Geography Reference
In-Depth Information
Several factors drive this phenomenon. Constantiou and Kautz (
2008
), in a
study of Danish VOIP adopters from a technology diffusion perspective, high-
lighted the role of economic factors such as its low price, network effects
(i.e., compatibility with fixed line systems), and switching costs (e.g., hardware
and investments in learning the new system). The promise of wireless VOIP, still
in its infancy, threatens to elevate its popularity yet further.
Once the province of relatively small telecommunications startups, the VOIP
market has recently attracted interest from almost all telecommunications giants
such as MCI-WorldCom and Deutsche Telekom, hardware and software firms such
as Nokia and Microsoft, and cable television companies such as TimeWarner Cable
and Comcast. As VOIP has shifted from the consumer market to include business
applications, many large corporations (e.g., Boeing, Bank of America, and Cisco
Systems) use VOIP to minimize their telecommunications costs, often simply by
using the spare capacity of their intranets, generating considerable savings in the
process. Others, such as Bank of America, deploy the technology to relocate back
offices and data entry functions to India. Even some telecommunications carriers,
such
as
Telecom
Italia,
France
Telecom,
Deutsche
Telekom,
Japan's
NTT,
Telefónica, and the Dutch firm KPN, have begun to offer VOIP services.
VOIP has also surged in the developing world in an uneven series of path-
dependent trajectories (Cecere
2009
). In the case of VOIP, the drivers and
obstacles to adoption include the sunk costs of existing telecommunications
companies and their ability to shape national regulatory structures; the legal and
economic barriers faced by new entrants to the market; internet penetration rates;
and the capacity of local providers and consumers (including their accumulated
experiences and technological sophistication) to exploit new technological and
social opportunities that internet telephony generates (Cecere
2009
).
The world's most popular VOIP application by far is Skype, founded in 2003
by two Scandinavian entrepreneurs, Niklas Zennström and Janus Friis (the creators
of KaZaa) using software developed by Estonian engineers. Skype essentially
fused VOIP with peer-to-peer computing, a departure from traditional client-
server models, and its SkypeOut application pioneered the shift from computer-to-
computer VOIP to include PSTN networks. What started as a set of free services
broadened to include fee-based ones, including voice mail and conference calls. In
2005, eBay paid $2.6 billion to acquire Skype, and then sold it to investors in
2009; Microsoft, attracted by the potential future growth and ''click to call''
advertising, acquired it in 2011 for $8.5 billion. Headquartered in Luxembourg, it
relies heavily on software engineers located in Tallinn. Today, it supports 29
languages and allows users to make free calls to other Skype account holders or
calls to other phones for nominal fees. In 2009, more than 560 million Skype users
(Fig.
4.2
)
1
accounted for 12 % of the world's international telephony minutes
1
Some challenge this estimate on the grounds that it includes users with multiple accounts or
unused accounts, and argue that the ''real'' number of users is more likely around 170 million.
Most analyses of Skype traffic focus on the average simultaneous number of users, typically held
to be roughly 30 million in January 2012.
