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My Q&A With Skype: iPhone Battle Won, but War Not Over

As the Federal Communications Commission considers the net neutrality rules proposed by Chairman Julius Genachowski, Web applications firms in Silicon Valley are trying to make sure the agency knows where they stand in this debate. Their goal, in short, is to keep Internet service providers from screening content in ways that prevent consumers from accessing those Web applications.

Skype is one Web applications company that has a big stake in the net neutrality battle. (To be sure, Skype is no suffering startup -- it's being sold to a group of private investors for $2.7 bilion.)

I talked to Christopher Libertelli, a senior director of government relations for Skype, about AT&T's recent decision to allow Internet voice services for the iPhone on its network and what that means for the debate on net neutrality. Here's an edited version of our conversation:

How does AT&T's decision to allow Internet voice services like Skype on its network advance net neutrality?
It advances the cause of network neutrality in at least three interrelated ways.
First, it’s a concrete demonstration of what a network neutrality policy is designed to protect. When this debate started in February 2007, the carriers claimed that Skype on mobile was technically infeasible. This announcement puts that argument to rest.
Second, it demonstrates the need for a consistent policy that applies however consumers access the Internet, whether that is over a wired or wireless connection. We shouldn’t have one set of openness rules when you’re chatting on your laptop; but when you decide to take the dog for a stroll, you walk out of the openness protections that Chairman Genachowski described so well at the Brookings Institution two weeks ago and again at the CTIA IT & Wireless Entertainment Conference on Wednesday in San Diego.
Third, companies and consumers need certainty and an understanding of the rules in this space. Certainty will promote new investments in applications and the networks that support them.

Skype believes new net neutrality policies at FCC should still be adopted. Could the effects of such policies be achieved through the market, like in announcements we saw earlier this week? There is a concern that regulation may be too prescriptive of such a dynamic industry.
We reject the notion that the choices before the FCC are binary. Our opponents argue that Chairman Genachowski has only two options: 1) radical, laissez-faire policies or 2) intrusive government regulation by micro-managing bureaucrats. But it’s not that simple, and it is our sense that the chairman and his fellow commissioners understand that. So let’s be sober about all this Adam Smith religion.
When government speaks, it too acts as a participant in the marketplace. In this case, the FCC sent letters inquiring of AT&T regarding its VoIP policies. Those letters and the responses Apple, AT&T and Google became market facts. These led to AT&T’s voluntary action to change its policy, which then led Apple to state it will follow suit expeditiously. So in a sense, the goals of openness were served by private actors doing what they think makes sense for their businesses and for the government charged with regulating in the public interest.

AT&T said in a letter to the FCC that it had agreed with Apple to deny iPhone VoIP apps that would run on 2G or 3G networks, because it essentially would erode the carrier's voice revenue base and end up making handsets too expensive to subsidize. Will consumers suffer from higher device prices if voice profits are reduced?
First, I would say that government has no obligation to protect the business models of wireless carriers, Skype or any other actor in this inter-related space. It’s hard for us to believe that the use of a more efficient technology – the Internet – to deliver calls will lead to higher prices when the underlying costs to connect people are decreasing, not increasing. In addition, the wireless industry contends that theirs is a ‘hyper-competitive’ market. Generally speaking, you don’t see consumer prices rise in ‘hyper-competitive’ markets. Is there a business model shift happening? Yes. Is there any FCC rule prohibiting them from rationalizing the way carriers price access to the Internet? No.

Skype phones in the pipeline if FCC rules adopted?
Stay tuned…

If you were a carrier, what do you see as the solution to the business model shift? In other words, how do you avoid becoming a ‘dumb pipe’ in a way that satisfies regulators?
Well, I don’t want to presume to speak for them. As a software company, perhaps we see the world differently than they do. We try to be humble about distinguishing what we know from what we don’t and we don’t know anything about the business of sending armies of technicians to dig up streets, bury fiberoptic cable and erect wireless towers. That said, our engineers wake up every day thinking about how to make Internet calling simpler to use and more engaging for consumers. In the end, there will be intelligence in the core and at the edge of the network. Thinking otherwise is dumb.

By Cecilia Kang  |  October 9, 2009; 8:00 AM ET
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