Yesterday Skype released its initial Skype for Windows 3.0 beta with several new features. However, the press release does not really show the entire picture and, in fact, two of the four features mentioned were available in the previous 2.6 beta - namely, Click-to-Call and Skypecasts Live. Click-to-Call is simply an embedding of the previously available Skype for Web Toolbars supported by the Phone Number Recognition COM-component. It is a very handy feature that I have been using for some time.

But the other two -- Public Chats and a User Interface refresh -- bring some significant changes:

Public Chats -- my first activity was to walk through the Public Chat setup wizard. But I quickly realized it should be called the Skype Watercooler. The algorithm allows you to control who will participate; you can invite via emails, chat session or via a web page. You can control if a participant is active (able to contribute to the discussion) or passive (can only read the discussion). Lots of flexibility here. Whereas Skypecasts are publicly exposed such that anyone can join, the level of participation here is determined by the level of exposure you provide for your invitation.

But most interesting is to get the experience that comes from the persistence of a public chat. Yesterday I joined the Skype 3.0 Public Chat started by Phil; this morning when I came to my PC I could quickly review all the conversation that had occurred overnight (hey, those Europeans start their day early). Skype's Public Chat will become an interesting tool within the social networking landscape but Skype Marketing needs to look at a more definitive, attention grabbing name for the service. Let me say it again: Skype Watercooler.

User Interface: Lots to talk about here but I will just highlight some features:

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As mentioned elsewhere I have had significant exposure to a variety of phones that have been designed to work with Skype, either as the primary purpose of the device (Skype WiFi phones, Skype Cordless phones) or as an application within a more versatile mobile "personal assistant" platform (Windows Mobile platforms and, by year end, Symbian platforms such as the Nokia N-series). In addition I have now had the opportunity to work with a few wireless phones made by Nokia and Research in Motion (Blackberry). A few comments that could help Skype ecosystem product managers going forward:

Battery life: many of these phones have a battery life of four to six hours idle time. Probably best to license RIM's Blackberry power management -- I can get four to five days of idle time on my 8700. Any device that will have a hope of broad market acceptance should have at least two days idle time.

DTMF tones: This is a fairly basic and widely deployed feature of the Voice 1.0 phone infrastructure; yet I am constantly amazed at the cavalier approach taken to making sure "TouchTones" work with any Skype client, whether a softphone or a hardware device. Here are some of my experiences:

• Skype itself would not work reliably with DTMF tones prior to version 2.0; that issue has been resolved at this point (within the Skype client's "Dial" tab).
• The Skype WiFi phones do not support DTMF; therefore they limit the usefulness of SkypeOut when calling businesses that use IVR systems or other services, such as voice mail systems, that require a DTMF response. I have also experienced USB phones with the same issue.
• At the other extreme the RTX Dualphone and VoIPvoice Cyberphones do provide the appropriate support; the Sony Mylo aslo supports DTMF but you have to remember to put their unique keyboard in NUM mode to enter the tones.

Chat: I view Skype as having two primary features: Instant Messaging (presence and chat) and Voice. For USB phones, the IM activity remains on the host PC; however, for PC-independent devices there are issues:

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Yesterday Andy posted a reference to an article in today's San Jose Mercury News about various new "mobile lifestyle" companies that want to change the way we are using phones. But Michael Arrington has made an excellent point in stating that:

A bunch of VOIP services have launched to help people make cheaper calls from normal phones. None of them are compelling for the mass market.

The question any VC's need to ask when considering funding of any of these startups is "How do you intend to readily migrate these services into the mass market?".  This is a market that fundamentally picks up a handset, "dials" a number (or looks it up in an embedded directory to dial) and makes contact with the called party. Unless it can perform this basic simple algorithm for establishing a voice connection, additional services and features become technology showcases without hope for any mass adoption (and all the associated revenue opportunities).

Over the past three months I have had the opportunity to use the VoIPVoice UConnect when in my office and their CyberSpeaker W Skype phone when on the road. (Both use the same driver software and start with a standard telephone keypad user interface.) Two weeks ago I had the opportunity to preview what is coming out this fall in cordless phones. As mentioned previously I am evaluating some relatively new wireless devices. Over the past year I have not had to pay more than 3 cents a minute for any landline long distance calls whether at home or on the road beyond any basic service fees (and since mid-May that has gone to zero for SkypeOut calls within North America).

