Experts wonder: Is telecom dead?

CANNES, FRANCE — There was one question on the minds of technology leaders attending the Etre conference in Cannes on Tuesday: ‘Is telecom dead?’

Paradoxically however, whether they answered yes or no, they pointed to the same reason: Skype.

Skype Technologies SA, the Luxemboug-based startup that provides software that allows users to make free phone calls worldwide over the Internet, is changing the landscape of the traditional telecom market, experts agreed. Whether Skype was killing the traditional telecom industry or forcing it to reinvent itself to survive were matters of contention, however.

“Yes, telecom is dead,” McKenzie Consulting analyst Mike Nevens said during a keynote address, citing the pressure the industry faces from companies like Skype that are providing data voice services over the Net, cutting out telecom operators’ traditional fixed-line business.

Tim Draper, managing director of venture capital firm Draper Fisher Jurvetson took a different tack, however. “Telecom is alive and well and it’s living in Skype!” Draper exclaimed. To be fair, Draper’s firm invests in Skype, but even among attendees with no economic interest in the company, the Skype hype at Etre reached fever pitch.

While some traditional telecom players have already jumped into the game with voice over Internet Protocol offerings — primarily for businesses — Skype is seeing a faster rate of growth, allowing it to establish itself at a time when questions over whether regulation will hamper telcos’ participation in the area still remain, analysts said.

Skype has over 12 million users and adds 70,000 new customers a day, according to company co-founder and Chief Executive Officer Niklas Zennström. The company’s telephony software runs on a decentralized peer-to-peer network, which means that it costs virtually nothing to support new users, Zennström said. And posing more of a potential threat to the telecom operators, nearly 40 percent of Skype’s users are not only using the service for personal calls, but their business calls as well, according to Zennström.

“Voice becomes a software application and it’s liberalized from the network. It’s all about free calls — you don’t have to pay to load a Web page, so why would you pay for this?” Zennström said. Despite the generosity of this claim, Skype plans to make money. The company already offers a paid service called SkypeOut, which allows users to call mobile and fixed-line phones worldwide at discounted rates.

But whether traditional telecom operators jump in to compete head-to-head with the likes of Skype, Zennström figures that they will benefit from the popularity of Internet telephony.

“The opportunity for the phone companies is great because they will have so many more broadband connections — wireless or wired,” he said.

Besides, figures Draper, it’s not worth operators protecting their traditional business when in ever industry, you must evolve or die.

The Etre conference runs through Wednesday.