Cutting through the Skype

19 May 2005

While well-known international players such as Vonage and Net2Phone are leading the field and courting venture capitalists, there is no stronger poster child for the voice over IP (VoIP) revolution than that of Luxembourg-based start-up Skype, which has so far signed up 29 million registered users worldwide for its net phonecall software. In Ireland, the company already boasts some 50,000 to 60,000 registered users.

Only last year the company launched a paid service called SkypeOut, which lets subscribers make calls from the internet to the traditional phone network. Despite claims that the technology is at times flaky when calls are made from the net to standard mobile phones, Skype has so far notched up one million customers for the SkypeOut service.

If traditional fixed line and mobile carriers aren’t paying attention to VoIP, they should be.

It was for this reason that last week’s First Tuesday event in Dublin was packed to the rafters and produced one of the most entertaining debates on where the future of telephony in Ireland is going. In a machine-gun quickfire session chaired by George Young, chairman of the Telecommunications and Internet Federation, leading lights from Eircom, Tele2, Smart Telecom, BT Ireland and VoIP start-up Blueface debated the key issues.

While all the speakers agreed that VoIP was going to shape the future of telecoms, Seán Loughnan, head of innovation at Eircom, laughed off speculation that the incumbent’s survival will be under threat. “Many’s the time that Eircom’s demise has been forecast,” Loughnan said wryly. “The fact is we are already selling VoIP services. We have 25 corporate customers using it across a managed IP network. For smaller companies we offer IP voice services with all the features of a PBX (private branch exchange). In the months ahead we are going to be offering consumer VoIP services on top of DSL,” Loughan added.

Feargal Brady, CEO of Irish VoIP start-up Blueface, believes that there is good return on investment to be gained for telcos and businesses that switch to VoIP but telcos that don’t embark on a VoIP strategy could ultimately face annihilation. “The age of paying for phone calls is coming to an end. Voice calls will be just like email. Telecom players should embrace it now and charge instead for services they can add on top, or simply fade away.”

BT Ireland’s VoIP manager, Cathal O’Toole, said he was unsure of the long term viability of telecom start-ups such as Skype and Blueface that don’t own their own infrastructure. His assertion was seized upon by Loughnan, who added: “If you can control the end-to-end communication, you can differentiate yourself in the market. Players such as Skype have a lifetime, but not a very long lifetime.”

Smart Telecom’s programme manager Joe Lavin — despite his company’s conviction that VoIP is a relevant offering for the Irish marketplace — ended the evening on an ominous note by highlighting a blot on the VoIP horizon in the form of security threats over VoIP and related technologies such as session initiation protocol (SIP). “The danger I foresee is the advent of VoIP spamming and SIP spamming whereby spammers will fire out recorded messages to SIP clients. Unless we act now, people could be bombarded with automated messages about Viagra, in the same way that we get email spam today.”

Pictured at last week’s First Tuesday meeting on how VoIP will shape the fortunes of the telecoms sector were: Joe Lavin, programme manager of Smart Telecom; Cathal O’Toole, VoIPmanager with BT Ireland; Mark O’Toole, managing director of Tele2 Ireland; and Dr George Young, chairman of the Telecommunications Internet Federation

By John Kennedy