Skype: Leading the Voip Revolution

Skype: Leading the VOIP Revolution

Case Study

Research Assistant Bojan Angelov prepared this case under the supervision of Professor Bharat Rao at Polytechnic University in New York. This document was prepared as a basis for class discussion, and does not reflect the effective or ineffective handling of an administrative situation. The authors would like to acknowledge the valuable contributions and suggestions of executive program participants in the MOT and TIM Programs at Polytechnic University. Do not cite or use without permission. Please contact Dr. Bharat Rao at brao@usa.net to provide feedback or request further information.

“I knew it was over when I downloaded Skype. When the inventors of KaZaA are distributing for free a little program that you can use to talk to anybody else, and the quality is fantastic, and it’s free – it’s over. The world will change now inevitably.” -- Michael Powel, Chairman, FCC, Fortune Magazine, February 16, 2004. Introduction It was March 10th 1876 when Alexander Graham Bell made the first telephone call to his assistant Thomas Watson1, his exact words being: “Mr. Watson - come here - I want to see you.” Today, we take basic telephony for granted, and it is priced like water or electricity. In the midst of the war for market share in a nearly mature telephony market, a tiny company located in Luxemburg began the process of revolutionizing the traditional view of what Alexander Graham Bell began two centuries ago. The name of the company was Skype, and by 2004 the industry was abuzz with what could potentially disrupt its collective long-held business model. Skype had successfully fused peer-to-peer computing (P2P) and voice-over-Internet-protocol (VoIP) to create a new standard for telecommunications. One year earlier, on August 29th 2003, Niklas Zennström and Janus Friis had released the Beta/test version of Skype, touted as “the free Internet telephone that just works.”2 Industry Background Over the past decade, the...