February 23, 2024

For Microsoft, Skype Opens Vast New Market in Telecom

In agreeing Tuesday to pay $8.5 billion to buy Skype, the pioneer in Internet phone calls, Microsoft is embracing a technology that is transforming the way people communicate at home and at work. And by stitching Skype technology into Microsoft products, used by hundreds of millions of people, the software giant could hasten the mainstream adoption of video communications, especially in businesses.

Microsoft, although rich and powerful, lags in new fields like smartphone software. Skype could help it better compete with the new giants of technology, like Google and Apple.

“Skype has been a forerunner, and this deal is Microsoft trying to become relevant in this new age of Internet communications,” said Berge Ayvazian, a telecommunications consultant. “It could really change things for Microsoft and accelerate the spread of this new technology.”

The future of communications, industry analysts and executives say, will be animated by Internet technology and rests increasingly on video calls, as well as voice and text messages. Skype started on personal computers less than a decade ago, but is now beginning to make its way onto smartphones. As it heads for living rooms with applications like at-home videoconferencing on digital televisions, it could change the way people make even the most routine calls.

This next generation of communications is both a threat and an opportunity to telecommunications and technology companies — a focus of energy, investment and anxiety for corporations including ATT, Verizon, Apple, Google and Facebook.

Microsoft is betting that Skype can help change its fortunes. Skype is a leader in Internet voice and video communications, with 170 million users each month connected for more than 100 minutes on average. In the last year or two, video use has surged, now accounting for 40 percent of Skype’s traffic.

That large and active community of users represents a major asset, said Steven A. Ballmer, Microsoft’s chief executive. “It’s an amazing customer footprint,” Mr. Ballmer said in an interview. “And Skype is a verb, as they say.”

Mr. Ballmer never mentioned Google, Microsoft’s archrival whose name is used as a verb for Internet search. In that market, Microsoft is spending heavily to try to catch Google, and making some progress with its Bing engine, but at great financial cost.

Google, like Skype, has a free Internet phone call and video messaging service. So Microsoft, analysts say, is taking a bold step to grab a leadership position instead of risking falling behind Google in a crucial market and then facing the difficult task of trying to catch up.

“Skype gives Microsoft instant size and scale in this emerging market,” said Howard Anderson, a senior lecturer at the Sloan School of Management at the Massachusetts Institute of Technology. The merger with Skype, if successful, could give Microsoft a leading consumer Internet service — something it has lacked — and help lift its other businesses, like smartphone software, Office productivity programs and Xbox video game consoles, analysts say.

In doing so, Microsoft aims to keep people seamlessly connected at work or at home. “We want to enable communications across people’s lives,” Mr. Ballmer said in a press conference in San Francisco.

Skype, founded in 2003, is a creation of the new technology that is transforming telecommunications. “For some time, it has been clear that telecommunications is going to move to all-digital Internet technology,” said Kevin Werbach, an associate professor at the Wharton School of the University of Pennsylvania and a former official at the Federal Communications Commission. “Skype shows what can be done.”

Skype was founded by two entrepreneurs, one Swedish and one Danish, with software developed by a small team of programmers in Estonia. They deployed a version of peer-to-peer software, initially associated with illegal file-sharing of pirated music and movies. The voice and video travel over the Internet rather than dedicated phone landlines or cell tower networks.

Skype has had a bumpy ride as a business. EBay bought it for $2.6 billion in 2005, and then sold most of it to a private investors’ group in 2009, after eBay could not figure out how to make money on Skype.

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Bits: Big Medical Groups Begin Patient Data-Sharing Project

The ideal of computerizing patient records is captured in the words behind the government’s aspirational acronym, N.H.I.N., for Nationwide Health Information Network.

The vision includes not only the efficient collection and use of digitized patient records to help physicians make smarter, more cost-effective diagnoses, but also the sharing of information by far-flung doctors and hospitals. A person walks into a clinic in Phoenix, say, and, with permission, her records from her hometown physician’s office in San Francisco are efficiently summoned with a mouse-click.

Across much of the country, that ambitious vision lies well in the future. After all, only about one quarter of the nation’s doctors even use computerized patient records today. The Obama administration is offering billions of dollars in incentives over the next five years — up to $44,000 per physician — to accelerate the adoption of electronic health records.

But five leading medical groups — pioneers in the use of electronic health records — are announcing on Wednesday a project intended to exchange patient information. It is intended as an elite forerunner of the national health information network, spanning several states and millions of patients.

The five are Geisinger Health System, Kaiser Permanente, Mayo Clinic, Intermountain Healthcare and Group Health Cooperative. They are calling their project the Care Connectivity Consortium.

“Our groups have all seen great results internally,” George Halvorson, chief executive of Kaiser Permanente, said in an interview. “The challenge is to connect with other systems.”

Many local and regional programs for sharing data among medical groups, known as health information exchanges, are already underway. Indeed, the legislation to stimulate the adoption of electronic medical records includes grants for setting up such community information exchanges.

But the consortium of the five big groups represents a step beyond those efforts in scale. For patients, Mr. Halvorson said, the most common uses would be referrals from one system typically to specialist physicians in another, or walk-in patients (the Phoenix-San Francisco example above).

The leaders of the five medical groups have worked on the consortium for the past six months, and it was put together in face-to-face meetings and with e-mail volleys, Mr. Halvorson said. The conversations began among the chief executives, and then the chief information officers were brought in.

“The C.E.O.’s had to make sure the C.I.O.’s didn’t think this was crazy or impossible,” Mr. Halvorson said. Some data-sharing among the five groups is intended to begin this year.

Are there business implications to the consortium? After all, some of the groups have their own insurance arms, including Kaiser, Intermountain and Geisinger. Electronic health records typically include reporting and billing information. Are the groups assembling a potential rival to national insurers like UnitedHealth, Aetna and Wellpoint?

Nothing of the kind, Mr. Halvorson insists. “This is totally focused on care,” he said.

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