It's time to put an end to telecom operators?
[+] Telecom money, far bigger than media money
On October 31, 2003, I received a letter from a student studying at National Taiwan University. He believed that Instant Messenger (IM, e.g. Yahoo! Messenger, MSN and ICQ,) would have a great potential in the advertising market.
In the meantime, however, he was also greatly confused to find that neither Yahoo! nor Microsoft had made any serious attempt in this field. None of the studies he read was optimistic about it either, holding that IM users tended to be active in using the service but did not like advertisements.
I wrote back and said that, the future of IM was not to make media money, but to make telecom money. He was even more confused, for, despite the fact that IM had been a good communication tool, charging fees seemed to be an issue out of the question. Truly, there were tens of millions of users out there, but you could not make money from them yet.
My answer was:
"The revenue model of IM will be beyond your wildest imagination. It would be impractical to charge the users for using IM. However, once IM is integrated with VoIP and the mobile communication service, the entire business fundamental of the telecom and Internet industry would change.
What you see today as the combination of IM and the telecom service is just a beginning. The real revolution is going to happen in a few years. The profit margin of IM will be very attractive. Yet before that real, IM is used only as an advertising platform, a sideline of the service provider, not a source of big money.
If you are aware that the revenue and profit of the telecom sector (living on communication services) are many times larger than those of the media sector (living on advertising), you will see that it is a fool not to make money from the telecom sector."
[+] An over-panic to Skype
At the end of July 2004, during a visit to Taiwan for a joint launch of Skype's Traditional Chinese version with the local portal PC Home Online, Niklas Zennstrom, the founder of Skype, made a speech.
In appearance, the software is very similar to any other ordinary IM. Its main function is to enable those sitting in front of a computer to make phone calls through the Internet. It does not sound remarkable to any extent, as there have been a number of other VoIP software and services long before that. Traditional IMs, too, can support voice communication.
What's remarkable about Skype is, with the P2P (Peer to Peer) architecture, the quality of communication is unbelievably high, completely different from the impression that many people have, i.e. "VoIP has unreliable quality". As it is free, it is able to attract 16 million users around the world within a very short period of time.
With earphones and microphones, Skype enables voice communication between two computers for completely free. Therefore, many people use it as an alternative to the international call service. It allows to dial ordinary phone numbers too. In that case, it is fee based, but the cost is much cheaper.
The advantage of the P2P architecture is, the computers engaged in a Skype call are directed linked with each other, and no intermediary server is employed for processing the call. Therefore, unlike traditional telecom services, which depend on equipments that are expensive to purchase and maintain, Skype has much lower operating costs.
Niklas Zennstrom's speech in Taiwan attracted many telecom operators and Internet professionals. Everybody knew that although it was just a beginning and Skype had not made a profit, nobody dared to ignore its potential power in the future.
An interesting episode was, during his speech, Niklas Zennstrom stressed repeatedly: "I do not mean to stand in the opposite line against the telecom industry." However, no one really believed that statement in the speech. (Otherwise what do you think so many CEOs and VPs were there for?)
Yet when we study the telecom industry in depth, we will find that he was not lying. As a matter of fact, although Skype is enormously popular by providing the free VoIP service, it has not been able to make profit with it. It will have to depend on telecom operators to make real money in the future. Therefore, it cannot afford offending the traditional telecom industry.
[+] VoIP, the next tide in the Internet industry
To my delight, while portals have faded into a "traditional sector" today, many new revolutions are emerging in the Internet industry, among which, VoIP is one. During the past few months, a number of portals have accessed the VoIP market.
On October 25, 2004, Tom.com, whose prime market is in the mainland China, announced to cooperate with Skype to offer the free download of Simplified Chinese version of the software. In the meantime, the famous email service provider 263 launched its "eTelephone" video VoIP service.
In Taiwan, portal yam.com introduced its own VoIP service in November, too. Cooperating with Type II telecom operators, it offers computer-to-computer, computer-to-local landline and computer-to-mobile phone communication services. Consumers with VoIP phone sets could also call each other.
Feeling the pressure from the Internet companies, some Type I telecom operators in Taiwan are planning to offer the VoIP service, also by installing software on users' computer. However, it is a service that many Type II operators have been offering for a long time.
Such a tide would lead many people to believe that it is time for the Internet sector to put an end to traditional telecom operators. However, it is too early and over-exaggerated for the media to make such a conclusion. For me, it would be a very hard and slow process, an "evolution", rather than a "revolution".
2004/11/28 - By Digitalwall.com - Way to
China Internet/Telecom )
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VoIP (1) It's a Fool Not to Make Telecom Money - 2004/11/28
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