By Sean Wu (andrew id: seanw)Background
It is interesting to see how the word Skype can be used as a verb. That is how big of an impact Skype has had on the world. There is only one other website/program that has entered into today’s dictionary and that is Google. People often say “Google it,” suggesting that “it” can be found online via Google’s search engine. Today, people say “let’s Skype” or “Skype me” if they are referring to online web calling or video conferencing: people associate Skype with any type of online voice or video communication.
Skype is a computer application that allows users to make voice and video calls over the Internet for free. Users only need a computer with a working microphone to use Skype’s voice service and a working video camera to utilize Skype’s video service. Skype also has a unique share screen feature that allows users to view each other’s desktops over the Internet. This is very useful, especially for work-related matters. Skype holds the capability of making phone calls to landline telephones. Users can deposit money into their Skype account and this can be used to make calls to landline phones, anywhere in the world. Apart from phone related services, there are many distinct features to Skype. Users can send each other instant messages, as well as transfer files over the Internet.
I skype with my mother about four times a week. Both of us agree on a time to log-on, and using our built-in video cameras on our Macs, we video chat and catch up. My mother lives in Hong Kong and travels frequently to Beijing and Shanghai, and often times it is expensive for her to call me and vice versa. Long distance rates, especially to the United States, are especially high in Hong Kong and my mother and I tend to converse for hours, so that doesn’t exactly help us out financially either. I would pay for the rates, but I am a poor college student and thus I have no money.
The United States to China rates here aren’t exactly favorable either. Moreover, I have found it hard to keep track of the different telephone numbers my mother uses; she has three different numbers; one for Hong Kong, one for Shanghai, and one for Beijing. Skype has helped us solve all of these communication issues. Not only is Skype free, but Skype also allows us users to login with one username and utilize their services anywhere in the world. One particularly unique feature of Skype is the Online Number, also known as SkypeIn. This feature allows Skype users to receive calls from regular phone users via a Skype phone number. These Skype phone numbers are available in many countries, including Austria, Belgium, Brazil, Chile, Colombia, Denmark, the Dominican Republic, Estonia, Finland, France, Germany, Hong Kong, Hungary, Ireland, Italy, and Japan just to name a few. Skype users can have local numbers in any of these countries and call rates are usually the same as the fixed lines in any respective country.
Company Information
Founded in 2003 by the Swedish entrepreneur Niklas Zennstrom and the Danish entrepreneur Janus Friis, Skype today is the leading global communications company. The company’s headquarters stands in Luxembourg, with offices in Europe, the United States, and Asia. The number of Skype users has been increasing exponentially over the years. In the fourth quarter of 2005, there were roughly 74.7 million Skype users. In the fourth quarter of 2007, that number rose to 276.3 million. Today, there are roughly 521 million active Skype users. As a result of the amount of users, Skype has become the largest international voice carrier.
On October 2005, eBay agreed to acquire Skype for approximately $2.6 billion in a mixture of cash and eBay stock, as well as potential performance-based considerations. For eBay, this deal strengthened eBay’s global marketplace and payments platform, while creating new business opportunities. For Skype, this transaction advanced Skype’s leadership in Internet voice communications and furthered the company’s dominance as an Internet voice carrier.
How Skype Works
Skype uses VoIP (Voice over Internet Protocol) technology to connect people globally. Prior to the introduction of VoIP technology, many people used mobile and PSTN (Public Switched Telephone) networks to carry voices over both short and long distances. This method proved to be both more expensive and more inefficient than VoIP technology.
The inputs of VoIP technology are quite simple. Using the Internet, VoIP utilizes SIP (Session Initiation Protocol), which is a variation of TCP/IP protocols, to create data packets. These data packets carry text, live video, images, high quality stereo, as well as “shared screening” to computers all over the world, as opposed to standard monovoice old telephones used to carry.
The data packets get sent from a receiver. Receivers can range from hardware devices such as telephones or Skype phones to software applications (such as Skype or any other third party communication software) installed on computers.
