Monday, June 20, 2005

A Conundrum

David Beckemeyer- Mr Blog

Andy says he agrees with Jeffrey Citron. My conundrum is that I agree with what Andy says, but I don't entirely agree with what Citron says.
Andy says he doesn't consider Skype a phone line replacement. I agree, or more accurately, I agree that Skype is not mutually exclusive with phones or other telephony solutions. Despite the hype that says landlines are going away, the facts show that only a tiny fraction of users have dropped a landline completely and replaced it with something else (a cell phone). How many have replaced their landline with Skype? A small segment of mostly younger, single people, with no kids and not yet homeowners, may be about the only people that have gone to cell phone only. And in a lot of cases, I'd wager that when they have kids and own a home, they will end up finding the benefits of a traditional landline to be substantial. They may hold their nose, but I'd wager the lion's share of them will get that old landline.
And there's another practical matter. To use VoIP as the replacement, one needs broadband, and so if DSL is the option (which it is for 42 percent of broadband users in the US, and over 60 percent worldwide), well you have a landline anyway, so the whole issue is moot.
I don't agree with Jeffrey Citron when he says:
What Skype does is allow you to make a cheap telephone call using your PC- so as an ancillary communicaitons provider, who are they impacting?," Citron asks.
"They are certainly not impacting Vonage," he sniffs.
Certainly saying that Skype is not impacting Vonage is wishful thinking on Citron's part. For some portion of customers, those just looking at cheap ways to talk to distant contacts for instance, the two products would be in direct conflict for the customer.
I think Citron misses the point. It's not about whether Skype is a phone line replacement. It's about what the user wants. Skype serves a vastly different role than that of a phone. People use Skype in different ways. It's not the right solution for everyone. But at the same time, it does things one cannot do at all with a plain phone. The way I see it, the whole argument that all users make a choice between either Skype or a Broadband-phone VoIP is the wrong way to look at it. Very few people are using Skype exclusively. The vast majority still use a phone too. And likewise, getting broadband-phone VoIP would not remove all the reasons one may have to use Skype. There is overlap for certain use cases, but the bigger driver is the user's objectives, their needs and wants. For those that want what Skype offers, a Vonage-like Broadband-phone isn't the answer at all. Likewise, Skype may be a bad choice for those that are more phone-centric. This point seems lost on the press, analysts, and investors.


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