Group Name

Skype Unit

Group Members

C. Senkow, D. Thiele, B. Trieu, L. Van Zandt, C. Young

Initial Statement

We will investigate Skype and its economic effects on both personal and corporate markets. We believe that Skype has a positive effect on these aforesaid markets and when compared with other communication companies, it is clearly superior.

411 on Skype

Skype, introduced by the founders, Niklas Zennström and Janus Friis, on August 29 2003, is an Internet application that enables users to send files, instant messages, and live videos. But the one aspect that separates Skype from all the other Internet chat applications is the ability to treat the Internet as a phone line. From computer to lane line and mobiles phones, users are able to call anyone, anywhere and for how ever long they want for little to no cost at all. Skype uses an innovative peer-to-peer technology to enable users to talk over the Internet. This system of communication has a better sound quality then regular Telephones and is equipped with an end to end encryption. Many features of Skype include: Free Skype-to-Skype calling, free video conference, SMS and Call Forwarding. An eBay version of Skype is also available. The tweaked eBay version has all the good stuff that Skype has, but more eBay friendly. The eBay version contains features that enable you track auctions you're watching, Search without opening a browser, check your winnings and sell your stuff. Skype has also introduced Skype mobile. Skype mobile is a cell phone that enables the user to use Skype and all its functions but on a regular cell phone. Skype is based in Luxemburg and its popularity is so immense in Europe and is now a global technology. Over the years since Skype has been introduce to the world, it reputation exponentially increased. After a mere 5 months, Skype records counted 2.4 million users from 200 countries. Therefore Skype answered by making Skype software in many more languages. Skype has been awarded many awards to display its success. Awards, such as, Smartphone & Pocket PC Magazine’s Best Software Award 2006 and Economist Innovation Awards to name a few. This downloadable, easy to use, global telephony with unlimited voicemail calls is available at http://www.skype.com.

Source: http://pages.ebay.com/skype/

How It Works

Skype uses VoIP (Voice over IP) to communicate over the internet. In order to use VoIP, you need a broadband internet connection. You may call from computer to computer, computer to land line or phone to phone or computer (with the proper adapter).

VoIP converts a voice (analog signal) to digital data (bits) and then breaks it up into packets, each encrypted and given an address to be sent to. Next, Skype sends the packet over the internet through the most effective set of networks. This is done through a global index technology, which is a way of connecting all nodes to a “super node” so that all available nodes are aware of other nodes usage and available to send information quicker. The packet is sent to an available close router, which then is responsible for transmitting to another router (which is closer to the destination address) and this continues on through the internet. When it reaches the receiver, it is converted from the digital signal back to the analog signal. Because the packet is sent over the internet, the connection between the two users is not continuous; only packets are sent when there is “data” to be shared.

Skype Statistics

135 900 000 Skype Users

250 000 New Users of Skype Everyday

$129 399 000 US made by Skype the first nine months of 2006

Personal Effects

The personal advantages that Skype offers its users are numerous. The ability to have reliable and affordable audio and even video communication over long distances by means other than cellular or landline telephone can drastically change the lives of people who live far away from loved ones. People who have been forced to live apart from one another due to circumstances in their lives now have the ability to communicate with virtually no cost besides an internet fee. The Skype program is free to download, and all that is needed to operate the program is a microphone and speakers or a headset, and perhaps a webcam for video conversations. For people involved in a distant relationship, this is an ideal solution. Rather than focusing on how many minutes are spent on each conversation via expensive landline communication and worrying about the next phone bill, individuals now have the freedom of knowing their minutes are not costing them a fortune and can therefore focus more on the conversation and less on the time.

“Skype aims to delight users by offering free global telephony with a superior quality that’s never been heard before,” said Niklas Zennstrom, CEO and Co-founder of Skype. “The free conference calling ability means that people can Skype with groups of their family, friends and colleagues, enhancing real-time communications and the value reaped from their investments in technology and connectivity.”

Source: http://about.skype.com/2004/

Source: http://evangelismaction.wordpress.com/?cat=

VoIP Reliability

People often ask "how reliable is VoIP communication?" The answer to this is that it is just as reliable as the ISP (Internet Service Provider)the protocol is being transmitted via, just as a traditional landline phone call is only as reliable as the switches and circuits via which it is transmitted. The difference between VoIP and landline communication is that the data transmitted by VoIP is in packets. This uses less capacity allowing for more options and flexibility than a traditional landline would offer. Additionally, due to the fact that the data is transmitted in packets, security is increased since the data is encrypted making it more difficult to decrypt and potentially alter or delete the message. Nevertheless, unless you are absolutely certain that you can always rely on your ISP to be working, it is a good idea to have an active landline as an alternative.

