Skype and Telephone companies

Telegeography published an interesting article with the title “International Long-Distance Slumps, while Skype soars”.
I manipulated (cut and paste) their graph somewhat and came to this result:

Beware the interpretation of the graph: it shows the “YEARLY INCREASE” in calling minutes (phone trafficdark blue - and Skype free calling –brownish orange) worldwide, with emphasis on the word “INCREASE”. Total phone calls were 413 billion minutes in 2010, this is an increase of about 16 million minutes compared to 2009 or almost the same growth in absolute minutes as 2009 compared to 2008, but about half the amount of the previous years (2005-2008).
Telegeography is probably right that the economical recession of the period 2007-2009 affected the volumes of international “paying” telephone calls.

But, if we add Skype to the telephone companies, we see a quite different picture: The variation year to year of total minutes “INCREASE” fluctuates around 42 billion minutes from 2005 to 2009. Skype takes a higher proportion of this increase in 2008 and 2009.
AND … 2010 is quite spectacular: Skype generates 45 billion minutes increase in calling minutes, which, adding the telephone companies means an increase of over 60 billion minutes in 2010.
How can we explain this? I will advance some hypothesis:
  1. Some people who didn’t care about “free calling” in the past (because they had the money!) had to switch to free Skype calls, and by discovering the benefits (including video calling) they kept using it and made mouth to mouth publicity.
  2. The growth of the emerging countries, where money is still an issue, and free calls is still an advantage.
  3. Video calling! Almost all computers have now an imbedded webcam, and I guess Skype is one of the main reasons for it!
Look at the good quality of the snapshot I made of a Skype call from Belgium to Brazil some months ago, amazing:

I had sometimes better image quality and often worse, but still … being able to call somebody and see his or her face, FOR FREE … waw!

Is the 16 billion minutes growth compared to 2009 good news for the Phone companies? Not really, there is growth in minutes, but there is also a fierce competition in lowering prices, therefore I guess their revenues are not raising!

Is this good for Skype in the long run? If they can monetize their services in some way, yes. But they said: Skype to Skype calls will always be free! And I believe most new users are only interested in the free voice + video features, including me!


i_bRok3_teh_USA said...

The 2010 comparison between Skype and Phone usage is simply unbelievable!

(I just came across your blog and plan to become your regular reader.)


Jean Mercier said...

Welcome to my blog Chirag.

However, i blog less than i used to, because Skype publishes less numbers than in the past!

I love Bush too since he is gone!

Anonymous said...

That's great, I've been invested in Microsoft for about a year, I questioned the Skype buy originally, but in retrospect, this a no-brainer and huge growth area for them. I really like this picture, they should buy it and use it as a promotional advertisement, you have the happy couple and the doggie just radiating good feelings, it doesn't get any better than that.