Between the Lines

Larry Dignan, Andrew Nusca and Rachel King

How Microsoft, Skype, Nokia can rule: Cut out obscene data roaming rates abroad

By | May 18, 2011, 8:09am PDT

Microsoft Chairman Bill Gates stumped for the $8.5 billion Skype purchase and international domination may be a good reason for the enthusiasm. Microsoft, Nokia and Skype could be deadly to data roaming charges.

In a BBC interview, Gates said he advocated for the Skype acquisition. Surprise! Did you expect Gates to say that he hated the Skype purchase and that it was too pricey?

In the BBC chat, Gates said video conferencing will improve. He’s alluding to the fact that video phones will be common—you could argue that they are today via tablets and Skype.

Kevin Fox, a Mozilla Labs designer, argued that Microsoft-Skype and Nokia can upend mobile carriers. Google is aiming for something similar.

I agree with Fox, but there are a few other key items to consider about the Microsoft-Skype combination with a broad partnership with Nokia. Here’s the landscape:

  • Microsoft’s Windows Phone 7 on Nokia phones will still have a tough time getting traction in the U.S.
  • In Europe, however, Microsoft and Nokia could do significant damage in terms of market share gains.
  • Skype is well received abroad and serves as a killer app on a solid mobile OS with good hardware from Microsoft and Nokia, respectively.
  • Europe also happens to be the place where data roaming charges are obscene. ZDNet highlighted the data roaming issue in polls around the world.
  • Take those moving parts and Nokia and Microsoft could take Skype and integrate it to the point where it can minimize carrier connections on the fly. If Skype could instinctively leverage Wi-Fi where ever possible—or cut out wireless carriers entirely—Nokia and Microsoft could do a real service.
  • And those data roaming charges are high enough where even folks that even the Microsoft phobic would play along.

It’s unclear whether Microsoft-Skype-Nokia could pull off such a carrier-minimizing stunt, but the math adds up. Users could theoretically save on data roaming. And all Microsoft has to do with Nokia is hold the line on international market share and both companies will be major players.

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Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic.

Disclosure

Larry Dignan

Larry Dignan has nothing to disclose. He doesn’t hold investments in the technology companies he covers.

Biography

Larry Dignan

Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic. He was most recently Executive Editor of News and Blogs at ZDNet. Prior to that he was executive news editor at eWeek and news editor at Baseline. He also served as the East Coast news editor and finance editor at CNET News.com. Larry has covered the technology and financial services industry since 1995, publishing articles in WallStreetWeek.com, Inter@ctive Week, The New York Times, and Financial Planning magazine. He's a graduate of the Columbia School of Journalism and the University of Delaware.

For daily updates, follow Larry on Twitter.

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RE: How Microsoft, Skype, Nokia can rule: Cut out obscene data roaming rates abroad
tringo007 27th Sep
It's the best time to make some plans for the future and it's time to be happy. I have read this post and if I could I want to suggest you few interesting things or advice. Maybe you can write next articles referring to this article. I want to read even more things about it! apartments for rent in barcelona
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Double edged sword
Economister Updated - 18th May 2011
Cutting roaming rates means taking money from the carriers, just when MS et al. need the carriers the most to sell their HW. Getting the carriers' cooperation when at the same time you try to stick it to them is VERY tricky.

We will see how this one goes.
@Economister

Agreed, if MS want to be really disruptive then they should look to spend some of that cash pile on picking up some of the smaller carriers and then start offering contracts on WP7 handsets with unlimited data plans, or at least a data plan which doesn't include Skype usage in its limit.
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Now THAT....
Economister 18th May 2011
@OffsideInVancouver

might be interesting to watch. If they bought a "world standard" carrier, even I might consider a WP7 phone. I hear T-Mobile may be for sale. wink
@Economister

T-Mobile you say?... Just did a quick check, Deutsche Telecom's market cap is just under a quarter that of MS's...

Go on Ballmer, do something extraordinary, you know you wanna!
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However, it wouldn't be sticking it to the carriers
adornoe@... Updated - 19th May 2011
if those carriers would be getting traffic through their pipes that they otherwise wouldn't have.

Making a service attractive to people who would otherwise not use the product, would create an increased volume of calls and traffic through the major carriers' pipes/
guys rememeber they now have no "big brother" watching over there every single move, i doubt microsoft will buy nokia as the deal is huge considering the price and other factors but they could essentially get carriers into a contract where the user give them a fixed fee or user opt for a premuim skype service with revenue shared between microsoft and carriers and allow users to use skype for unlimited calls over the wi-fi or even on data. "3 mobile" in UK allows unlimited free skype calling..with microsoft and nokia pushing they can get into exculsive deals and the game can turn around pretty rapidly.. esplly in the enterprise market
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But if that does not pan out.....
Economister 18th May 2011
@abhi.jamwal

what is plan B?
It's the best time to make some plans for the future and it's time to be happy. I have read this post and if I could I want to suggest you few interesting things or advice. Maybe you can write next articles referring to this article. I want to read even more things about it! apartments for rent in barcelona
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Cost is shifted onto the Consumer
Dietrich T. Schmitz, ~-~ Your Linux Advocate 18th May 2011
What will stop obscene roaming rates is allowing carriers (the smaller ones) to piggy back on ATT/Verizon infrastructure at a non-obscene rate.