The combined experiences have helped me establish a base line for the level of simplicity I would expect as we see the emergence of both cordless phones and wireless mobile devices that use or access Skype (and/or other VoIP-based services) while serving as a standard telephone handset:

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Since its inception the secret sauce that results in the excellent voice quality of Skype-to-Skype calls and facilitates quality in Skype-to/from_SkypeIn/Out calls has been the Voice Engine for PC and Voice Engine for (Windows) Mobile licensed by Skype from Global  IP Sound (often referred to as "GIPS"). Monday came the announcement that Skype has licensed a second player for voice engine software in embedded, PC-free consumer devices, namely, Trinity Convergence. Trinity's VeriCall Edge^TM software  brings their many years of silicon-device independent software development into the Skype stand-alone PC-free device space.

The agreement benefits hardware manufacturers by providing a software bundle that allows them to efficiently and cost-effectively design Internet calling and the Skype user experience into devices such as wired phones, WiFi phones and multi-function personal communication devices. Original equipment manufacturers (OEMs) and original design manufacturers (ODMs) will leverage the software bundle to shorten product development cycles and accelerate their time-to-market.

The first device to employ Trinity Convergence's software will be the forthcoming Sony Mylo which should be available later this month. Additional devices under development include a Skype phone from Universal Scientific Industrial, a Taipei-based ODM (prototype in the photo) and a currently anonymous dual mode WiFi-GSM phone.

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I often forget when writing for Skype Journal that terminology in the English language may have different meanings in different parts of the English speaking world. For instance, there is no boot on my Canadian car and I'm sure there is no trunk in Martin's car in Edinburgh.  I guess wireless and cordless can have different interpretations in different parts of the world.

Also sometimes I wonder if anyone is reading my blog posts (although I am learning lots of VON Fall 2006 attendees do). But I was glad to see my post where I recommended that Skype drop their WiFi phones drew at least one response questioning my recommendation.  Furthermore I recommended that Skype work with Nokia, RIM and the Windows Mobile wireless platforms to include Skype as an option for wireless phones.  But a wireless phone is not a cordless phone -- in North America at least.

Rest assured, Howard, today I have seen a solution that can meet your requirements for an easy to use phone that your parents can use with no PC and no learning curve, namely, the entire range of cordless phones being shown at VON Fall 2006, especially in the Ascalade booth. Here they are demonstrating the cordless Phillips and NetGear Skype phones announced last week plus models that will be introduced soon by US Robotics, Linksys and Creative Labs. (In the photo, L-R, are the USR, Phillips and Creative cordless phones.) The cradles hold the power adapter to charge these phones; the modules in the background are cordlessly connected to the handsets using DECT technology and include a processor with an embedded Skype client as well as an Ethernet connector for connection to a cable/DSL router and an RJ-11 connector to the PSTN line. While each vendor will be pricing these units, it appears that these base unit devices will sell for about $150 with additional handsets in the $50 to $80 range.  So not only is the base solution lower cost than the Skype WiFi phones, you can have additional phone handsets around the house or apartment as appropriate at a much lower cost than buying additional Skype WiFi phones.

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This is the second post in a series reviewing wireless devices in the emerging Personal Handheld Assistant space; the ultimate aim is to identify roles that Skype can play in this market of converged functionality devices. This is a special post in the series that was triggered by a VON Fall 2006 session. Links to other posts in this series are available at the end of this post.

Monday afternoon I attended the first Fall VON plenary session: IM: The State of Presence featuring a panel of executives and managers from the GYMAS-five representing over 90% of the IM usage worldwide. Carl Ford ran his usual vibrant Q&A format, offering each member of the panel an opportunity to provide commentary on several topics surrounding IM and where it is going. It was a very informative and stimulating discussion overall.

One major direction for IM is the extension of IM's access and reach by its incorporation into wireless devices. We heard about many of the issues that challenge the ability to provide seamless wireless IM clients, including login barriers, coverage and the relatively high cost of data services.

