Wah! Wah! Mommy, Skype won’t play with me

While Cisco Systems (s CSCO), the San Jose, Calif-based IP communications giant was busy making a fortune selling expensive video conferencing system to large companies, Skype was making it dead simple for little people to video call each other. No big screens to buy, no big special Cisco boxes – just plain simple software and you were good to go. As luck would have it, the concept of virtual offices and distributed workforce took off and gave Skype Video a big boost in small and medium sized business.  Of course, when Microsoft (s MSFT) bought Skype last year, the idea of Skype everywhere including the corporate offices became a reality.

Oops, said Cisco, which today announced that it wants the European Union to block the Microsoft (s MSFT) and Skype merger, because it is worried about the lack of interoperability between the world’s largest video calling service and Cisco’s own video conferencing offerings. Cisco thinks it is bad not just for them, but also for other video conferencing equipment makers such as Polycom and Lifesize. European Union has approved the deal and didn’t find any problems with it.

Juniper Research forecasts that the number of mobile video callers will hit 130 million by 2016, thanks to the introduction of mobile video calling services from most major companies and improvements in video calling technology. And as such it has become a hotly contested market. Here is what Marthin De Beer, Cisco’s SVP of emerging business group wrote in a blog post:

Our goal is to make video calling as easy and seamless as email is today. Making a video-to-video call should be as easy as dialing a phone number. Today, however, you can’t make seamless video calls from one platform to another, much to the frustration of consumers and business users alike. Cisco believes that the right approach for the industry is to rally around open standards. The video communications industry is at a critical tipping point with far reaching consequences. As video collaboration becomes increasingly mainstream, multiple vendors will have to work together to enable global scale and broad customer choice. Microsoft’s plans to integrate Skype exclusively with its Lync Enterprise Communications Platform could lock-in businesses who want to reach Skype’s 700 million account holders to a Microsoft-only platform.

Microsoft in an email responded with its own statement:

The European Commission conducted a thorough investigation of the acquisition, in which Cisco actively participated, and approved the deal in a 36-page decision without any conditions.  We’re confident the Commission’s decision will stand up on appeal.

I was surprised by this catfight considering that the Commission had rejected all claims by Cisco during the investigation. I always thought that Cisco and Skype played in two different ends of the market. Cisco hasn’t done a good job in the past being as open with its competitors. Tandberg, anyone? Apparently Cisco was asking the European regulators to make Microsoft give access to Skype’s entire customer base.

A world changing…

The company that once championed SIP and sold expensive PBX gear and expensive handsets for the offices has been losing influence in the new world of collaboration and communication. For a long time Cisco has dominated the unified communications business. Cisco, thanks to its nose-bleed inducing price tags, is aimed at companies with deep pocket books. Skype, on the other hand, is for real people and small businesses.

Cisco is extremely worried that Microsoft will now take Skype further into the corporate community, and that big companies will stop buying its gear. Cisco’s De Beer in his conversation earlier this morning wouldn’t go as far to admit it outright, but he did say that it was causing them problems with their corporate clients. The argument De Beer made was that just like any voice phone can talk to any other voice phone, video calls should have similar interoperability.

When asked if Cisco’s video calling was interoperable with Google’s video call services or Apple’s FaceTime, Cisco’s De Beer said they are in talks with those companies. I pinged my friend Erik Lagerway, a veteran of VoIP business (who once wrote a blog called SIPthat) and asked for his opinion. He was pretty blunt in his assessment:

They have few users in comparison to Skype’s 700+ million and SIP is already dying, they are concerned they will become irrelevant. The standards (SIP, H.264 etc.) are either broken, mired with patents and legal issues or have huge royalties attached to them making them unsuitable for any kind of real innovation.

Case in point, the IETF & W3C are currently debating which video codec to include in the proposed WebRTC standard and are having a hard time coming to a consensus, no surprise there. The open standard codecs (Eg. H.264 AVC) are hampered by royalties and the open source codecs (eg. VP8) are hampered with patents and legal issues, which is weird considering they are “open source”.

I too was in the “standards only” camp for a long time, after all my blog URL is SIPthat.com! But I have softened on that considerably. If you don’t have the users maybe you should focus on fixing that instead of whining to the EU about it.

In other words, there really is only one standard, the one that has the most users. When I think about it, Cisco’s actions are symptomatic of a larger trend in the world of communication — a move away from complex (even if standards-based) systems to more software-oriented and lightweight tools of communication.

Skype has been part of this shift and with more than 700 million people signed up for its network, the company has helped redefine how we talk and how we work. And while Skype was building a network, Cisco was too busy trying to hold on to its legacy approach to the business and now is forced to contend with this new reality.