Source: http://www.voipreview.org/news.details.aspx?nid=55

Mobility

Whereas a traditional landline is only able to communicate from the location where the line is fixed (i.e. from the home), VoIP allows for greater mobility with the proper equipment. A portable computer can be connected to the internet at numerous locations such cafés and coffee shops, airports, hotels, etc. In addition to this, mobility around the home is no longer restricted to a computer station either. With the new cordless USB connected Skype Phone, you are now able to move around the home while the phone communicates with the computer making the call.

Source: http://www.cecompass.com/index.asp?PageAction=VIEWPROD&ProdID=15

Research Study

Wainhouse Research Webmetrics did a study in November of 2005 to determine what Skype users thought of the quality of Skype connections. Although 5% believed that the connection was unacceptable to use whatsoever, almost all of the individuals contacted thought that Skype was useable to some degree. Surprisingly, 44% of those contacted used Skype to some amount in a business context despite these quality issues. This shows that Skype does have its place in the communications world. When is it acceptable to use Skype?

Corporate Effects

In the corporate world, there are a variety of means used to communicate. One of these contact methods is Skype. Skype can be very useful for business purposes because when communicating between two computers; it is free. However, if your business partner does not have Skype, then the Skype users have to pay to connect to land lines or cell phones. Skype does have a negative aspect; the quality of the connection is often poor.

In the event that both of the businesses have Skype installed on their computers, then their communication is free of charge. This, obviously, has great economic benefits to both parties, as neither of them has to pay as they normally would.

When only one of the business dealers has Skype installed on his/her computer, then the Skype user is obligated to pay a phone service rate to Skype in order to contact either to a landline or a cell phone. This phone service rate is extremely reasonable when being compared with all other telephone service providers including Bell, Primus, Rogers, Wintel, and Costco.

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When you examine the two rates, it is obvious that Skype is lower and is more beneficial to businesses. A lower rate can help the success of a business as they are paying less in overhead fees and can generate a larger profit.

Does a reduced phone cost actually help a business? It may sound like a small and unimportant cost to either the entrepreneur or the large corporation. However it will become obvious that Skype has lead to both increased quality of life and economic success.

One story of a Skype user turning a larger profit due to the existence of Skype is that of Bill Lewis. Mr. Lewis is a software tutor that lived in San Francisco. He helped students over the phone connected to his computer or through computer-to-computer connections. Although Mr. Lewis was making a profit, it was hard for him to do well financially because of very high communication bills. It cost him up to $10 per hour with traditional telephone companies, obviously cutting deep into him profits.

Mr. Lewis wanted to move to Puerto Vallarta, Mexico, but was concerned about extreme profit cuts while serving his San Franciscan patrons. He knew that the long distance rates available through traditional telephone companies would severely limit his ability to make profit. He was unable to move so far away from his livelihood.

When he was introduced to Skype, Mr. Lewis knew that he would be able to live his dream. He would face no cuts in profit because Skype is free communication between computers, which is how he operated. Even if he communicated with students over the phone using Skype technology, he would not be charged a high rate. After the introduction of Skype, Mr. Lewis improved is profit even though he was physically further from his customers than before.

Yes, there are large advantages for the corporal use of Skype. This being said, however, there are some downfalls for this free Internet communications service. Skype has poor quality transmissions at times. These bad aspects include dropped calls, bad reception, bad sound quality, and delayed sound. Dropped calls are when the communications between two parties are actually severed without their consent. Bad reception means that depending on the circumstances surrounding the call (like location, time of day), the call may not connect with the appropriate receiver. Bad sound quality includes tinny noises, background noise and crackling that may happen on a call. Delayed sound is when one partner in the communication speaks, but their words are not heard until long after they are said.

When journalist Renai LeMay heard about Skype providing free connections between computers and inexpensive connections to landlines and cell phones, he knew that he had to try it out. He used Skype for a few months before he made a final decision about its usefulness in the workplace. Mr. LeMay argues that although Skype is good enough for internal calls, calls to customers on landlines and cell phones are a plight to be avoided. He believes that “no Skype quality issues have been experienced; unless calling or taking calls from the traditional telephone network”. In this case, Mr. LeMay and others do not suggest using Skype. It often has a high rate (reported to be sometimes as high as 30%) of dropped calls and poor quality phone service. Mr. LeMay’s argument shows that it is important to use professionalism in the workplace.

Why is Poor Quality Unacceptable in the Workplace?

Any poor quality of Skype is a reflection onto the business that is using it. Customers that are negatively impacted by Skype’s bad performance associate this poor service with the business rather than with Skype itself. Therefore Skype cannot be used when directly communicating with customers.

Corporate Effects Summary

To summarize qualities, both positive and negative of Skype, the following are applicable:

• Skype is very helpful in cutting costs for the business and provides mobility of the business. Since it is free when used for communication between computers, this can be very helpful to promote profit

• When communicating internally, quality is not very important. If the business is experiencing difficulties with the technology, it is easy for them to forgive these problems and the reputation of the firm will not suffer. This is a great way to cut costs in the business

• Skype cannot be used for communication with customers, as it is not reliable enough. Customers will not forgive problems as easily as employees would.