But the session confirmed a belief I had started to hold about a month ago during my evaluation of several wireless platforms. In particular, my evaluation of one Skype WiFi phone demonstrated to me the futility of providing such a device:

• The battery life was about eight to twelve hours in standby mode
• It could not handle DTMF tones
• The basic clock would arbitrarily drop a couple of hours
• It provides the presence functionality of Skype's IM client but no text chat capability
• Skype was the only application that runs on the device
• While the Skype client provides Skype names and the Contacts' other phone numbers (if available via the Contact's registration), there is no address, email or other information such as provided by synchronization with Outlook.
• They would only work in open access WiFi zones; they would not work in WiFi hotspots requiring a browser-based logon.
• They were purely engineering toys that demonstrated one could make the concept work but they badly needed an experienced wireless phone product manager to get the feature set right.
• In a market of multi-function devices in a similar price range, a Skype-dedicated device could not be price justified.

I came away with the feeling that, while they perform more or less as advertised, Skype WiFi phones are nothing more than a prototype engineering demonstration of Skype on a wireless platform.  Certainly they would have a very limited market -- maybe in enterprises that wanted to provide "walled garden" communications amongst geographically disbursed nomadic employees. But they certainly are not a wireless phone that will gain broad consumer acceptance and market share of any significance.

Combining this experience with my experience with Nokia N-series phones, the Blackberry and Skype for Mobile on the Dell Axim I have to recommend that Skype drop the concept of a dedicated Skype WiFi phone and focus their efforts on getting Skype incorporated into those other wireless platforms. (It is for this reason that I did not bother to mention which brand of Skype WiFi phone I evaluated; it's the entire product concept that is a problem.)

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This is the first post in a series reviewing wireless devices in the emerging Personal Handheld Assistant space; the ultimate aim is to identify roles that Skype can play in this market of converged functionality devices. Links to other posts in this series are available at the end of this post.

Over the past couple of months I have received several wireless handheld phones/devices from Nokia (manufacturer of the last three cell phones I have owned), Research in Motion and SMC for evaluation. In addition I have been using a WiFi-enabled Dell Axim X50v as a PDA over the past two years and a Canon PowerShot A610 for photography; the Axim, of course, can run Skype Mobile, . Recently Sony announced its WiFi-enabled mylo; meanwhile last week saw the arrival of the Blackberry Pearl 8100.With such a variety of feature sets and user experiences, one needs to take a pause to review what is fundamentally important in a wireless handheld device to provide a basis for reviewing these devices, particularly in view of the convergence emerging in the various Nokia, Windows Mobile and (RIM) Blackberry devices.

This avalanche of handheld devices has made me ask the questions:

• How much convergence of functionality do I want or need on a handheld device?
• Where should Skype play a role in wireless-enabled handheld devices?
• Can my previous three devices (phone, PDA, camera) be combined into one unit or do I continue to need three device holsters on my belt?

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In a previous post I talked about the announcement of the Open AIM PhoneLine initiative and how, as one of their launch partnerships, they will be working with iotum to incorporate iotum's Relevance Engine call management service into AIM PhoneLine. But there is another story behind the scenes in terms of how iotum and the AOL PhoneLine API development team came together to bring about this service.

Driven initially by its military connections where Halifax, Nova Scotia is Canada's major east coast naval base as well as home to a major oceanography research center and four universities, Halifax has been a hotbed of Internet technology since the early days of ARPANet. In the late 1980's one of the navy's custom software vendors, Software Kinetics, got involved with ARPANet and ended up migrating the technology to open one of Canada's first Internet Service Providers called NSTN.  When the first national Canadian event on the commercial Internet was held in Toronto in early 1994, NSTN was the poster child for what could be accomplished over the Internet; they even had a bookstore making sales worldwide.  During the late 1990's I was consulting for Software Kinetics, visited Halifax many times and came to appreciate that Halifax was an "under-the-radar" mini-hotbed of Internet technology and innovation. So it was no surprise to me when I learned that AOL had setup their AOL PhoneLine development team in Halifax through an acquisition of InfoInteractive who had previously developed some infrastructure software for use with AOL's services.

