3GSM: Skype, Hutchison 3G partner on VOIP

If you're hooked on making Internet calls from your PC, you could really like this: Skype Technologies SA and the Hutchison 3 Group (Hutchison 3G) announced Tuesday a partnership to provide what could become the world's first commercial VOIP (voice over Internet Protocol) service for mobile phones.

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"Until now, we've been primarily focused on PCs," said Skype Chief Executive Officer (CEO) and co-founder Niklas Zennström, in a press conference at the 3GSM World Congress in Barcelona. "But our customers want a more ubiquitous experience. And, with a service for mobile phones, we plan to deliver this."

Hutchison 3G, which operates IP-based mobile broadband networks in several European markets, will become one of the first mobile phone operators in the world to embrace VOIP, a technology many in the industry view as a major threat to their cash-cow voice business.

The group, a subsidiary of Hong Kong-based Hutchison Whampoa Ltd., sees more opportunities than risks in venturing into VOIP, according to Christian Salbaing, managing director of European Telecommunications at Hutchison 3G.

"We want to give our customers more choice," said Salbaing. "We think they'll be thrilled to use Skype."

In a first step, the two companies will test the technology on the Hutchison 3G network in Sweden before rolling out trials across its other markets, which include Austria, Italy and the U.K., according to Salbaing.

Users will require smart phones with some SIP (Session Initiation Protocol) capability, which is required for VOIP service, said Ed Candy, technology director at Hutchison 3G UK Ltd.

Hutchison 3G's mobile phone networks are more capable of providing VOIP service because they are IP-based at the core, according to Candy. "If you have a legacy network based on circuit-switched GSM technology, you're going to have more difficulty," he said.

The question that begs an answer in this unusual match of partners is: What's in it for Hutchison 3G? Why give away minutes for free when you can charge money for them?

"We aren't giving away anything," said Salbaing. "We can't talk pricing right now but we will be looking at various ways of bundling Skype into our other services. Maybe we'll offer monthly subscriptions in some countries, or bundled minutes, as we do with text messaging and e-mail. The main thing is, we aim to generate new business."

Skype is in talks with other carriers, according to Zennstöm. "We're network agnostic," he said. "We want Skype to be everywhere."

Zennström declined to discuss commercial arrangements with Hutchison 3G, saying only that Skype is also in business to make money.

Whether Skype can break into the mobile Internet market as it has done arguably well in the fixed-line sector remains to be seen.

In a separate interview early Tuesday, Hamid Akhavan, chief technology officer at T-Mobile International AG & Co. KG, said VOIP service over mobile networks is still a "several years away," citing issues as security and quality of service.

Akhavan could be right, but so could Zennström who built up a successful VOIP business and sold it last year for US$2.3 billion to eBay Inc.