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SEPTEMBER 16, 2004
By Alex Salkever Why Jobs Should Heed VoIP's Call Apple has what it would need -- including its ongoing transition to a services outfit -- to make a "Macphone" network work The hype surrounding the Aug. 31 launch of the third-generation iMac stole the thunder from another launch of great interest to Mac users. I'm referring to the public release -- also on Aug. 31 -- by free Internet telephony company Skype of a long-awaited beta version of its software for Apple (AAPL ) OS X. Apparently I wasn't the only Machead jonesing for Skype. According to the company, 105,000 people have downloaded its Mac software since its launch. And bear in mind that this is a true beta version -- definitely not ready for prime time and lacking some of the key features of the full version available to Microsoft (MSFT ) Windows and Linux users. MOSTLY EXCELLENT. Nevertheless, within minutes of my download, I was on the network making calls over my cable broadband connection free of charge to Skype users in distant places. (Skype is the only company I can think of that rivals Apple in making hard tasks really, really easy.) However, I found Skype's claim of providing voice quality superior to that of regular phone lines untrue. My international Skype calls were punctuated with buzzes and pops, as if my neighbor's microwave was interfering with my 2.4-gigahertz cordless handset. Then again, for long stretches of conversation, Skype offered much better clarity and sound quality than regular voice networks. And as the global Internet continues to provide higher speeds to consumers and businesses, the quality of Skype calls will improve. In fact, I would wager that within the next five years, Skype calls to any seriously wired country will easily surpass the quality of similar calls on legacy twisted-copper networks. A while back, I wrote a column noting that Apple's impressive iChat instant-messaging software could easily replace phone lines for many purposes (see BW Online, 07/09/03, "With iChat, Who Needs a Phone?"). Skype blows away iChat in terms of voice quality. My recent test drive of Skype for OS X led me to conclude that it's time for Apple to start a phone network -- Macphone, if you like. CORD-CUTTING CUSTOMERS. I don't mean Apple should lay a bunch of fiber-optic cable and fill large buildings with high-price switching equipment. Rather, Jobs & Co. could provide the graphical interface and the ease of use. For the guts of the network, Apple could easily contract with other companies or try a bring-your-own bandwidth peer-to-peer approach like Skype. The potential downside is minimal. The possible upside is significant. Here's why: Everyone knows the business models that powered old-style phone networks are rapidly unraveling. The Baby Bells have seen a steady decline of the number of phone lines connected to their networks. Consumers are increasingly cutting the cord and using a cell phone as their primary mode of communication. At the same time, hundreds of thousands of Americans are now using Internet phone services to transmit voice traffic over their broadband connections and plug those calls into the public phone network. That number will soar as cable companies such as Cox (COX ) and Comcast (CMCSA ) and long-distance outfits like AT&T (T ) and Sprint (FON ) roll out Internet phone service for their subscribers. MORE FLEXIBLE. The new reality is that voice service will ride atop a network connection, just like e-mail and Web browsing. AT&T Call Vantage customers can connect to the AT&T phone system just fine over a Verizon (VZ ) DSL line or a Time Warner (TWX ) cable-modem link. And it will be a pure service powered by software. What's more, it will be far more flexible than existing landline and cell networks because these calls will travel over the ubiquitous Internet, not over specialized networks that can't easily talk to each other. That's why Skype can do what it does. Driven by a quest for quality, the company writes great software that's easy to use. Its motto is "Internet telephone that just works." Sound familiar? Apple already has the pieces in place to do what Skype is doing -- and it actually has a better chance of success. For starters, it has a paying customer base. It sells around 3 million computers a year, and it also enjoys an installed base of close to 20 million users, most of whom continue to pay money to Apple to purchase periodic software upgrades.
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