Microsoft + Skype + Nokia = NextGen 4G Mobile VoIP & messaging done properly

NOTE: The Microsoft / Skype deal is not yet confirmed, as I write this.

But if it goes ahead "as leaked" this is another major step for Microsoft's aggressive pursuit of Google and Apple, which also may have a secondary effect: further pain for the telcos and especially mobile IMS and its flag-waving applications VoLTE and RCS.

[Plug: I'm running a series of upcoming "Future of Voice" Masterclasses if you want to understand more about the implications & rationale for this. Contact details below to learn more]

I'm pretty sure that a lot of the comment and analysis today will be around whether Microsoft can execute better than eBay, why the price is so high, whether this is "all about Google" and whether Skype would have been better off living inside Facebook.

For me, this actually looks like a near-perfect fit for Skype. The other candidates I had in mind were Vodafone, AT&T, Cisco and Ericsson. No, not the most intuitive choices indeed - but companies with deep pockets, an interest in innovative services models and a willingness to pick and choose among standards vs. proprietary solutions where it suits them.

Some comments that help to explain my conclusions:

• A substantial part of Skype's current user base is from PCs. Although mobile devices get all the glory at the moment, Skype epitomises what's best about desktop VoIP. More importantly, a laptop is probably the perfect device for many video-calling use cases, as the keyboard+hinge and upright camera is much better ergonomically than a propped-up tablet or mobile phone.This would have been lost in a purely handset-focused company (eg Nokia in the past, RIM or perhaps Qualcomm). This may have ruled out Vodafone too, I guess.
• Skype gets widely-used in business - often only semi-officially, but it's a critical tool for many travellers, people doing conference calls and so forth. It is also increasingly working on corporate-grade solutions. This would have been lost inside a Facebook or similar company.
• I think that some of the operators that are less aggressive about deploying LTE - especially for smartphones - are doing so partly because of doubts about getting VoIP to work properly, to a degree comparably-good with GSM telephony today. Skype has a significant chance of being the only massmarket VoIP that has a big user base, and works well on LTE, by 2014. The "option value" for that is potentially huge. Hence AT&T and Vodafone on my "other possible acquirers" list - I also would have added Hutchison 3 and maybe Telenor, but the price is too high.
• Skype is class-leading in terms of understand and helping manage QoE (quality of experience) for IP communications *from the user device*. It doesn't control QoS (in the middle of the network), but involves the user and the device hardware to make the best of what's available, and alert the user not just to problems "in the middle", but also to other things like not having microphone working properly, temporarily poor WiFi or 3G reception, or if your device's processor is running too slow. Both Cisco and Ericsson urgently need device-side expertise to really understand "end to end" performance, but both know how hard it is to get across numerous classes and brands of device.  Skype has that knowledge. They have missed out today - but I suspect that Cisco's investors would have been wary, and Ericsson probably would worry too much about annoying its telco customers. It is also why it would have been a poor fit with Apple, which is much less platform-agnostic than Microsoft, especially in mobile.
• Skype is leading the way on personal video communications. I don't use it personally, but many users do - the % of minutes that are video-based is astonishing. I remember speaking to a friend recently who didn't know Skype could work in voice-only mode. He thought it was JUST a video comms tool. It just works, and is cross-platform unlike FaceTime.
• In the massmarket, Skype is probably the only platform that has (by skill or luck) will worked out a way to get users to adopt "permission-based" voice communications. Many Skype voice or video calls are pre-arranged, or "escalate" from an IM chat and presence in a way that telcos have long dreamed about. Its desktop-first strategy (and timing) has enabled it to do what IMS should have done, had it been universally available and using a Freemium model in 2005. As such, this would have been a near-perfect (if expensive) Telco-OTT proposition - and also help craft a voice experience that is much more than "just telephony", but fits with the Future of Voice vision I wrote about recently for VisionMobile

Would Skype have fitted well inside Google? It's difficult to tell. Google doesn't have much heritage of making and integrating large acquisitions, while Microsoft is "not bad", with some successes (eg Hotmail, Great Plains) and some failures (eg Danger). More importantly, Google has its own voice/VoIP initiatives, and internal politics would probably have been horrible with a Skype acquisition.

There are many other issues to explore around the Microsoft/Skype deal - especially the missed opportunity for one of the telecom operator community to "escape the herd" and lead the emerging Telco-OTT space with a head start.

But it's worth stepping back and focusing here on the impact on IMS, VoLTE and RCS. I still take the view that VoLTE is "necessary but not sufficient" - it's very late in coming, but there definitely needs to be a "simple circuit telephony replacement" technology for 3G/4G networks. GSMA and its partners are heavily focused on getting VoLTE working, especially focusing on interoperability and familiar themes like roaming. However, there also needs to be a focus on two other things that I reckon are being overlooked:

• There needs to be a view about the Future of Voice angle. If VoLTE had started as VoHSPA 5 years ago, it could have just been Telephony v1.1 and that would have been fine. But the timing now is wrong - LTE is a key transition point, further catalysed by the smartphone explosion. In the next few years, voice *will* change irrevocably, expanding well beyond mere telephony to a huge diversity of applications and use cases. If VoLTE gets delayed, it will have missed its window of opportunity - and I think that's a significant risk.
• More practically, I think that VoLTE will have to content with a ton of real-world horribleness about getting VoIP to work while mobile and on cellphones. RF issues, battery issues, echo, poor acoustics, sound glitches, codec choices, packet-loss concealment and so forth. QoS only gets you so far - and then you need software and proper audio expertise to fix what's left. The network companies and standards bodies in VoLTE aren't really focused on microphones and sound volume levels - they're hoping that the handset companies will fix all that. Have a look back at the history of fixed-line VoIP to see how "easy" all that is to get right, even on relatively predictable home broadband or corporate LANs. Skype has been doing mobile VoIP for many years - and while it's not perfect, it's got a huge head-start.

In other words, Microsoft is buying a $8bn option on the future of the mobile telephony industry. If we get to 2014 and VoLTE isn't working as well as it should - Microsoft (and its partners like Nokia) will have both an OTT option and a "white label" proposition for operators. Also, don't forget that Microsoft also sells IP-PBX functionality in its Lync / OCS product - it doesn't think that all call control should reside in the operator domain.

As for RCS.... well I think this is just another nail in an already well-sealed coffin. Microsoft has never really bothered to grasp IMS ("Oh, that's just SIP isn't it?" was one response I got in a interview at MWC a few years ago) and it's now looking even more of a poor fit when combined with MSN, Live, corporate UC products and so forth. It seems likely that none of the big smartphone OS providers - Apple, Google, RIM or Microsoft will be particularly well-disposed to RCS. Sure, there will be various third-party add-ons for Android and perhaps other platforms, but it's unlikely to be a key priority for Windows Phone now.

I'll try and update this post or add another later on, after some reflection, but this should be enough to catalyse some discussion.

Also, now seems like a good time to highlight some upcoming events on "The Future of Voice" I'm running together with Martin Geddes. These will be small-group collaborative Masterclasses, drilling into the use cases, technologies, applications and user behaviour for voice communications, as we pass the point of "peak telephony" and move on to other modes of B2B, B2C and C2C interaction. The first one is in Santa Clara on June 30th, followed by London on July 14th. Martin and I will also be conducting customised private workshops for specific clients. Email information AT disruptive-analysis DOT com for details.