From internet telephony trail-blazer to being usurped, Skype may yet have another act

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The first time I used Skype, it was illegal to make a phone call through the internet in South Africa.

My article appeared in the now defunct This Day in September 2004 with a photograph of me – thought up by the business editor Kevin Davie – that looked like an arrest picture with the placard “Skype user” instead of the usual police case number or whatever.

“Every day I break the law,” I wrote. “And I love it.”

A recent series of articles about Skype’s various problems reminded me of how internet telephony was then-outlawed in South Africa, as the Department of Communications upheld a law that gave Telkom a monopoly on all forms of telecommunications, except cellular. The law was passed to make it attractive for the foreign telecoms firms that bought into Telkom, and gave them an anticompetitive advantage you’d never see passed by any competitive agency now. Skype was the first of the services that used the internet to make a call, known as Voice over Internet Protocol (VoIP).

“Holding back the tide of innovation is a bit like the Nats trying to hold back democracy, and eventually such artificial laws had to go,” I wrote in that fine newspaper ThisDay. The damage had been done to both the South African economy and to Telkom.

Telkom, under CEO Sipho Maseko, has finally emerged from out of the destructive mindset that allowed it to stagnate because of its monopoly, and become a properly competitive modern telecoms business.

Given how things have changed, Skype is now one of the VoiP services that Telkom is offering for free (what’s called zero-rating) as part of its aggressively-priced FreeMe cellular data-orientated packages.

Skype, meanwhile, has grown to become the largest international call carrier in the  world. It was bought twice, first by eBay for $2.6bn which wrongly assumed its auction site users would easily shift from email-based discussions into voice calls. Then it was sold for $1.9bn, but it was after Skype had become the largest international call carrier in the  world. Remarkably most of these intercontinental calls, which would have once been expensive fillip for Telkom’s coffers, are now for free.

Microsoft made its largest- ever acquisition in May 2011 and bought Skype for a gobsmacking $8.5bn. It seemed like folly then, and more so now given the recent declines in its quality of service and general lack of innovation.

In many huge mergers, where firms are expected to assimilate into a new culture and adopt the priorities of their new overlords, the recently bought start-up tends to lose the plot for a while.

Skype used to be far more reliable than it has become lately. From being a regular Skype user, I’ve dropped it in favour of Apple’s FaceTime and more recently WhatsApp and WeChat calling. Like Telkom, the erstwhile voice and landline incumbent, Skype, the VoIP incumbent, has seen its fortunes flipped by new upstarts that are sowing the fertile new markets ploughed by Skype and, before it, by the old-style business it disrupted.

With a text chat service during the early days that was as superior as its voice offering, Skype would swallow up Microsoft’s own messaging app in 2013, the clumsily named Windows Live Messenger, originally called MSN Messenger and an icon of the early days of the Internet.

Skype this month unveiled what many in the industry think is the next big thing: chatbots. These software robots will use text-based messaging to interact with customers, like a call centre agent would, I guess. These include a travel bot, another to book tickets to sports events and a SpockBot to “learn the ways of Vulcan logic”.

Skype, like Telkom – which has its own scifi-themed link, via a Star Wars association, having sponsored the reboot of the iconic film last December – is facing competition from the very new businesses its trail-blazing disruption enabled. That’s what irony means.

This column first appeared in Financial Mail

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About Author

Toby Shapshak is editor-in-chief and publisher of Stuff, a Forbes contributor and a Financial Mail columnist. He has been writing about technology and the internet for 20 years and his TED Global talk on innovation in Africa has over 1,5-million views. He has written about Africa's tech and start-up ecosystem for Forbes, CNN and The Guardian in London. He was named in GQ's top 30 men in media and the Mail & Guardian newspaper's influential young South Africans. He has been featured in the New York Times. GQ said he "has become the most high-profile technology journalist in the country" while the M&G wrote: "Toby Shapshak is all things tech... he reigns supreme as the major talking head for everything and anything tech."

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