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Last week Skype issued two press releases (Philips and NetGear here and Panasonic here) relating to partnerships that involve cordless Skype phones. No PC required! Just Plug-and-Call -- from anywhere in your home. Basically they comprise a base station that connects directly to your home router as a well as a cradle for the base station handset and the portable handset itself. They provide a degree of freedom that allows you to make Skype calls from anywhere within the cordless phone's radio range with minimum installation hassles. Another vendor, Ascalade, has also announced they are showing Skype Certified cordless phones at Fall VON.

Why the sudden interest in cordless phones? Well, Russell Shaw references two more cordless Skype phone announcements (US Robotics and Linksys); then he goes on to explain all this activity may result from the fact that our homes are getting larger (about 50% on average relative to 1975) and we want the flexibility, range and portability inherent to cordless phones. He goes on to point out other factors: more rooms, more air conditioning and a higher percentage of two story homes.

Garrett Smith goes on to reinforce Russell's arguments, stating that his sales data  and sales floor experience interacting with customers demonstrate that customers will pay a premium (of over $100 per handset) for the convenience:

In general, most consumers found the entire process surrounding the use of a telephone adaptor difficult to fully wrap their head around. What if I have five phones in my home (a typical telephone adaptor only allows for two phone lines)? Does this mean only two of them can use VoIP? What if I want all five phones to utilize VoIP (you need to use multiple adaptors)?

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• Hostel stay comes with Skype.
• Free Comverse Klonie avatars for Skype. One more erased barrier to adoption. It's good that Skype continues to experiment with offers and prices in eCommerce.
• McAfee security products get Skype Certified. Co-marketing, revenue sharing, hoping McAfee's saftey brand notes wash off Skype's piracy brand notes.
• Live video special effects. ManyCam works with Skype, MSN Messenger, and Yahoo!
• Bob Crabtree reviews the D-Link Skype USB Phone Adapter DPH-50U. "Judging by our experiences, a more honest strategy for D-Link would be to pull the product completely off the UK market until it is able to introduce a version that works with modern DECT phones in something approaching a reliable fashion." Ouch.
• Windows Live Spaces launches with gadgets and social networking. Microsoft's blending of their blog and voice social spaces brings their slow and fast worlds closer together. Personal digital identity is the common thread, something shared by eBay/Skype, Yahoo!, Google, and AOL. They build strength by (a) having more places to use your own ID, (b) the convenience of managing contacts in one place, and (c) the large directories that improve your chances of finding someone the first time you look. Stand-alone VoIP networks are at a disadvantage, so I expect lots of M&A activity by this time next year.

Video Action Keeps Expanding: In addition to service launches on the video communications front, (Skype, SightSpeed), it was a week when we learned where Skype's founders, Niklas Zennstrom and Jaanus Friis, may be spending some of their eBay-generated wealth.  (Keep in mind that Niklas and Jaanus had VC partners with whom they shared probably a significant portion of that $2.6B sale price.) Phil has commented on their Venice Project, a forthcoming video play first revealed in a Business Week story. Om thinks it does not bode well from an eBay investor's point of view:

"Whatever the case might be, this doesn't look good from an eBay investor's perspective.They spent $2.6 billion (and change) on Skype, and the two main guys are busy doing other projects."

My take, having worked with many technology-based enterprises transitioning from startup to a sustainable expanding business, is that eBay has let Niklas and Jaanus go back to doing what they are best at - entrepreneurship - and have let their more operationally experienced managers take responsibility for growing Skype from an emerging ~$100 million annual revenue enterprise to the multi-billion per year revenues required to justify a $2.6 billion purchase price. As long as Niklas and Jaanus can input their suggestions and viewpoints into management decisions and do not go to a competitor, I would not lose any sweat as an investor over this situation.

