WebRTC: The failure of VoIP (Part 2)

Another in a series of articles describing the new emerging WebRTC initiative.

The telephone industry had a need to make phone calls using IP but had an equally important need to protect their turf. Phone calls were difficult, they are important and money needs to be made. The industry now had SIP and they had engineered enough complexity and secret handshakes into it to ensure that no casual passer-by would dare to try to enter their domain and if they did, they’d have to play by the nearly impossible rules that the telecom industry had created.

The industry happily set off installing VoIP SIP equipment and the good news it was indeed cheaper, needing less hardware (from their prospective at least) but it was still mostly a closed environment.

Enter Skype
About this time Niklas Zennström and others had just finished developing  a new file sharing protocol resulting in a music sharing service known as Kazaa. Kazaa used a peer-to-peer protocol and basically leveraged the power of the Internet to share files in simple, yet secure and innovative way. Niklas figured he could do the same thing for voice. They looked at SIP and well, that’s about all they did quickly concluding that SIP  overly complex and fundamentally was so busy being complicated, it really didn’t serve the problem of the end user (which is what any service is supposed to do).

They started Skype, which used it’s own proprietary and encrypted protocol and basically operated like a pirate on the Internet. By this time the telephone companies had gotten into the ISP business and certainly didn’t like anyone trying to take their crown jewel of voice revenues away from them. Some spent a fair amount of time trying to block Skype. A cat n’ mouse game ensued. Skype incorporated all sorts of what is effectively hacker technology to ensure your ISP couldn’t tamper easily with a Skype call.

The ‘net effect was that Skype worked, and worked well and it worked nearly all the time and we (as end users) started to adopt it. The telephone industry buried it’s head in the sand, Skype was a toy, you could call only a limited number of people and they had to talk into their computer. Who wants to talk to their computer? Well it now appears a bit more than the telephone companies thought.

Skype continued to grow and hit nearly $900m in revenues. The industry didn’t much like Skype but  ceded they would have to allow Skype their space (what’s $900m anyways).  In the telecom , acquisitions are usually made based upon a multiple of annual revenues, typically 1 to 2 times revenue is kinda of normal, so last year (2011), when Microsoft acquired Skype for $8.5 billion – the telephone companies might should have paid a tad more attention.

Just a few weeks ago, Skype announced they had achieved 40 million simultaneous online users. Truly a big number and especially impressive considering how little infrastructure Skype has to actually run this service (could you imagine how much equipment a traditional telephone company would need?). Worse, if you figure the world is a big place (it is) and seems to be turning with day and night, you realize that Skype has more than 120 million regular users. Truly impressive and HELLO are you listening?

Operators were long aware of the decline in the usage of fixed telephony and in fact were noticing that minutes of use (MoU) on their mobile networks had also started to decline. In these same sort of time period, Google introduced Google Voice and basically gave away free telephone within their Gmail application. It was now clearly apparent that the race to the bottom was well underway and the telephone companies got to ride in the first car of this roller coaster (screaming no doubt). Voice would be free or nearly free. The end of an era was upon us.

… continued



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