I am a bit late on that one, but eBay announced a month ago that it was taking a $1.4bn impairment charge on Skype. At the same time Niklas Zennstrom - and a bit later Skype's COO Michael Jackson - also left the company. It is a significant writedown for what was supposed in 2005 to be an industry changing acquisition. VoIP had come of age and players such as Skype would kill the good old telcos, hence a $4bn tansaction value (including potential earnouts). The transaction is now "only" worth $1.9bn post impairment and $530m payment to settle all potential earnout obligations, and Skype big men are out of the game, with Niklas Zennstrom even admitting that the company had never been worth that much.

With Vonage struggling to avoid going bankrupt, would be easy now to announce the failure of VoIP. We would be wrong. VoIP is here to stay and is actually already a mass market solution. The key thing is that VoIP is not a service, it is a technology that ensures a better a more efficient transport of voice over a network or the internet using the IP technology. Anybody can offer it,... including existing telcos ! This is what happened and how the industry changed. VoIP enabled broadband providers to bundle voice with their internet subscription to compete with the fixed incumbent. Such players as Free in France or Carphone Warehouse in the UK also included unlimited calls to fixed and even international numbers. Incumbents had to respond - why not use a new technology if it is cheaper ? - so players such as France Telecom or BT also started to offer VoIP voice bundles. So much that now, more than 40% of fixed line calls in France are through VoIP, and a quarter of BT Broadband subscribers use their VoIP number.

What's the point of using Skype then when you can already do unlimited calls within the price of your telephone/broadband subscription? Skype and Vonage are parasitic players, i.e. they do not have any infrastructure and can only service users with an existing line, so the opportunity for them disappears if unlimited calls are already included in the price of that line. There is also an ever decreasing quality of voice communications on Skype - as it can't ensure a guarateed QoS without any infrastructure - and users are becoming vocal to request radical - and costly - fixes. Not to say that Skype is useless, it has its value but only for some niche segments (international small enterprises, migrant workers from remote countries), but difficult to see how it will add many paying users to sustain a profitable business model for its owners (at least not close to a $4bn PV).

And on the mobile, now that "almost" unlimited data bundles become available ? Well, it is even trickier as (a) calls can be free only if you call other Skype users (otherwise interconnection costs kill any potential value) and (b) operators and consumers are used to bundles of minutes when under a contract subscription. The Skypephone might just be a clever marketing campaign to convince users to get a cheap ODM (i.e. white label) phone reducing handset subsidy costs for 3. If you add to that that all postpaid 3 subscribers have unlimited on-net calls (why bother with the Skype client then?), it becomes an even more niche product. If you're say Italian and live in London and call your mother everyday, sure it offers great benefits... but even London is not that cosmopolitan a city to make it really impactful and have loads of customers churn to join 3.