An investigation into Skype Technologies SA
VoIP is the future telecommunications media in Germany
What is Skype’s future in Germany and is it able to impact the telecommunications market in Germany?

Dissertation submitted in fulfilment of the project unit for the degree of:
BA (Hons) Management Business and Administration
New College Durham

by J. Stadler
Submission Date: 18th December 2006

Table of Contents

Table of Contents ... iii
Table of Abbreviations ... vi
Table of Exhibits ... vii
Acknowledgements ... viii

Chapter I: Introduction
1.1 Skype – nature of study ... 1
1.2 Hypothesis ... 2
1.3 Aims and Objectives ... 2
1.4 Limitations to the study ... 3

Chapter II: Literature Review
2.1 VoIP – the technology ... 4
2.2 The future of VoIP ... 5
2.3 Skype – the technology ... 6
2.4 Characteristics of Skype’s technology ... 6
2.5 The future of Skype ... 7

Chapter III: Methodology
3.1 Case Study Approach ... 10
3.2 Key Concepts ... 10
3.2.1 Validity and Reliability ... 10
3.2.2 Triangulation ... 11
3.2.3 Generalisability ... 11
3.3 Research Families/ Research Techniques ... 12
3.3.1 Primary data ... 12
3.3.1.1 Interviews ... 12
3.3.1.2 Questionnaires ... 13
3.3.2 Secondary data ... 14
3.4 Analytical tools ... 15

Chapter IV: Findings
4.1 Structure of the findings and the conclusion ... 17
4.2 Evaluation of the primary data sources ... 17
4.2.1 Questionnaire directed to private persons ... 17
4.2.2 Questionnaire directed to IT experts ... 24
4.2.3 Interviews with IT professionals ... 28
4.3 Tariff comparison of SkypeOut v. German Telekom ... 29
4.4 Skype’s Vision, Mission and competitive strategies ... 31
4.5 Analysis of the future market opportunities of Skype ... 32
4.5.1 SWOT ... 32
4.5.1.1 Strengths ... 32
4.5.1.2 Weaknesses ... 33
4.5.1.3 Opportunities ... 34
4.5.1.4 Threats ... 34
4.5.2 The Product-Market Growth Matrix by Igor Ansoff ... 35
4.5.2.1 Market Penetration ... 35
4.5.2.2 Product Development ... 36

Chapter V: Conclusion
5.1 VoIP’s future in Germany ... 37
5.2 Skype’s future in Germany ... 40
5.3. Final conclusion ... 44

Chapter VI : Recommendations & further investigation
6.1. Recommendations to Skype ... 46
6.2. Further investigation ... 46

Chapter VIII : Appendix
7.1 Bibliography ... 47
7.2 Ethical issues ... 54
7.3 Form: Questionnaire directed to private people ... 55
7.4 Form: Questionnaire directed to VoIP specialists ... 60
7.5 Framework of the interviews ... 63
7.6 Abbreviations, technical terms and definitions ... 64
7.7 Skype - history & facts ... 66
7.8 Declining German Telekom ... 69
 

Acknowledgements

The world of telecommunications and VoIP is awfully fast-moving and innovations are made every day. Skype launches new products continuously. The author collected information until the 15th of November 2006. Hence, information given in this project is correct until the 15th of November and predictions are made according to this data.

The author is no studied IT expert. She presents technical information about Skype’s and VoIP to the best of her knowledge and she always backed up information with IT specialists. In the following, the words “VoIP”, “Voice over IP”, “IP Telephony” and “Voice over Internet Protocol” do all stand for making calls over the Internet. They can be used interchangeable.

The investigator does hereby express her thanks to all those people who provided access to information. Especially, she would like to thank respondents of the questionnaires and the interviews.
 

Chapter I: Introduction

1.1. Skype – nature of study

Skype. The whole world can talk for free. This is Skype’s slogan. “Voice over Internet Protocol is predicted to be the next revolution in telecommunications.” (BBC News, 2005)

Skype is quite a new software enabling free calls over the Internet (Shaver, 2006). Users save money, because Skype charges nothing for telephone calls between Skype users. Only calling a landline or a mobile phone (SkypeOut) and receiving incoming calls from a conventional phone or mobile phone (SkypeIn) are charged (Skype Fast Facts, 2005). This idea is supposed to revolutionize the whole phone market (Powell, 2005).

IP Telephony is getting more and more lucrative for private users, as only a standard PC with soundcard, headset and Internet access is needed. Most households have these prerequisites. Private users state they switched in order to save costs (VOIP INFORMATION, 2005c). Due to the fact that Skype users do not have to pay monthly charges or telephone rates, they are only charged for the Internet connection. The best is having a flatrate with a fixed monthly charge (VOIP INFORMATION, 2005d).

In September 2003, Skype Technologies SA was founded by Niklas Zennström, co-founder and CEO, and Janus Friis, SVP, Strategy and co-founder. Its headquarters are in Luxembourg (Shaver, 2006). However eBay acquired Skype in October 2005 and Skype became a 100% subsidiary of eBay, Skype’s brand and product act independently in the market (Skype, 2006a). In the second semester 2006, Skype registered 113 million users worldwide and covers more than 7% of the global international long distance calls (Company Update, 2006). Every second, 6 new users register at Skype and between 6 to 8 million concurrent Skype user are online. In Germany, 5 million users are registered (Analyst Day, 2006).

1.2. Hypothesis/ Research Question

Skype is the best-known VoIP provider (FAZ.NET, 2005). Although many people know VoIP and Skype, very few think about the impact of Skype on the conventional German phone market. According to a survey, carried out in early 2006 by the German foundation Stiftung Warentest, 10% of the German population use VoIP. This demonstrates a high demand for IP Telephony and a need to analyse the future of VoIP in general and of Skype in particular and the impact on the conventional German telephone market. Predictions state that in 10 years, everybody will use VoIP technologies, instead of landlines (FAZ.NET, 2005). On the other hand, Blau (2005) stated that “over the next five to 10 years, most phone customers will remain with their traditional telephone”. Due to this controversy, it is important to investigate the future of VoIP in general and of Skype in particular and its economic impact on the German telecommunications market. The researcher developed the following hypothesis and research question:

VoIP is the future telecommunications media in Germany.
What is Skype’s future in Germany and
will it be able to impact the telecommunications market in Germany?
 

1.3. Aims and Objectives

• The researcher’s overall goal was to analyse Skype’s future within Germany and to consider its impact. This overall goal has led to the following specific research objectives:
• Collate the technology behind VoIP and critically analyse its advantages.
• Evaluate the future of VoIP.
• Critically analyse Skype’s technology and its implied pros and cons.
• Explore Skype’s strategy.
• Predict Skype’s future in Germany.
• Discover Skype’s strengths, weaknesses, opportunities and threats.
• Evaluate German’s attitude towards Skype and its future.

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