  Well, something like this (what follows is a fantasy conversation between Nokia CEO, Stephen Elop, and an unknown group of carrier executives).

Elop: "Trust us, we know what we're doing here. We know that you regard Skype as a hugely disruptive force in the industry and many of you can't understand why Microsoft thought it could buy it and have us and them remain friends with you carriers. But hear me out.

"Think of it like this - if we, Microsoft and Nokia, control Skype we can make it more carrier-friendly than it might have been; certainly more carrier-friendly than any of the OTT Skype alternatives that could come along and displace it if we don't handle it carefully.

So we (I mean Microsoft) looked at Skype long and hard before we bought it and we worked out (and you know this too) that it only makes money where it crosses over with carrier business models  -  your network in other words. Think about SkypeIn and SkypeOut - that's about getting a share of call termination revenue for Skype. Without that Skype would have had no revenue at all.  We want to find more opportunities like that so that we can monetise services for you. 

"To that end we think the trick is to leverage the carrier network on the one hand and Microsoft technology on the other so we can work together to achieve two things with Skype.

"First 'Protect', design services and applications that minimise, as far as possible, the cannibalisation of existing carrier services, especially voice. Take a look at Skype for Windows phone, just released, and you'll see what I mean. We have designed this application so that it can't be used as an alternative to the onboard phone service because it won't work in background.  That means users can't easily take incoming calls on it, so Skype is an additional option on board the phone, not a replacement for a carrier service.

"Second, 'Serve' your strategic needs. We plan to embed Skype in such a way that we and you can control it and, over time, will be able to monetise services to drive incremental revenue. As you are fully aware, the public enthusiasm for net neutrality makes it nearly impossible to charge extra for specific services crossing the network without getting regulators and politicians steamed up. The alternative is to think of Skype as a series of value-added 'endpoints' which we can charge for as a service.

"We're doing this already with Comcast where Skype is available on the customer's HDTV using an adaptor box, a video camera and a remote control (users can IM using Skype as well). Customers can get a full HD, living room Skype experience without having to tinker with a PC and webcam. So in effect we've used our technology to turn a software capability into real, carrier-grade service and we've been able to charge for it like a service - $10 per month in fact. That's the way we see Skype evolving.


"We know this is not your ideal outcome, but think of the alternative...  Google taking the lot."