Is Skype useful for business use? Skype is helpful in cutting costs for internal use for businesses, especially those that are spread over many locations. However the unreliable nature of this new technology makes it not feasible for communicating with customers. Skype is overall an asset that should be used and recognized as a viable option for company use.

Skype Economic Rates, Compared to Other Competing Companies

I’m taking a look at the rate comparisons that Skype offers for international calls compared to other challenging companies. I have decided to use Roger’s long distance rates, for they seem to be the closest ones to rival Skype. I am showing this comparison to show how it is wise to use Skype Communication, not just because of the cheap rates but also the endless talk time. All of these comparisons are for landline phones (home phones) or calls from computer. There are no mobile or cell phone rate comparisons. I was comparing a more stay at home, continuous long distance situation, rather than spontaneous long distance calls; which usually are only used for cell phones. More ideally people call long distance at home and not on cell phone, for the rates are more expensive no matter what company, what time, for calls to or from a mobile phone. Why Skype? Skype allows you to talk long distance at the same rates every minute, for the whole duration of the call. There is no 3 minute add on fee or hidden charges. Skype Long Distance Rates Talk free to other Skype members. Anywhere. Anytime. It’s just 1.7 euro cents* (0.021 cents Canadian) per minute to their 30 most popular destinations, but there’s a big list of rates to destinations everywhere in the world. You can pay for SkypeOut™ in a couple of different ways: will Skype Pro, certain calls are nothing per minute*; or with Skype Credit, you put some money on your account, and then it’s pay as you go. This is the website to take you directly to the rates that Skype charges per country: http://www.skype.com/intl/en/prices/callrates/ Skype calls are more expensive if calling mobile phone rather than landline. Can also send cheap text messages You can call almost any phone number on the planet for 2 cents a minute.

**Rogers Long Distance Rates**
Country	Rate (cents/min)
United Kingdom	5
Hong Kong	5
India	15
China	5
Within North America	5

There is a 5 cent charge, per minute anywhere in North America. Can compare on site http://www.shoprogers.com/store/cable/ld_AWP.asp?shopperID=JQTRUHP8CTF88KUR7RM1P7B6Q75CAAB3

Skype Long Distance Rates versus Rogers Long Distance Rates Skype charges all these country’s 2 cents a minute. Canada, Germany, France, China, Australia, Hong Kong, Italy, Spain, Switzerland, United States ($0.021 without VAT, $0.024 with VAT)

**Skype Long Distance Rates versus Rogers Long Distance Rates (prices as of November 2nd 2007)**
Country	Skype Rate (dollars/min)	Rogers Rate (dollars/min)	Skype with VAT (dollars/min)
Australia	0.021	0.05	0.024
Australia - Mobile	0.203	0.39	0.233
Brazil	0.054	0.09	0.062
Brazil - Mobile	0.213	0.23	0.245
China	0.021	0.05	0.024
China - Mobile	0.021	0.05	0.024
Russia	0.048	0.09	0.055
Russia - Mobile	0.071	0.29	0.082
Jamaica	0.126	0.29	0.145
Jamaica - Mobile	0.224	0.29	0.258
Japan	0.023	0.05	0.026
Japan - Mobile	0.154	0.25	0.177
Dominican Republic	0.087	0.17	0.100
Dominican Republic - Mobile	0.172	0.17	0.198
India	0.092	0.15	0.106
India - Mobile	0.092	0.15	0.106
Vietnam	0.329	0.39	0.378
Vietnam - Mobile	0.329	0.39	0.378

What is the VAT on vouchers for?

Skype Vouchers include VAT at the applicable rate. Depending on the country, you may have to pay local VAT or Luxembourg VAT (where Skype is based). We will deduct this VAT at the time of redemption so the amount you see on your balance is the voucher amount minus VAT. All the calls you make from Skype will then be charged VAT free.

Summary of Skype's Economic Effects

There is roughly a 3 cent different per minute, per charge for a call in North America. Not a big deal many common households. However, if you add them up Skype can cost you a lot less on your long distance charges. Say an average household uses up 200 minutes of long distance charges per month on calls anywhere in North America. Your bill with Rogers at 5 cents a minute is $10. Now you use the same minutes but on Skype’s 2 cents a minute. The monthly charge using Skype is $4. You are saving more than half of your bill by using Skype over Roger’s long distance plan. Now say you talk 1000 minutes of long distance on Skype per month. The monthly bill will be $20; where Rogers 5 cent plan would cost you $50 for that month. A big difference when you look at the big picture.

Conclusion

Skype affects both corporate and personal markets positivly. It provides an inexpensive and relitively high quality form of communication that can be used to great benefits in either of these contexts. When Skype is compared to other communication companies, it is obvious to the user that the positive aspects of Skype outweigh a few negatives and therefore, it is a viable alternative to these companies.