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Expanding Skype's user base beyond "geeks who use softphone clients" is key to Skype's ongoing growth that would justify eBay's $2.6B purchase price.  But the non-geek world is much more familiar with another user interface for its voice communications, namely, the 12-button TouchTone telephone keypad. This interface is associated with that large installed based of traditional telephone handsets incorporating the keypad. So when a device comes along that can effectively connect those phone sets into Skype such that users can dial in a familiar manner but take advantage of SkypeOut in appropriate situations, such as long distance calling,  they deserve an in-depth look. Once they are using Skype for familiar applications, they can learn and experience other applications -- even something as straightforward as "chat".

A plethora of devices is coming onto the scene for using my 12-year old Nortel M9417 dual line phone as the primary telephone handset on my office desktop (wood version). They continue to provide access to my PSTN services in the normal manner yet accessing Skype is as simple as picking up the handset and dialing 00. One such device that makes this possible is the newly released Skype Certified Multi-Link TeleVoIP Stick.

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One of the challenges of entering the VoIP consumer space is to simply sign up users; so how do you match up the fact that Skype has over 100 million registered users (even if only max 7 million, and climbing, are on Skype at any given time)?

A lot of posts yesterday about Gizmo Project's newly announced "All Calls Free" program whereby registered GizmoProject users can make free calls from GizmoProject to  either VoIP or PSTN phones, provided both parties are registered GizmoProject users. At the right is the resulting right click menu for individual contacts.

The genius in this program is the attempt to drive market awareness virally by getting all your (PC- and headset-equipped) friends and family to sign up for GizmoProject and experiment with it. You then have the option of calling them at no charge; they can receive the call on either the GizmoProject softphone or their legacy PSTN phones. However as Mark Evans states in his post, "Telco Hell":

"The idea of free calls will no doubt appeal to the bleeding and leading edge who have no concerns about using software and computers rather than traditional telephones. For the mainstream, the Gizmo Project is probably difficult to grasp."

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In a press release issued today, Skype announced "collaboration with [four] hardware partners to deliver the first WiFi phones for Skype(TM) software, making Internet calling on the move a reality". Basically these devices will eliminate the need for a PC to make Skype calls in a "authorization-free" WiFi-enabled environment. Sounds like we may finally see the mildly overdue offering from NETGEAR but they will have some competition.

Andy at VoIP Watch comments: "Unfortunately, the phones remain only useful with open hotspots and do not provide the ability to be used on services supplied by T-Mobile, Boingo or The Cloud." I can add Bell Mobility (who provide service at Starbucks' Canadian locations) and Rogers Hotspots in Canada to the list.

The easy to use devices come with everything built-in to connect to Skype via any personal, business or free public WiFi access point that does not require browser authentication. The phones are extremely easy to set-up and use with automatic synchronization to a Skype account and contacts. The devices support common WiFi encryption protocols including WEP, WPA, and WPA2 with PSK support.

So while at home or visiting friends, businesses and Internet cafés with freely accessible (but hopefully encrypted) WiFi, these could be useful devices.  But, with the browser-based authentication required by most hotels, I'll still be using my PC to make Skype calls to bypass hotel switchboards while on the road.

We look forward to the chance to evaluate these units when available in the fall.

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Providing an outline and overview of the full Skype Certification program in action, including both the technology and business aspects, was the goal of Tiit Paananen's presentation at the eBay/Skype Developer Conference last month. The full slide presentation is here but I will add some comments that came out of the session.

From the Skype perspective, the certification process can become a "chicken-and-egg" problem in that both parties (Skype and the partner) must have a common visualization of what the end user product is and how it can bring value-add to the Skype ecosystem. As a result Skype has established a multi-phase process that facilitates preparation and communication while minimizing the number of steps to achieve Skype certification. Establishing this process involved:

• gathering requirements for the program
• establishing Skype's criteria for acceptance
• determining the pre-certification activity required to prepare for testing
• facilitating iterative listing of products as they change once certified.

The business objectives of Skype certification are:

• help sales of partners' products
• ensure a positive user experience
• establish quality control criteria and processes
• avoid technical issues once a product comes to market

To date Skype has the most experience with hardware certification (33 categories and counting) while they are still learning the processes and criteria required for software certification where they are still defining categories. A complete set of certification documentation (by category) is available on the website. As general guidance for software they look for:

• Solutions that make Skype better (Pamela)
• Solutions that Skype makes better (Salesforce.com)

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