Will Microsoft-Skype Finally Kill the Cellular Minute?

May 10, 2011

As someone who has watched Microsoft try and fail to embrace and extend the idea of Voice over IP on more than one occasion, today’s announcement of Microsoft’s purchase of Skype has the feeling of an “all-in” moment at the World Series of Poker. It’s not a stretch to see Microsoft trying to goose the juice for Windows on mobile devices by blending it with the world’s most popular form of voice communication. But is it enough to kill off the cellular carriers’ legacy “minutes” rate plans?

Just yesterday I happened to be in a cellular carrier store, seeing if I could add another phone to my current smartphone plan. What I wanted — and this seems reasonable — was a smaller, flip-architecture phone to make voice calls and sometimes check email. What I didn’t want was a huge addition to my bill since I don’t use my cellular devices to talk that much — I rarely hit my 450-minute a month limit — but the carrier in question had no way to satisfy my desire to have one plan for multiple devices.

Instead, I was told that any “shared” phone plan had to have a minimum voice contract of 1,500 minutes per month — no matter whether I used them or not. Arguing did nothing to help since store personnel aren’t able to modify plans. And I suspect I would find no different a situation at any other major carrier. So even though smartphones, apps and data are all the rage the big-change ante in the cellular contract game is still the voice plan, something we almost never talk about anymore. But Micro-Skype has the potential to change all that, especially when you throw in the chips of partner Nokia.

Verizon Wireless and other carriers may have made noises about partnering with Skype before, but it’s hard to believe they were serious about really enabling an over-the-top carnivore whose very DNA is all about making “minutes” irrelevant. Now you have some big players with big bankrolls who could do some truly innovative things: How about a Windows Smartphone from Sprint, running Skype with unlimited data on the Cleawire WiMAX network? For, say, $50 a month? All you can call and all you can download? With a portable hotspot embedded to beam Wi-Fi to any other device you own, like an iPad?

Right now, of course, this is simply a dream and it may not ever occur given Microsoft’s apparent inability to do anything innovative when it comes to communications. But by buying Skype they have taken the keys to the single most innovative application and service in the voice space, an entity that scares the bejeebers out of the telecom status quo. Let’s see if Ballmer has one more win in him. It’s long past time for the cellular billed minute to finally die.

MagicJack’s VoIP Scheme Slammed by AT&T, FCC

April 11, 2011

Hat tip to our old pal Andy Abramson for tracking a legal development in the VoIP world — seems like the factually elusive Daniel Borislow got his MagicJack VoIP scheme slammed by AT&T and the FCC. Andy’s post has a thorough explanation of the beef, which we will try to distill further — basically it appears that Dan was trying to subsidize the “low-cost” MagicJack plan by billing AT&T and other large carriers for completing calls, a la the old Iowa-based Free Conferencing dodges of the near past.

It was interesting to see that the FCC didn’t rule that MagicJack’s plan was illegal, immoral or unlawful — it simply agreed with AT&T that MagicJack had tried to fudge the way it described its service and that error meant that MagicJack can’t charge AT&T the fees it is claiming. What that means for us MagicJack and Borislow fans is that the Dan show probably ain’t over yet, though as we stated before you have to wonder how people can continue to put good money into a stock of a company that calls something like this a financial release.

While we are waiting to hear back from Dan (who sometimes responds to our emails, but sometimes not) anyone seen the heralded magicjack Plus or the hinted-at femtojack, which less cynical “news reporters” apparently expect to hit the streets any day now? C’mon Dan, can we at least see if one of your promises comes true?

UPDATE: Dan Borislow apparently replied to a blog post by Forbes’ Eric Savitz on this subject. You have to click to open the comments but our man Dan is in a fighting mood… as he says (we have every reason to believe it is really Dan posting) about AT&T, “We are owed the money, we suplied [sic] a valuable service and when AT&T tried to strongarm us, we told them where to go.” Read the blog post for more.

MagicJack Gets its ‘IPO’ — by Merging with VocalTec

July 19, 2010

I’ll leave it to those who have more time to spend with SEC documents than I do right now to sort out all the details, but the initial public offering hinted at by MagicJack founder Dan Borislow last summer has sort-of come to pass, with the announcement of a merger between MagicJack’s parent company and VoIP gear supplier VocalTec, which trades on the public markets.

As befits a Borislow operation, there’s a whole lot of murkiness and mess involved — gotta love the line from the SEC filing that flashes a big red light over any and all proceedings, mainly to do with the fact that VocalTec isn’t a U.S.-based company so doesn’t necessarily have to play by NASDAQ rules. From the merger SEC filing, we quote:

We are a “foreign private issuer” and you will receive less information than you would about us from a domestic U.S. corporation. In addition, we have opted out of certain Nasdaq Marketplace listing requirements.

With the caveats out of the way, what else is interesting about MagicJack? According to the fiscal numbers, MagicJack did indeed have a $100 million revenue year in 2009 as Borislow predicted when we talked to him last — it was actually $117.8 million in revenue according to the document — but the company also incurred a loss of $22 million for the year, mainly due to huge costs like those of the MagicJack devices sold ($23.4 million), advertising ($32.1 million), network and carrier charges ($25.6 million) and $41.8 million in “General and administrative” charges, which seem quite high for a smallish startup of MagicJack’s nature.

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