The cost otherwise gets passed along to the consumer.
@Dietrich T. Schmitz, ~-~ Your Linux Advocate
Do AT&T and Verizon have a large European presence?
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tiny USA
Bradish@... 18th May 2011
@jdakula I think you guys should realize that the US mobile market is very small compared to that of asia and I would even guess Europe (but could be wrong there). Look at the bigger picture to see the problem as the US structure is really antiquated, if not dictatorial! Check out the China carriers and their market for some leadership in what the US should do (I know, it hurts but in the interest in better service for the customer...)
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The interesting aspect of MS, Skype and Nokia is the developing potential to influence the market at the carrier level.

At the same time I see Skype currently being a force in the market. My family has been using it for almost 5 years for video conferencing around the world.

Risks I see are MS pushing to exclude competitive products, be it new products from HP using their Palm technology, Google's Android, Apple's two OS platforms or Linux users.

Oddly enough it MS decides to pull, or seriously deteriorate, Skype performance on competitive platforms it might well provide an opportunity for a competitive product to push Skype out of it's prime position in the market.
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A conspiracy theory of mine...
Economister 18th May 2011
@Ken_z

argues that MS could slowly kill Skype as a favor to the carriers in exchange for them pushing WP7. The downside would be as you mention, that newer and better alternatives would probably come along, but it just might give MS and WP7 traction long enough to become a contender in the market.
@Economister
My guess is that MS looked and said, "We already run one of the biggest and most profitable peer-to-peer networks in the world, Skype can easily fit right in."

MS doesn't care if you use WP7 or not, they just want to get you into their cloud (as opposed to Google's). Right now, they are in a great position to do that relative to the aforementioned competitor.

If they integrate Skype with SkyDrive and Hotmail and Office Web Apps, etc., it won't matter to them if you access those services on an Android, Blackberry, or i phone. Lockin in the cloud is going to make lockin on Windows look like unabashed freedom.

Skype is just one more way to get you there.

That said, count me in. The MS future strikes me as a bit more appealing than the Google one. (I'd rather say nuts to both of them, but I don't think that's an option.)
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You obviously dont know much about Nokia
saf312 Updated - 19th May 2011
@Economister
You obviously dont know much about NOkia, they will already do that and they wont just become a contender they will take the No1 spot or No2. Nokia is massive everywhere apart from the US
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Obviously you don't know much about inflection points
Economister Updated - 19th May 2011
@saf312

A LOT of things can go wrong with the MS-Nokia deal. The past may be almost irrelevant in predicting the future. Let's see how Nokia's market share holds up first and the quality and market acceptance of their first WP7 sets, before we get too excited about predicting the future. Giants have stumbled and fallen before.
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WOW
Hasam1991 18th May 2011
I thought Bill Gates would actually stand up to Ballmer and fire him... any way you look at this, it was all Google tricking Ballmer to spend that much money... and it worked..
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The mobile operators might actually welcome this
WilErz Updated - 18th May 2011
The European mobile operators have made no secret of their dislike of Apple and especially Google. A primary reason is that they view Apple and Google as selling products designed to push their own high-bandwidth services, which put enormous pressure on the mobile network infrastructure, without giving anything substantial to the operators.

Upgrading the mobile network infrastructure to support higher data rates isn't cheap, and if increases are eaten up by iPhone and Android users, that leaves the operators less able to provide the mobile internet services some have been heavily promoting (both prepaid and subscription).

The obvious reason for charging obscene data rates for roaming users is to discourage them from using the data networks. Why pay these obscene charges when you can pop into a discount supermarket and buy a prepaid Sim card with a few GB of data? It's still metered, but at a reasonable rate, and then everything goes through the local mobile operator.

In the longer run, I think the mobile operators aim to become primary providers of internet data services. That's difficult to do if iPhone/Android users eat up any new bandwidth they add. In contrast, if Nokia/Windows Phone users are still paying monthly tariffs, but are sending much of their traffic over other networks (e.g. corporate/institutional or home WiFi), then the operators can offer higher quality services to users paying for mobile internet, without giving up the base revenue streams from mobile phone users.

