Skypephone hits the market

Sunday Business Post - Technology pages - Nov 11 2007
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Mobile phone operator 3’s new Skypephone marks a turning point for mobile phone users, as prices continue to be driven downwards by an increased level of competition. Dermot Corrigan reports.

Mobile phone operator 3 has launched a new handset that comes pre-enabled for the Skype VoIP (voice over internet protocol) service.

The new ‘‘Skypephone’’ handset, which will enable users to make free voice calls and send free texts to other Skype users, goes on sale tomorrow and will cost €99.

This is the first time that an operator has offered a consumer product designed for free mobile telephone calling using the internet. The managing director of 3 Ireland, Robert Finnegan, said the new Skype-enabled 3 handsets will be a popular Christmas present this year.

‘‘We expect to sell loads,” he said. ‘‘The fact that people can now make calls for free means there has been a huge amount of interest in it. We believe it will be very big.”

Skype is an internet service that allows users to talk to each other over their broadband internet connections. It also allows users to make cheaper local and international phone and video calls and is usually accessed via a PC or notebook computer. Skype currently has 246 million registered users worldwide.

The Skypephone handset can also be used to make conventional mobile phone calls and send conventional text messages in the same way as any other mobile phone. Users access Skype via a separate call button.

‘‘You just press the Skype button in the centre of the phone, key in your username and password and off you go,” said Finnegan.

3 users who signed up to its X-Series schemes have been able to access Skype from their handsets since September, but the Skypephone is the first model to include the functionality as an integral element of the handset. The 3 Skypephone handset was developed by Skype and 3 in partnership with US technology giant Qualcomm.

As well as Skype functionality, the 3G handset features a 220mm x 176mm colour screen, two-mega-pixel camera,MP3 player,16MB internal memory and Bluetooth, Java games, mobile TV and internet capability as standard.

The 86-gram handset comes in black or white, with blue or pink trim. It measures 100mm x 44mm x 13.6mm. Battery standby time is 320 hours, talk time is 270 minutes and video talk time is 170 minutes.

‘‘The whole idea behind the 3G network is to allow people to do what they do at home, chained to a desk or their laptop, on the go on their mobile,” said Finnegan.

‘‘We started off with voice and text as a core, but with internet access, watching TV, downloading music, and playing games now on your mobile, an extension of that is the Skype function.”

Ireland is one of the first countries to get the Skypephone. It will also be available before Christmas in Britain, Australia, Austria, Denmark, Hong Kong, Italy, Macau and Sweden.

Price plans
Finnegan said the Skypephone would be available from 3 stores, www.three.ie and selected retail outlets across Ireland.

He said the new handset has been introduced first into the prepaid market. Skype-to-Skype calls and text messages are free once the user tops up their credit monthly. It will then be released to bill-pay customers in 2008.

‘‘We want it to go into the mass market,” said Finnegan. ‘‘It will be a sub-€150 handset.”

First-timeSkype-users can create an account by going to www.skype.com and downloading the free software onto their computer. Alternatively, they can create a Skype account directly from their 3 Skypephone.

Other operators
Finnegan said he expected the existence of free calls in the Irish mobile market to provoke a reaction from competing operators.

‘‘I have no doubt the other operators will follow us in due course,” he said. ‘‘We have an exclusivity with Skype, so they cannot follow us in that way for quite awhile.”

Chris Handley, head of mobile internet and content development for Vodafone in Ireland, said Vodafone had no plans to follow 3 in this direction.

‘‘There is a common misconception that Skype or VoIP on mobile phones equates to free calls,” he said. ‘‘What people really want is a good value, quality voice service that is reliable and is supported by effective customer care - this is not currently on offer via VoIP on mobile.”

Amanda Carroll, media and public relations manager with Meteor, said many of its customers could already benefit from free mobile calls, due to its Phone a Friend for Free and Free Calls to any Network all Weekend For Life promotions.

Quality concerns
Vodafone’s Handley said VoIP calls were of a lower standard than those made using competing mobile technologies such as GSM (global system for mobile communication), 2.5G, 3G and HSDPA (high-speed downlink packet access).

‘‘At this point in time, in terms of quality and service level, VoIP is not comparable to our full service package, which is far superior and include s a range of network technologies,’’ Handley said.

Gerry McQuaid, commercial director of O2 Ireland, said customers would not accept lower quality voice calls, even if they were cheaper.

‘‘The cost of delivering VoIP calls could increase, as operators build in the improved quality of service that consumers now expect as a minimum,” he said.

‘‘Until the experience of mobile VoIP calls improves, there is little reason for customers to seek such potential alternatives to familiar switched mobile services.”

Finnegan does not agree that VoIP automatically means a lower quality of service. ‘‘We are very pleased with the quality,” he said.

‘‘We have had people here testing them over the last three or four weeks, and there has been no difference in quality that we can see.”

Business model
Regardless of whether O2, Vodafone and Meteor introduce a Skype-type service, Finnegan said there was an inexorable slide towards an end to per-minute call charges in the Irish mobile market.

‘‘The industry is certainly changing,” he said. ‘‘We are getting away from the per-click, per-second, per kilobyte charge, towards just free access. We can see call costs from the other operators dropping already, but that is because they are coming off such a high plane, and they have had it so good for so long without any really sharp competition.”

Finnegan said 3 did not view profitable voice calls as central to its business model.

‘‘In terms of the future revenue models, we would see Skype as a great opportunity for us to acquire customers to start with, but also customers would then avail of the other services that we offer, accessing the internet, watching RTE news on-the-go, and downloading music,” he said. ‘‘Also, we see advertising revenues playing a role in our revenue model in the future.”

Meteor’s Carroll agreed that generating revenue from other services besides voice was now important to mobile operators.

‘‘While better value offerings from voice will be one of the key drivers in the mobile market, we can expect to see a broader array of services coming from data, entertainment and music downloading, as technology evolves,” she said.