Why Three aren’t scared of offering unlimited Skype

Note: This post might be a little dated. It was published in December 2006.

Craig Barrack had a great article in the NMA last week explaining why Three aren’t scared of offering unlimited Skype and Instant Messenger … on their top end “X-Series” contracts, for now.

Conventional wisdom on the future of mobile operators has two important axioms. The first is that mobile voice-over-IP (VoIP) is a massive threat to the approximate 75% of revenue they earn from voice services. The second is that mobile instant messaging could cannibalise SMS revenues, which make up a large proportion of the remaining 25% of revenues attributed to data. So there has been great interest in Hutchison 3G’s release of X-Series this month.

… This could be the first seismic shift within the industry since the launch of 3G. [...] At the forefront of the capabilities of X-Series are clients for Skype and Windows Live Messenger. Heavens above, that’s VoIP and IM in one handset – surely this can’t be 3 committing commercial seppuku?

I don’t think 3 created this offer without some careful arithmetic. Within higher value contracts, as X-Series is positioned, operators already offer minutes of cross-network calls in the hundreds. For those, they have to pay a termination fee with the network being called, slightly over 5p a minute. Calling web Skype users, there will be no such charge, so 3 will be better off if its customers spend their time calling Skype users rather than other mobile networks.

By offering Skype on a fairly high-value tariff, I think that 3 has negated the traditional worry, especially if this offer increases its monthly contract subscriber base. If Skype clients become more widespread on lower-end handsets so users can call each other without affecting their monthly call allocation, that may not be the case.

A similar case can be made for the inclusion of Windows Live Messenger. Text bundles are usually included within high-end contracts anyway, so I can’t see that 3 will lose significant income.

Read the full article on NMA.co.uk

Another thing also to bear in mind is that I suspect Three only offer you an internet connection if you are in an area that has 3G coverage. If you happen to be in a blackspot, then you wont get GPRS connection. Instead you are just refused an internet connection. Depending on where you live & work, this alone could put you off signing up.

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