Verizon Wireless, Skype and Sun-tzu

Carl Weinschenk

One important variable during the past decade of telecommunications evolution is the discipline, grace and savvy with which carriers move from antiquated to new technology. It's a delicate move that must be done without fear of change. The new technology has to be close enough to fully baked to enable the carrier to move forward without missing a beat or, at least, too many.

 

These issues are evident in the transition from legacy networks to VoIP and in the move from T1s, T3s and other older options to carrier Ethernet. Carriers live in fear of the new technologies reducing the revenues of the older. At some point, however, they realize that the new technique is going to grow, regardless of any sentimental attachment they have to the old ways. Finally, they realize that if their legacy revenues are to shrink, they are best off cannibalizing themselves.

 

Carriers have to think very carefully about how long to hold out against new technology. Ultimately, the smart companies fight while it makes sense, and then switch. Timing is everything. It is reminiscent of the famous dictum, often attributed to Sun-tzu, to "keep your friends close, and your enemies closer."

 

Andy Abramson at VoIP Watch alludes to this in his assessment of Verizon Wireless' deal to offer Skype on its handsets. In this case, the transition is in international long distance. Abramson points out that Skype, according to Telegeography, already controls 12 percent of international long-distance traffic. The idea for Verizon Wireless is that it will retain some business by being the data plan launching pad, so to speak, for Skype.

 

Om Malik at GigaOm has a different take. He points out that it is a limited deal, and he does a good job of describing what the two companies are doing and, more importantly, what they are not. He suggests that Verizon Wireless has lived in fear of the iPhone. (Abramson, who references Malik's post, calls it "iPhobia.") Malik sees the Skype deal as something of a Verizon Wireless response.


 

Malik, perhaps channeling Sun-tzu, writes:

 

I've been reporting on Skype for some six years, during which not at a single day passed when I didn't hear some kind of anti-Skype remark from an operator, Verizon included. There was a visceral hatred for the Internet calling service, which essentially started eating the insides of their business. And when you have so much hate for a particular entity, you just don't get up an embrace it - unless you're scared of something. In the case of Verizon, that something is the iPhone.

 

There is a lot of common ground between Malik's and Abramson's points. Both commentaries assume that Verizon Wireless, which is owned by Verizon and Vodafone, is being hurt by Skype, and that the industry is dealing with the transition to a more efficient way of doing long distance.



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