Will Telcos Buy JoltID and Shut Down Skype?

Skype Cofounder Niklas Zennstrom Most Important Man in Telecom – Again

Niklas Zennstrom is one of the most important people of the century in the communications space. Skype, the company he cofounded is responsible for enabling hundreds of millions of people to communicate for free. Moreover Skype allows a person to communicate over HD quality with full video for free. The company he ran was also responsible for tens of billions of dollars of lost telecom revenue and Zennstrom’s Skype is despised by carriers like no other company.

Just as Apple came into the mobile phone market with a simple and elegant interface and subsequently began to take it over, Skype too was very late to the VoIP game and became entrenched because their software was easy to use and the GUI had a really cool look about it.

But Zennstrom’s influence on technology faded after he was let go from Skype by parent company eBay and his most recent venture Joost has been doing poorly relative to Hulu and other competitors.

But Skype founders Zennstrom and Janus Friis control Joltid, the company responsible for Skype’s crucial p2p software. Recently JoltID has said Skype has breached their license agreement by divulging confidential information about the technology pursuant to orders from U.S. courts. I find this shocking as a good deal of license agreements have a clause which allows companies to comply with local laws and court orders. It is surprising that such a stipulation was not added to this contract by eBay lawyers.

Assuming the above is accurate – and eBay doesn’t seem to be disputing the fact, the world’s largest auction site is in some trouble as JoltID is playing hardball. As eBay negotiates for continued access to the p2p technology it is simultaneously trying to create its own p2p software. It is unknown if they will be successful in either endeavor.

This leads me to a crucial thought. Who is the number two in the VoIP software market? I know all the players – Yahoo, Google, etc – but really – who comes to mind as the solid number two behind Skype? Really no one does – at least not to me. I would imagine Google would eventually take the market over between its Wave and Voice products but it would take time.

Can you imagine the disruption in the market if Skype were to stop working?

One wonders how much money global telcos are bound to gain if Skype were to shut down? Ten billion dollars perhaps? More?

This is an interesting dilemma for eBay/Skype and for global telcos an opportunity of a lifetime. Is JoltID worth more to Skype who gives away service for free or is it more valuable to a few hundred telecom operators (who would shelve the technology) charging an average of 10 cents per minute?

I would be shocked if some leading telcos aren’t courting Zennstrom and Friis as you read this. This story could take more twists and turns as time goes on. I look forward to hearing more details and reporting from next month’s ITEXPO in Los Angeles. Stay tuned.

  • Tom Keating
    July 31, 2009 at 10:48 am

    If you want some more of the back story check out my coverage of the JoltId vs. Skype battle back in April. Read the comments which are particularly insightful, since one of the commenters is a former Kazaa employee, who worked on the Fastrack p2p technology that is also used in Skype. He said Skype could indeed be taken down. Yikes!
    I personally believe that they can take Skype off the internet remotely as they did to Grokster and since they did it to a very large audience I don’t see why this case is any different from the first.
    Conclusion: Buyer beware and don’t lease software that can be disabled remotely by the vendor. Also, never purchase or lease software that is self encrypted, compressed or obfuscated because it’s not intellectual property that is being hidden, it’s always something else, and I say this because I can circumvent their “binary protection” code and what I have seen is nothing short of scary.

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