Skype’s market lead is small now and they are fighting against the entire SIP industry.
Skype has 55M downloads, but only around 2M active users. The active users are the actual size of the network; these are the people available to call on Skype at any moment. Most of these users are international and thus its strength is international toll bypass. Only about 10% of these users live in the US.
Even as a portion of the total IP telephony accounts, Skype has only a small market lead. The current broadband phone subscribers are likely in the range of 500,000 worldwide. Free SIP-based services probably total another 100,000. In addition, every Windows XP PC has a SIP client embedded in the included IM software. Cisco has shipped 1M IP phones that are software upgradeable to SIP. Sip.edu is a university project that has provided SIP accounts to reach 80,000 student phones at Yale, MIT, Penn and Indiana. All of the Vonage-like services are competing for mindshare. Vonage is spending $40M this year and will spend $75M next year on advertising. AT&T is likely to spend similar amounts.
Skype’s potential market is limited on PCs.
The vast majority of Skype’s clients are on PCs. In fact rather focusing on broad mobile device support, they have created Linux and Mac versions. However, people do not normally talk on PCs, PCs are not always-on appliances and people are not always near them. The only reasons people make an effort to use Skype is when they are at their PC anyway or they are trying to avoid expensive calling charges.
Skype’s technology is not well suited to mobile devices.
When Skype does attempt to move their software to mobile devices, they will fail or be forced to move away from their p2p technology. The restrictions on mobile devices include high-cost mobile data, loosely-connected mobile data networks, limited battery power, and limited processing power. In short, the mobile world eliminates the idle PC resources that Skype exploits with its p2p technology.
An example of this limitation is Skyp’se first PocketPC client. The client only runs on the most expensive, fastest processor handheld devices. It cannot run on the first dual-mode cellular WiFi device, the HP 6300, due to its high processing requirements.
SIP is a server-assisted p2p technology.
SIP was designed as a p2p technology to empower connected devices to manage multimedia sessions. It is typically deployed with a network-based service to manage routing and policy. However, the network services typically only touch the signaling traffic and not the media traffic. The media traffic is routed peer to peer over the best available connection, unless a proxy is necessary for restrictive firewalls. In a 3 minute voice call, maybe 50 kb are used for signaling and 23 Mb are used for media. Less than 1% of the traffic is not p2p.
Skype is not the only solution for high quality, private, easy installation VoIP services.
Publicly available SIP-based technology can provide the same benefits as Skype, but optimized for mobile devices.
Skype is not cheaper to create.
A quick analysis of Skype spending shows that it’s cost to develop is similar to the cost of purchasing third-party SIP application and feature servers.
Total development cost to date: ~$20M
Total active subs: 2M
Development cost per sub: $10
A typical SIP application server is $5-10 per sub for a highly scalable, reliable and flexible platform on which to develop services. An integrated feature server which includes the application server and features is typically $10-40 per sub depending on target market.
Skype is not faster to develop new features.
For each new substantial feature, Skype must extend the protocol, create the logic for the SuperNode “server” and develop the client.