Has Skype won the VoIP wars?

Submitted by acohill on Mon, 01/09/2006 - 10:44

Several business associates and I decided to try a Skype voice conference call the other day. I had not looked at the Mac Skype software since it was first announced; at that time, I was not impressed. The latest version has an excellent interface and features built in chat and file sharing.

Voice quality was superb--better than a Plain Old Telephone Service (POTS) landline. The built in address book makes one click dialing dead simple.

But we had some glitches. One of the people trying to join the call discovered that his broadband access provider was blocking Skype--more on that in a moment. And about forty-five minutes into the call, I had trouble with my microphone input--it just stopped working, for no apparent reason. I had to call back to get it working again.

Despite the problems, I was impressed with the ease of use, the excellent design of the interface, and the terrific sound quality. There are still bugs to work out, and to be fair to Skype, I occasionally have the same sound input issue with iChat, Apple's voice/chat application. So it's not clear that that problem is even a Skype issue.

We're on the verge of an enormous change in the way we make voice calls, and the software and hardware is just about there--good enough that millions of businesses and individuals are using VoIP systems every day. But one glitch is the growing resistance of broadband providers to free and fee-based IP voice systems like Skype. From their perspective, companies like Skype use their bandwidth for free, and that's essentially correct.

Hence we have companies simply blocking Skype packets, rendering the service unusable on their networks. The Wall Street Journal reported last week (subscription required) that the major broadband providers, including BellSouth and SBC/AT&T, are beginning to consider charging content providers for network access. It's not just voice that is driving this; as more and more people download movies and television shows, the broadband providers have to deliver more and more network capacity, but have fixed price contracts with customers, meaning their costs go up as their customers use the network more, but their income stays the same.

The current cost/price structure for broadband is untenable, and we will see much confusion in the marketplace over the next several years as new price models emerge. But companies like PacketFront have already solved this problem by providing a comprehensive communitywide network operating system that is service-based, rather than bandwidth-based. In a service-based model, broadband connections would be free, and if you wanted a VoIP phone, you'd select from several different VoIP service providers that have contracts with the network operator (e.g. the community or private broadband provider). Part of the fee for VoIP service would go to the network operator to cover the cost of providing the network. This model is very similar to the way we build and manage roads, and that model has worked well for decades.

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