Why Even The Economist Can Be Wrong

Update: Another interesting take on the Economist's piece is over at Tomi Ahonen's - he dismantles the article's shaky foundations in ways that I simply cannot.

I think the Karmic rebound I was contemplating a week ago is doing its thing - I can't get away from the VoIP scene, even on vacation.

To top off yesterday's news, I got a call from a colleague letting me know that Celso demoed a pc-to-mobile video call on national TV.

Which, in itself, is nothing new (heck, we've been doing it for ages), but that this close to the Skype-hype wave (and what I personally refer to as the "national lemming race for broadband VoIP") can be translated into a very successful marketing stunt for Sapo Messenger.

(If you've been living under a rock for the past six months or so, they built an IM network atop Jabber, and are tacking on features - first VoIP, and now video.)

But that's not all of it. Early this morning before hitting the breakfast buffet, I spread the Economist across the table to find that, as part of their tech quarterly, they published a massive article that picks up the Skype/eBay deal and points to VoIP eating Godzilla-sized chunks of call revenue from "traditional" telcos, glossing over the way eBay spent a fortune buying into Skype's "innovative" (but pretty damn risky) "business model" (the quotes are mine) and reciting ever more strident verses of the "telcos are dead" mantra as it gushes toward a triumphant (if shallow) conclusion.

By this time, you must have figured out that I think this "oh-its-so-obvious" line of thought is utter crap, and I wrote a couple of pages detailing why VoIP won't kill mobile at all before I figured out that it would reduce my Disclaimer to smithereens.

So I'll stick to the basics and re-iterate what everyone in the business knows, but reporters systematically forget about:

  • The PC is a big, hulking thing that you can't carry around with you. In your pocket. Constantly on, for days at a time.
  • All PDAs are crap where it regards audio processing (the fact that mobile phones have dedicated, streamlined hardware for voice processing alone - which has been repeatedly optimized for over a decade - seems to be lost on most reporters).
  • A traditional telco's biggest asset (besides its customer base and its technical know-how) is its infrastructure. Networks talk by interconnecting infrastructure, and as technology evolved, protocols have become the new infrastructure.
  • Skype has no infrastructure of its own, and exists as a closed, parasitic entity atop other networks.

And where am I going with this? Simple. You won't be able to run Skype (or any of its competitors) in a cost-efficient way on your mobile phone anytime soon. Period.

And by cost-efficient I mean the whole deal, i.e., in terms of CPU compression, device performance vs. cost, and even call charges - anyone can say VoIP calls to, say, Trinidad or Beijing are cheaper than carrier X's tariff, but that doesn't make it uniformly cheaper, or (one of my key points) make the overall voice/service quality any better, let alone replace overnight mobile phone technology that we've been developing for a decade (nearly two if you count some DSP stuff).

Of course some phones (and I'm not talking about PDAs or prototypes) will soon be able to do so (I expect the first one to appear not a month after I write this), but they will be sorely limited in both service quality and performance.

(And no, VoIP over Wi-Fi isn't a solution, either - hitching rides off Joe Bloggs' access point isn't my idea of providing a reliable - or legal - service.)

Furthermore, Skype is as good as dead unless it opens its protocol and starts interconnecting properly to other networks. And that is what they are afraid of, as is every single one of their proprietary competitors (yes, Gizmo, I'm looking at you).

You see, the main difference between protocols and infrastructure remains one of tangibility - i.e., traditional telcos can open their infra-structure while retaining ownership of it, but there is no way you can open up a network like Skype's (which, of course, doesn't really exist) while retaining control.

So my personal bet is that VoIP on the Internet is going to be as much of a balkanized affair as IM, with every provider wanting you to install their own software in order to talk to that subset of your friends that also use that particular piece of junk.

And that will be pretty much like AIM, MSN, Yahoo, etc. are today - after, it should be noted, over five years of constant warfare.

There will be no standard numbering plans, no reliable way to reach someone, no way to even be sure of what they're using at the moment (and don't talk to me about DNS kludges, I've seen it all before).

And that, in a world where I can take my current mobile phone anywhere there's a standards-based mobile network and still make and receive calls, is no threat at all.

On an entirely different note, we went to see the dolphins today. Photos will be up soon, as will a photography-oriented Canon/Sony rant - assuming my iBook doesn't suffer a meltdown from importing over one hundred 8 mega-pixel shots.