August 7, 2022

Microsoft’s Plans for Skype Are Unclear

BERLIN — If Microsoft’s $8.5 billion acquisition of Skype, the Internet communications company, goes through, supporters of network neutrality may be losing a standard-bearer.

In Europe, Skype has been the chief litmus test for measuring the openness of mobile networks. The results so far have been resoundingly negative. Most European mobile operators block Skype from their networks or impose arbitrary charges on consumers wanting to use the free service from their cellphones.

This runs counter to the concept of net neutrality, which calls for the equal treatment by networks of all Internet traffic, regardless of content.

Skype executives have complained loudly to European regulators in Brussels for more than a year, describing the carriers’ policies as a form of economic discrimination. And the regulators have been sympathetic. In April, a month before Microsoft announced the deal with Skype, the European commissioner for telecommunications, Neelie Kroes, warned operators to stop blocking or imposing fees on Skype before the end of the year or risk unspecified sanctions.

But assuming that Microsoft acquires Skype — the transaction requires approval by the competition authorities in the United States and Europe — Skype’s interests may take a back seat to Microsoft’s larger goals.

Unlike Skype, Microsoft views mobile carriers as customers for mobile phones using the Microsoft operating system, which will soon gain wider carriage as part of new models by Nokia, as well as for Internet protocol television and Lync, a unified communications server.

Since the sale was announced May 10, Microsoft and Skype executives have released few details about what role Skype will play under Microsoft. Executives from both companies in Europe declined to speak about Skype’s future role for this article.

Experts in the Internet telephone industry were split over what Microsoft would do. Some said they thought Microsoft would redouble Skype’s lobbying efforts in Brussels, providing a strong ally in a fight that could require European operators to open their networks to economic competitors.

Michael Dorn, the chief executive of PrimaCom, an Internet operator in Leipzig, Germany, said he expected Microsoft to press the issue of mobile access in Brussels because telephone systems have become increasingly Internet-based, and with Skype, Microsoft would have the opportunity to enter that growing business from a position of strength.

“The mobile operators’ biggest problem are their business models,” Mr. Dorn said. “The industry is moving toward data-based calling systems, not the old systems used by mobile operators, who still charge by the minute or the text message.”

Thomas Vinje, one the Brussels lawyers who sued Microsoft on behalf of its rivals in a 10-year antitrust case, agreed, saying that he expected Microsoft to press Skype’s demands on operators because it was to Microsoft’s economic advantage.

But others said they expected Microsoft to backpedal, either dropping Skype’s critical line of argument in Brussels or striking a deal to share revenue with operators.

“Microsoft is an operator-friendly company,” said Rajeev Chand, an analyst at Rutberg, a private bank in San Francisco. “It’s hard to imagine that Skype’s approach to Brussels would not change given the context of Microsoft’s overall business.”

Mark Page, an analyst in London at A.T. Kearney, a research firm, said Microsoft had no choice but to try to recoup its purchase price for Skype by trying to get the most from its Internet telephone and video revenue. Mr. Page said Microsoft would not alienate carriers by defending Skype in Brussels.

“Operator device procurement tends to be a formalized process several times a year and is all about hardcore economics — attractiveness, availability, cost — rather than being generous to firms on the basis of their lobbying strategy,” Mr. Page said.

Jens Weller, the chief executive of Toplink, a seller of high-speed Internet and voice-over-Internet services to businesses in Germany, said Microsoft was already taking a conciliatory approach because it was reliant on the cooperation of operators to make its Windows Phone software function seamlessly and effectively.

In mid-May, three weeks after the takeover was announced, Mr. Weller said that he and executives from Deutsche Telekom; Arcor, a German fixed-line operator owned by Vodafone; the German unit of the British provider BT; and Colt Telecom had been invited by Microsoft to a presentation on its software products and its strategy for carriers.

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