August 01, 2005

Economics of Toll Free Service

My understanding of the technical aspects of telephony may be questionable, but I will freely admit that I don’t fully understand the financial aspects of this industry. Just as the airline industry seem to defy some of the Euclidian axioms, the economics of the telephone industry many a time escapes logic. That was my reaction when I read the press release from Skype that it has started to offer access to toll free numbers in some countries for their SkypeOut subscribers. They are even extending this service to basic Skype users as well.

I thought that even though the call is toll free from the caller’s point of view, the carrier still receives a toll for the call, from the organization that is receiving the call. So what Skype has done is that it has established itself as a CLEC so to speak when it delivers these toll free calls. In other words, as it expands its service repertoire, it has added a new revenue stream. At least that is what I think. Andy while commenting on this service and its lack of sophistication does not comment on this point. So probably I am wrong.

I also think it might create a potential problem for Skype. In PSTN, potential for fraud can be managed. After all, the carrier has good control over the originators of toll free calls and subscribers to toll free calls can easily restrict the calls to a specific geographical area. It is not clear to me how Skype can meet these two requirements.

In a recent entry, Martin observes that Skype’s wide-band codec can improve customer experience. But alas, at least in this case, Skype has taken the easy road of handing the call over to PSTN using one of the standard codecs with the associated problems.

By the way, have you noticed that in many respects Skype is following the strategies of Free World dialup – first free call days and now access to toll free service. I wonder whether Jeff has shared his game book with his new found protégé.

Posted by aswath at August 1, 2005 01:15 AM
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Comments

As I think Martin said, why doesn't Skype just get installed in the call centers. The answer is they can't just yet. Once the can then the 800 number calls end up being Skype calls.

Posted by: Andy Abramson at August 1, 2005 02:34 AM

This from skype info page on toll free **Certain US regional toll-free numbers are blocked. This is because the company being called only wants to accept calls from certain areas of the US, and is not able to determine where the Skype user is located since Skype is not transmitting the info at this time.**

Apparently, this is how skype meets the potential fraud problem that you mentioned Aswath.

And about Andy's comment, well even if skype is installed in the call centres, they would need skypeIN numbers which, again, need to be toll-free from PSTN perspective ? Who pays for those calls to PSTN operators ?

Posted by: Manish at August 1, 2005 07:46 AM

"Apparently, this is how skype meets the potential fraud problem that you mentioned Aswath."


Not exactly. Toll-free numbers do not have to be nationwide - I can "open" a toll-free number in a single LATA (remember those?), and only allow callers in that LATA to dial the number.

Or I can route a single toll-free number to different POTS numbers in different LATAs.

So if a call comes in from a VoIP provider, and its origin can't be determined, it's blocked.

Posted by: JAC at August 1, 2005 09:38 AM

Skype already has carrier partners that hand off calls to local exchange carriers; those carrier partners are (at least in US terms) operating as the CLEC. So if Level3 is handing off directly to the toll-free service provider (in the US), the call recipient is paying the toll-free service provider, and the toll-free service provider is paying Level3 switched access. Whether or not Level3 passes along a cut to Skype is a question of their business arrangement.

Posted by: DG Lewis at August 1, 2005 10:02 AM

Andy:

Given that there is a per minute charge and that if the call center is enabled with Skype, this revenue stream goes away, what is the incentive for Skype to do it?

Manish:

I do not see how this controls the fraud problem. Take a company that is ready to accept calls from any place. But then how do they control fraud/crank calls. If the only recourse is to turn off all calls from Skypeland, then this service is not really viable.

Posted by: Aswath at August 1, 2005 12:11 PM

JAC, what you're saying is exactly what it means in the clipping I posted. Certain toll free numbers are not reachable because they are geographically sensitive. But what do you mean by this "So if a call comes in from a VoIP provider, and its origin can't be determined, it's blocked." ? Who blocks the call ? When/how does it break out of VoIP network ?

DG Lewis, if skype would hand it over to CLEC, and those would route the calls to the geographic toll free numbers of that area, wouldn't that increase the fraud, as Aswath mentioned in original post ? I think skype would not connect to any such toll-free numbers at all, irrespective of their capability to do so.

And Aswath, ofcourse this is a work-around way of minimising fraud, not ideal. And I understand this is the 'technical limitation' you originally pointed out. Do you see a better way (unless skype tries to figure out the region from the IP etc..too complicated IMO)

But about a non-geographic toll free, when you say "Take a company that is ready to accept calls from any place. But then how do they control fraud/crank calls" What is the specific problem created here by skype ? How does this company control crank calls from regular PSTN network ?

Posted by: Manish at August 2, 2005 02:29 AM

In PSTN, as part of the service, the subscriber to toll free service gets ANI. If a pattern of crank/fraud calls develops, they can trace the person(s) belonging to the ANI and the long arm of the law can be used. But that option is not available in Skype or any other service that freely gives away identities.

Posted by: Aswath at August 2, 2005 06:26 AM

Hmm...okay I dont understand the ANI business very well. Just thinking, I got an impression that this toll free calls from skype are treated as skypeOut calls (even if you dont have a skypeOut account) in the technical sense. Then, aren't they supposed to go through the skype gateways in their network, rather than P2P, like normal skype calls ? If so, then they can(and would) maintain the call records. That can help catch the spammers I would think.

Posted by: Manish at August 3, 2005 03:36 AM

On the back of your credit card, there's likely a message that goes something like this: "24-Hour customer service US and Canada, call 800-xxx-xxxx. From other locations, call NPA-NXX-xxxx."

What this means is that your credit card company, through the 800-billing system, is absorbing the cost of domestic calls. But the card-holder is on their own if placing the call from overseas. What Skype appears to be doing is offering a free service to get the call to a US landing point, and then handing it off to the PSTN to be handled as a regular 800-number. The 800-carrier will be receiving a toll from its customer (the credit card company) for this portion of the call.

Posted by: Dan Ryan at August 5, 2005 05:53 PM

Dan:

I agree with you on the workings of Skype toll-free service. This works fine for legitimate callers. But the question is fow will Skype eliminate/control fradulent calls.

Posted by: Aswath at August 5, 2005 10:20 PM



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