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Over the past year and a half, Skype’s popularity has exploded with over 25 million users currently signed up for the service worldwide. By 2008 that number is expected to dramatically increase to between 140 and 245 million. Most of Skype’s adherents use it for personal calls although a growing number of them are also using it to make calls for work. In addition, Skype have secured a number of high profile deals highlighting their product’s increasing appeal. Recently, Motorola joined Skype Technologies to co-market connectivity options for Skype's growing base, an alliance designed to advance mobile internet telephony, while consumers will soon be able to purchase Skype-enabled PCs from retailers thanks to a new agreement between the VoIP provider and Xandros, which will bundle Skype with its Xandros Desktop Operating System.

So what is Skype? As a VoIP service Skype technology converts phone conversations into packets of data, which are then transmitted down the self-same wires used to surf the web. Subscribers to broadband internet services, which allow a quicker transfer of information and data, can use Skype to link their machines together and talk to each other using a microphone and speakers. Skype users can also send instant messages if voice fails.

What attracts users to Skype is that essentially it enables ‘free speech’ over the internet by offering software to be downloaded, for free, that allows unlimited worldwide voice calling, for free. What is the catch?, I hear you say. Apparently, no catch. The differentiation between Skype and other providers of VoIP services is that it utilises P2P software, which was first widely deployed and popularised by file-sharing applications such as KaZaA and Napster. With this innovative technology, Skype have been able to virtually eliminate costs associated with traditional client-server networks, as P2P networks scale indefinitely without increasing search time and without the need for costly centralised resources.

Therefore, Skype can afford to offer free global telephony and enable people to communicate with each other more flexibly and more cost-effectively. So how is the company making money? It is connecting computers to telephones via its SkypeOut service, offering calls to landlines and mobile phones at low rates. To some of the most popular destinations Skype have one unified rate, the SkypeOut Global Rate, which is 1.7 Euro Cent (approximately 2 US cents per minute). Unless it is specifically mentioned, the SkypeOut Global Rate is only for calling regular landline telephones. Calls to mobile phones are more expensive. Other destinations have individual rates but with Skype what matters is where you are calling to not where you are calling from.

The advantages of using Skype are not only that it can significantly reduce your phone bill but it is also simple to install regardless of your PC environment. Skype facilitates a user-built global phone directory accessible to all users and is equipped with the language editor, which allows users to easily select their language of choice by translating Skype into their own language. Skype also works behind most firewalls and gateways with no special configuration needed and without providing new security risks. Security is also enhanced as Skype encrypts all calls and instant messages end-to-end for unrivalled privacy.

Yet, the feature that Skype boasts about the most (besides the service being free) is that it has raised the call completion rate and offers superior quality calling for broadband users – it is also available to dial-up users – to levels exceeding that of the standard telephony system. We asked a number of Skype users to comment on the quality of calls made using Skype to African countries and around the world.

South African-based Peter Benjamin of OKN, a local knowledge-sharing project is an enthusiast:" “ It’s basically a very good service. I frequently call from South Africa to Senegal, Zimbabwe and Zambia using it. It’s wonderful. It’s really the only way to manage an Africa-wide project without expensive, low-quality telephone calls. The connection to Zimbabwe is actually better than making a phone call. If I make a telephone call to Harare, the call usually drops 10-15 minutes into the conversation. Obviously quality depends on connectivity and to get the best quality you need a leased line, adsl or a VSAT connection. If you’re using a dial-up connection, it’s entirely dependent on the quality of the phone network. Conference calls fall apart in Africa and are enormously expensive. Skype makes that kind of communication possible.”

A Ghanaian journalist and internet activist has had less luck calling in Africa: “I ring South Africa and the quality is not the best. Calling folks on Skype is better for Europe. However it's better to call Africa during the night. With the USA and Canada it is better and we sometimes get a better connection during the day. Bandwidth out of Africa is a major constraint. I do not use dial-up at all. I have access to broadband during evenings and on the weekends so I use that. There I am close to the international gateway so it works but right now I am in the Cape Coast and the connection is just not something we can use to chat through.”

An NGO user in Kenya has not been able to use it much because of congestion on the network: “I did test Skype but haven't used it for a while. I'm sure the quality here has improved since the Jambonet upgrade in mid December, which has made the Internet more reliable and less congested during the day from Kenya. I did have one bad experience with Skype in Malaysia where someone from 80-20 (Retriever) in Australia was giving a lunch time seminar using skype and collaboration tools. The voice kept cutting off every few minutes so he soon lost the attention of most participants and in the end changed to the normal telephone.”

Another NGO user finds the quality too changeable to be completely trustworthy:“It's very variable in quality but as Ian indicates it seems to be better now on the Kenya side. We've used it to communicate with (international organisations in Latin America) and some countries in Europe and it's OK for the occasional chat. I would not use it for important meetings that require continuous good quality speech. Phone conferencing does that a lot better if you have the equipment. As I said, the quality is very variable - last week I had great quality with someone in France, this week I get a terrible echo on my side making it impossible to have a serious conversation.”

Nevertheless for some users Skype's instant messaging service comes in handy:“I use Skype for instant messaging every day, however for voice it is close to useless from (where I work). I am not sure what our present claimed bandwidth is but it is not enough. On a really good day, I can hear the incoming voice perfectly well but the outgoing voice is badly broken-up. On a more typical day the outgoing voice is massively delayed and fragmented and the incoming voice is broken. More irritatingly there seems to be no correspondence between time of day and performance. We should expect that when no one else is using the system (e.g. at 3 o clock on a Sunday morning!) we should have very fast connection. Unfortunately this does not seem to be the case. If I was a cynic I would suggest the provider is 'stealing' bandwidth when they hope we won't notice! It’s a shame, it would be very useful and it is frustratingly close to being useable.”

Another person - the owner of an web design company - we spoke to has given up using it but gets calls from his brother in Hong Kong who uses it: “I have used Skype but have found the quality so bad I gave up. However my brother in Hong Kong uses it to call me on the regular telephone lines and it is great. I have a 256kps link but as you know that is not what you get internationally.”

An international organisation with offices across Africa uses it to communicate with them: “In terms of countries we Skype with, there's Senegal, which is very good quality. Kenya, the quality is bad. There is usually a small echo, probably due to the satellite. Egypt is surprisingly so so. Morocco, again the quality is good. Skyping to South Africa is fine. Basically it seems it has a lot to do with the speed of connections but also whether they are going through fibre or not.”

The following table provides a rough indication of the number of Skype users in each African country. The figures represent the largest numbers of users online after several searches:

The total number of users online is tiny but this small group of "early-adopters" is likely to increase significantly in the next 12 months. In those markets where the quality is acceptable corporates will make increasing use of it for work purposes. Predictably the main markets are the larger markets with good broadband connectivity: Egypt, Morocco, Senegal and South Africa. The importance of broadband is best illustrated by the relatively high number of users in the tiny island of Reunion. It is connected to the SAT3/SAFE cable and as a French "department" has broadband rates that are the same as those found in France: in other words, significantly cheaper than elsewhere on the continent.

So what can a telco incumbent do? Well there are three things that will keep people away from this kind of service: launch your own VoIP service, lower the price of international calling and improve the quality of calling to your main international destinations. But all this will only ward off the inevitable in the short-term. How long will it be before African ISPs offer calls between their subscribers on the same basis? Therefore, long-term telco incumbents need to get into being infrastructure providers and start creating first-class IP networks. Then every service provider will want to use your network...