It is entirely understandable that mobile operators should be concerned about customers whose expensive handsets they have subsidised rendering that investment worthless by avoiding paying for calls. A top-of-the-range iPhone sells on eBay (Skype's parent company) for around $630, though presumably an operator would pay somewhat less and European mobile operators such as O2 in the UK are prepared to give their subscribers one of these for free, in exchange for a hefty £44+ per month subscription. Apple's deal with their franchised network operators unusually involves them getting a share of network revenues and perhaps it is for this reason that they have ensured that the Skype application is limited to calling over WiFi, rather than over 3G or other mobile data networks.
Thankfully for the mobile operators, their immediate predicament is scarcely dire. For one thing, the customers with whom the risk is greatest, those whose handset is heavily subsidised, have (like O2's well-heeled, or gadget-crazy, £44+ per month set) already committed to pay for their minutes whether they use them or not. Even pre-pay customers, who will have paid nearly £400 for a 16Mb 3G iPhone, are likely to find it more convenient to make their calls in the normal way over the GSM network. Perhaps it is for this reason that some mobile operators, such as Vodafone in the UK, have apparently so far refrained from blocking or forbidding the use of VoIP over their networks. Others, such as Huchison's 3 UK have come to commercial terms with Skype and made a virtue of it. Even those who use a VoIP application that has not been blessed and taxed by the operator, such as Fring or Gizmo, may find themselves paying a not-insignificant amount to their operator for the data connection.
Nevertheless, as mobile data becomes cheaper and faster and as the VoIP applications become slicker and better-integrated with the phone's basic functions such as call buttons and directories, very large amounts of currently profitable revenue from both voice calls and text messages are at stake for the mobile operators. This is underlined by over a million downloads of the iPhone Skype application in its first two days - making it the number one download from the App Store in 40 or so countries around the world, including Germany, according to Skype.
T-Mo is not alone in blocking the use of Skype and other VoIp services on their networks through technological and contractual means. So do all the other mobile networks in Germany and their French counterparts do the same, as does AT&T in the US, raising calls for regulatory intervention and not just from the likes of Skype. The VON Coalition, for example, a pressure group which includes, amongst others, BT, Microsoft, Intel, Cisco and Google (and, at least as recently as last year, T-Mobile USA), reportedly argues that
"Blocking of voice applications on mobile devices, such as the announcement of T-Mobile to block Skype on iPhones in Germany, is highly detrimental for consumer welfare in Europe".The VON Coalition describes itself as:
"Member supported coalition of service and software providers and equipment manufacturers organized to advocate and educate policy makers and regulators the viewpoint that the IP Telephony industry should remain as free of governmental regulation as possible."Never mind the potential irony of such a body calling for regulatory assistance, the tenor of arguments so far advanced is that of net neutrality, or as Robert Miller (Skype's General Counsel) puts it:
"Skype passionately believes that consumers should be entitled to access an open Internet on a variety of devices and on fixed and mobile connections to the Internet."
Unfortunately for them, network neutrality seems to have failed to ignite the same degree of emotional intensity in Europe as it has in the US - perhaps because Europeans believe that if their ISP restricts their access to information or applications unreasonably they can always switch to another one. And, as Miller wistfully points out, current EU legislation in front of the national Parliaments would not help much, requiring no more than that service providers inform their customers first if they are going to restrict traffic in this kind of way.
Whilst the network neutrality debate is probably not yet over in Europe, it might be worth considering whether there are other red rags to the regulatory bull here. This would very probably turn on whether each national regulator deemed that the network operators had Significant Market Power (SMP) in the relevant market (and there might be some debate about which market that would be) and, if so, whether blocking or forbidding access to VoIP services is an abuse of that power.
One problem is that the most likely Market, as defined within the Framework, is Access and Call Origination on Mobile Networks, which was deleted from the list as part of the 2007 reforms, meaning that it is not a requirement for national regulators to carry out regular reviews of the extent of SMP and of the remedies they should apply. It does not mean that EU and national regulators will not take action, though, as has recently happened with the prices charged for calls when one is outside the country in which one's phone service is registered. But action would most likely only happen if regulators are spurred on by public concern and lobbying.
Network operators, for their part, are likely to argue (again) that the loss of profits they make from calls and texts would lead to them cutting back on investment and force them to raise prices, forcing vulnerable consumers off the network.
The glass-half-full view would be that the regulators are (implicitly) right and market forces will not allow what consumers want and technology allows to be blocked by suppliers for very long. After all, T-Mobile's earlier apparent démarche in the UK and the indignation surrounding this latest incident suggest that using restrictive contract clauses and network blocking to strong-arm customers away from using VoIP has about as much chance of longer-term success as the record companies have of stopping illegal copying and downloads of music tracks by brandishing copyright laws.