Ultimately, given Nokia's excellent reputation with the operators, and Steve Ballmer's claim that he wants to make Windows Phone the most operator friendly mobile OS, I don't think Microsoft would do anything that would anger the operators. Taking some of the load off of their networks could actually be what the operators want right now.
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Interesting analysis
facebook@... 18th May 2011
As an American, it is sometimes easy to forget European and Asian markets. Each acquisiition, by itself, was just one part of a much bigger puzzle. Nokia + European market dynamics + Microsoft + Skype = A shift in market dynamics. A picture is already starting to form. I wonder if there are any more missing pieces from the puzzle.
@facebook@...
You're missing Azure, Windows Live, Office 365 and a few other pieces. There does indeed appear to be a bigger picture forming.
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Yes, it would work,...
kingkong88@... 18th May 2011
with prepaid data SIMs while roaming. Wifi is not practical nor workable even for the most ******** fans.

If WP7 and Skype can make dialing for voice calls as seamless and problem free as dialing a GSM voice call, then it is attractive, and there is no need to have your original number online. Heck, you don't even need a voice plan back at home!
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Roaming charges aren't "just" obscene in Europe. They'e obscene everywhere! It costs a fortune to roam data in America too.

Nokia's just as much a dead duck in Europe as it is America. It's just as much about iPhone, Android, Blackberry here, as it is America.

You only look to Nokia for cheap dumb phones.
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Not true
WilErz 18th May 2011
@ bradavon

In Western Europe, Apple led the smartphone market in 2011Q1, with 20.8 per cent market share, but Nokia came second, with 19.6 per cent. The bad news for Nokia is that in 2010Q1 their market share was 40.6 per cent. However, Apple's market share also declined, from 24.6 per cent market share in 2010Q1. HTC and Samsung were the main winners (Rim also lost).

The fact that Nokia were able to hang onto 20 per cent of the smartphone market without any compelling products shows there's still a lot of brand loyalty. If they ship compelling Windows Phones, things could very well change.

In contrast to Europe, I gather Nokia's market share in the United States is too low to even be included in the figures -- 1 or 2 per cent at best. It's a completely different situation to Europe, and one that's going to be much harder for Nokia to change.
What's wrong with Microsoft Unified Communication? Why can't MS UC do the job?
@roni5000 UC doesn't integrate quite like Skype which is a verb.
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Very simple grasshopper...
Wolfie2K3 19th May 2011
@roni5000
Skype has clients for OSX and Linux and most phone OS's. Microsoft UC is currently limited to Windows and coming soon - WP7. Skype gives them one thing that would be cost time and money - a CROSS PLATFORM PRESENCE...
PR 1.0 rc1 "Song and Dance" on behalf of his besieged buddy with the big sagittal crest.
I have the Gates interview sitting on my SkyHD box to watch today.

Data Rates abroad are absolutely no use to you if you have a crappy Verizon or Sprint CDMA phone, as very few other countries support this dead end technology - Europe is a CDMA desert.

What is needed going forward is

For contract phones...
- a fair 5-10Gb monthly data allowance
- being able to use the data allowance as you please - phone, HotSpot, tethering, music streaming etc
- Cell Companies globally to sort out their shite 3G networks, as opposed to pissing more money up the wall on 4G

As a co-operative Microsoft, Apple, Google, Walmart and Tesco need to make a big telecoms play and buy T-Mobile globally, and take the fight towards the carriers, as opposed them and customers being repeatedly ****** over by them
Ya CEO Ballmer Is going to get Nokia .. Microsoft 50 billion cash in there savings account ..yes they are going to buy Nokia just watch ..buy Danger was just the start! Nokia is next
@digitalrao1

There is not really any reason at all for them to buy Nokia. They already have everything they want from Nokia in the present partnership.
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Missing the big picture
Heenan73 19th May 2011
Good point, but misses the obvious - M$ are culturally unable to undercut anyone by a significant amount - if there's a fast and immoral buck to be made, M$ wants their share.

It ain't a charity, for Gawd's sake!
SKYPE ? After their stunt with verizon to load up our android phones with non removable crapware and now you want to reward them again..Fools you be, I have to stop reading this trash,,,The beatings will continue from the carriers because all of you are here begging to buy whatever they have under any terms..Good luck with that strategy genius
dominants yesterday, losers today, allies tomorrow. outadated tomorrow. and finally losers tomorrow.
they just need RIM to join them.
no need for skype with nimbuz/tango/fring..
no need for WP7 with Android/iOS
no need to nokia with Apple/HTC/samsung/motorola..
To reduce obscene data roaming charges, maybe apps like a "iRate Meter" (C) which displays on your device the dollars being charged to your mobile account can be designed for the Android, Blackberry, iPhone, iPad and W7. Then you have full control of how much you are willing to spend every month.
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Uh, who made those tables?
Nunya Bidnez 31st May
Not to point out the really, really obvious, but in those tables in the story, as an example: 77% + 65% + 64% + 43% + 40% + 36% + 27% + 26% + 22% + 5% + 4% most definitely does not equal a "Total" of 100%. Does ZDNet not employ actual editors?

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