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Nokia's President and CEO
Olli-Pekka Kallasvuo

Skype Reaches Deal to Have Its Software Preloaded on Nokia Phones

February 18, 2009 12:50 PM
by Anne Szustek
In its latest move into mobile telephony, Skype has an agreement with Nokia to have its VoIP software come preinstalled on Nokia’s higher-end models. What does this mean for either end of the deal?

Nokia Deal Ensures Skype Gets Airtime—Literally

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Nokia, the world’s largest maker of mobile phones, struck a deal to pre-install Skype’s software on some of its smartphone models, beginning third-quarter 2009.

Skype’s VoIP (Voice over Internet Protocol) software offers free calls between subscribers, and practically free long distance between Skype users and traditional phones. Non-Internet long-distance phone service providers have thus looked askance at Luxembourg-based Skype as a potential loss of revenue, with some state phone providers, such as the UAE’s Etisalat, blocking access to the service.

According to Skype CEO Josh Silverman, however, mobile provider Hutchison Whampoa’s 3 has reported a 20 percent bump in average revenue among customers using Skype-enabled phones, and that use of flat-rate data plans was spurred.

Along these lines, Nokia sees the Skype deal as a potential avenue for similar revenue growth and consumer take-up.

“What makes it our flagship is the tight integration with services,” Nokia Executive Vice President Kai Öistämö was quoted as saying by PC World magazine, in reference to his company’s N97 model’s opportunity to have Skype run along mobile entertainment and e-mail content.

Skype has released versions for download onto mobile devices before. Having the software come preinstalled on mobile handsets allows for more software integration with the VoIP software.

“When we partner with manufacturers, we are able to deliver a superior service,” Silverman was quoted as saying by Reuters.

Nokia also has recently announced plans to partner with Qualcomm for smartphone development, namely for the use of Nokia’s UMTS S860 handsets in North America, expected to be rolled out mid-2010.

Key Player: Skype

According to the “About Us” section of its official Web site, VoIP service Skype was founded in 2003 by Niklas Zennström and Janus Friis. Headquartered in Luxembourg, the service, which provides service to landlines and cell phones, as well as voicemail and call forwarding, is used by over 405 million users in most countries of the world.

On April 24, Skype released a beta version of its service on 50-odd Java-enabled cell phone models, including some offered by Motorola, Nokia, Samsung and Sony Ericsson.

EBay acquired Skype in 2005 for $4.3 billion with the hopes of adding on to its payment service PayPal; however in 2007 it made a $1.4 billion write-down. There have also been rumblings that eBay is considering putting Skype up for sale, something on which Skype CEO Josh Silverman did not give further comment to Reuters: “[e]Bay is very supportive,” he told the wire service. “I spend 100 percent of my time building the world’s best communications company.”

Related Topics: Skype’s Chinese censorship controversy

This past autumn, Skype came under criticism after it was discovered that its Chinese partner had been censoring messages and logging user data.

Researchers at University of Toronto’s Citizen Lab revealed Oct. 1 that they discovered online text message and voice service Tom-Skype—Skype’s Chinese operation—maintained an online database containing censored messages and users’ personal information. In a 16-page report, Citizen Lab stated that Tom-Skype messages are scanned for politically sensitive keywords and, if certain keywords are found, uploaded and stored on a Chinese server.

It is widely believed that the Chinese government had access to the data, and likely ordered Tom-Skype to collect it. The government has been active in censoring political dissent and controversial content on the Internet, creating what has become known as the “Great Firewall of China.” Internet providers must agree to block certain content if they are to be allowed to operate in China, however they are not forced to collect and hand over data.

Reference: Technology guide, Skype

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