Then, a voice is “transcoded from the analog format that the microphone captures, into a digital format, and then passed on to a compressor that minimizes the size of the audio stream enabling transfer on slow connections” (Neaqu, makeuseof.com). This means that once the voice gets converted into a digital format, it is divided into small pieces; pieces small enough to fit into these data packets. These small voice pieces are then “stamped” with a destination address and sent through the network.It is also important to note the downsides that are associated with using SIP. Since SIP was never designed to support live conversations and since SIP is the main protocol VoIP uses as a means of spread, VoIP is “susceptible to stutter and latency” (Neaqu). Also, VoIP has been criticized as being unreliable in emergency situations. When electrical power is absent, VoIP technology does not work at all. Hardware devices that use VoIP technology need electricity at all times to function.
When the data packets reach the receiving end, the receiving end needs to reconstruct the packets for ideal reproduction. Unfortunately, this does not happen on most public networks since public networks are prone to lag and congestion during peak hours. This congestion can cause the receiving end to be unable to reconstruct the complete audio stream, which would result in blank audio spaces for short periods of time.
In situations where Internet connections and electricity are available at all times, VoIP technology “provides an incredibly cheap and comprehensive way to communicate, mitigating roaming charges that traditional service providers require for long distance calls” (Neaqu). Skype is not the only company that provides VoIP service. Many other VoIP service providers, just like Skype, offer free calls within their user base as well as calls to traditional networks for low fees. These companies are Skype’s competitors, but most of them are not worthy of mention. The only and most worthy competitor to Skype is Gizmo5.
Competitors
As I mentioned above, the most worthy competitor to Skype is Gizmo5, which like Skype, is also a VoIP communications network. The company was acquired by Google in 2009. Just like Skype, Gizmo5 also uses Session Initiation Protocol (SIP) as well as Extensible Messaging and Presence Protocol (XMPP) to operate its services. XMPP is a communications protocol for “message-oriented middleware based on Extensible Markup Language (XML).” XMPP used to be named Jabber, and used to be a part of all Apple iChat clients.
On November 12, 2009, Google acquired Gizmo5 for $30 million in cash. Prior to this transaction, Gizmo5 had collaborated with GrandCentral on many projects. GrandCentral is now known today as Google Voice. Google Voice was created using both GrandCentral and Gizmo5 technology. Moreover, Google utilized Gizmo5’s technology to better their stance on voice communications, and even integrated Gizmo5 into their Gmail. Gmail clients are given a function to make and receive calls. This technology comes directly from Gizmo5.
I personally think that Google Voice and Gmail’s video chatting capabilities are much better than Skype’s. Skype currently has the edge on Google because their software is more well-known and there are more Skype users. But from personal experiences, I have been cutoff on my Skype calls much more than my Gmail calls. Also, the video quality on Gmail’s video chat is much clearer than that of Skype’s. Skype is simply just more well-known and easier to use. I should probably teach my Mom how to use Gmail efficiently.
Skype’s Future
Skype today is the largest international voice carrier. In the future, Skype plans to maintain this reputation and provide the same high quality Internet communication service. Skype plans to file for an initial public offering of up to $1 billion dollars, further improving its position as a top tier Internet voice company. However, Wall Street sources have suggested that investors will have to wait until next year before the initial public offering prices. Analysts predict that this IPO transaction will yield a valuation that will range from $750 million to $1 billion. This IPO will allow Skype to dive deeper into the business market so that various corporations will utilize their services, especially for conference calls. According to a VoIP professional who has in-depth knowledge on Skype, Skype plans to start with small businesses then hopefully enter into the enterprise business sector. Skype also plans to offer multi-party video conferencing, a key component that the current software lacks. It is safe to say that we can expect big things from Skype in the future, especially with Google right on its tail as a serious competitor.
References
http://www.slideshare.net/earningreport/presentation-on-q1-2009-earning-report-of-ebay-inc/
http://www.makeuseof.com/tag/technology-explained-how-does-skype-work/
http://investor.ebay.com/ReleaseDetail.cfm?ReleaseID=176402&Fyear=
http://www.theregister.co.uk/2005/07/05/project_gizmo_voip/
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