Should Apple Acquire Skype?

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Ted Wallingford

Ted Wallingford
Sep. 17, 2004 09:42 AM
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URL: http://businessweek.com/technology/content/sep2004/tc20040916_1040_tc056.ht...

While I myself wrote a piece comparing Skype to iChat, I'm starting to weary of people freaking out whenever Apple's products are bested by a competitor. The latest in this pattern is Business Week's Alex Salkever, who thinks Apple ought to to turn iChat into a phone service by using Skype's P2P approach. His comments seem driven by a dread of Apple's lovely iChat software getting trounced by the competition. But just for fun, let's indulge his idea. After all, Business Week printed it.

For starters, all iChat really needs is a built-in user directory. If that directory were centralized, unlike Skype, it would be reliable. Have you ever done a user search on Skype? For a 500,000-user system, the result counts are usually around 50 or so... It reminds me of searching a P2P file-sharing system for nearby files; of course, that's what Skype is: a P2P network. So, a decent user directory, perhaps using a cluster of LDAP-equipped Xserves at Apple HQ, would give iChat an instant advantage.

But the "MacPhone" idea requires quite a bit more work in order to replace your trusty household phone. How about a digital keypad in the iChat UI and a gateway to the Public Switched Telephone Network? Problem is, a PSTN gateway of the size required isn't chump change to set up.

Oh, by the way, don't let anybody try to convince you that any startup VoIP network will succeed without compatibility with the PSTN. The old Ma Bell system isn't going away for decades, if ever. The VoIP services that are making money are the ones who support dialing regular phones, and receiving calls at regular phone numbers. Skype does only outbound PSTN calling, and iChat doesn't do either. Coincidentally, Skype and iChat generate very little revenue for their owners.

The suggestion that a P2P network be used to replace the public telephone network grows less and less absurd by the day. The public voice system must be centralized for a whole host of quality of service and regulatory reasons. So, if Apple took the P2P approach as Skype has done, without any idea how high it can scale, they'd be taking a risk. But it would be a risk no greater than the one Skype's 1.5 million simultaneous users take every day. The real need for centralization comes when each user is going to be able to receive calls from a regular phone on the PSTN--and Skype's already got that covered with Skype-Out and Skype-IN.

Mr. Salkever is also missing the idea that, to be a phone replacement, a VoIP service has to work with traditional phone equipment and non-Apple IP Phones. Somehow, as much as I'd love to use a Cisco 7960 SIP phone or my analog cheapy home phone with the iChat network, I doubt Apple will go this route.

So, here are the three problems iChat needs to address in order to have an advantage on Skype--

Problem 1 - Missing support for PSTN calls
Problem 2 - No dialpad interface or searchable user directory in iChat
Problem 3 - No interoperability

Solution 1: Apple buys 8x8 Networks or Broadvoice. PSTN support problem solved.
Solution 2: Easy enough to fix, probably with an AppleScript that talks to iChat and Address Book
Solution 3: And this is the crux of the matter; Apple would have to seriously consider opening its velvet box of propriety, and this would take a huge shift in Apple's management.

Add to that the question of whether or not supporting a VoIP network as overhead adds to Apple's core revenue. I don't think it would, although it would make for a nice add-on to .Mac. Then I might not have such a begrudging feeling every time I fork over the $99 .Mac fee.

Honestly, though, I think Skype has bested Apple, and I don't think Apple really wants to play the telephony game. They're too good at other, more exciting things. So, in the time it takes for all my AIM buddies to migrate to Skype, I would just be happy with a searchable directory of iChat users built-in to iChat.

Ted Wallingford is lead consultant and co-founder of Best Technology Strategy LLC, and is the author of O'Reilly Media's Switching to VoIP and VoIP Hacks.