Mechanism 2: Preemption of Resources

This mechanism is driven by a company's ability to preemptively allocate, purchase, or acquire scarce resources. Because any market has a given amount of profitable firms, the first mover can take strategic actions in a niche market and have an advantage by limiting the amount of capacity available for later entrants (Economides, 1996). In many cases, this is achieved by establishing geographical locations or product volume. However in Skype’s case, the resources were preemptively gathered through investment costs aimed at enlarging their capacity to handle a “freemium” VoIP service. This made it almost impossible for late entrants to compete and acquire a piece of the market. Next we will look at the technological resources that Skype was able to obtain and preserve through the use of patent legislation.

5.2.1 Patents and Legislation

21

The actual number of patents owned by Skype is difficult to determine because some are owned by individuals who work or have worked for Skype, and some are now owned by Microsoft. All these patents, however, have been instrumental in keeping Skype’s technologies proprietary and in the overall value of the company. When Microsoft acquired Skype they also obtained Skype’s patents and technology. Without these patents Skype would have seen its innovations copied by competitors. With patents Skype was able to reinforce its technological leadership on its competitors over a longer period of time. As Suarez and Lanzolla determined, with a smooth technological development curve, patents give the first mover and owner of such patents a strong advantage. Next we will look at some of Skype’s most significant patents.

(The following patents were all taken from the European and United States Patent Archive)

EP 1649676 A2: Peer-to-peer telephone system and method: July 16, 200

There is provided a peer-to-peer telephone system comprising a plurality of end-users and a communication structure through which one or more end-users are capable for communication purposes. The system is distinguished in that: (a) the communication structure is substantially de-centralized with regard to communication route switching therein for connecting said one or more end-users; (b) said one or more end-users are operable to establish their own communication routes through the structure based on exchange of one or more authorization certificates, namely User Identity Certificates (UIC), to acquire access to the structure; and (c) said structure includes an administration arrangement for issuing said one or more certificates to said one or more end-users.

US 8175091 B2: Communication system: 27 Nov 2007

A method of transmitting messages from a network node in a communication network to a first user device can be provided. The network node transmits to a second user device a message-waiting notification. The first user device is identified, and a node holding the message is identified. In response to that notification, the second user device transmits a connection request to the first user device. The connection request is acted on by the first user device to establish a connection. With the identified node, the message can be optionally transmitted to the first user device.

US 8681873 B2: Data compression for video: Feb 19, 2010

22

A method of transmitting video data from a transmitter to a receiver, the method comprising:

receiving data values of a video signal at a higher resolution; at the transmitter, combining groups of the data values into one or more first units of a first lower-resolution arrangement;

encoding and transmitting the first lower-resolution arrangement to the receiver; at the transmitter, combining groups of the data values into one or more second units of a second lower-resolution arrangement, wherein the second units are offset from the first units by a fractional shift such that each second unit partially overlaps with at least one first unit; encoding and transmitting the second lower-resolution arrangement to the receiver; and transmitting an indication of said shift to the receiver; and at the receiver, combining the first and second lower-resolution arrangements based on the indication so as to reconstruct an image of at least a higher resolution than that of the first and second lower-resolution arrangements.

US20100275007: Secure Transmission System and Method: 8 Jul 2010

A method is provided for transmitting information from a user to a first network entity over a communications network. The user enters information into a browser executed at a user terminal. The browser generates a first message comprising the information using a first communication protocol for dispatch over the network via a network port, the first message including an identifier of the first network entity. A client executed at the user terminal receives the first message before the first message reaches the network port. The first message is wrapped in a second message of a second communication protocol used for transmitting messages between the client and a second network entity. The second message is transmitted to the second network entity over the communications network. The first message is unwrapped from the second message at the second network entity, the identifier of the first network entity translated to a network address of the first network entity and the first message is transmitted to the first network entity over the communications network.

US 8548125 B2: Call re-establishment: 28 Mar 2011

Method and user terminal for handling a call over a communications network between a first user terminal, usable by a first user, and at least one other user terminal, usable by a respective at least one other user, wherein a client is executed at the first user terminal for participation in the call. The client determines a condition of a respective at least one network connection used in the call between the first user terminal and the at least one other user terminal over the communications network. The client also determines that the call has been dropped, and responsive to the determination that the call has been dropped, the client automatically attempts

23

to re-establish the call in dependence upon the determined condition of the at least one network connection.

US 20120144051 A: System and method for detection of data traffic on a network: 6 Dec 2011

Systems and methods are described for detecting data traffic of a specific type, such as voice-over-IP traffic, on a network. A detector connected to the network is used to identify a set of data packets traveling across the network that conform to at least one signature describing data complying with a data transmission protocol. The detector is used to manipulate the set of data packets or create a record of data associated with the set of data packets. Such record can be analyzed or transferred to an external billing system to capture revenue for the transmission of the data. buy a product. Switching costs can also be related to learning, finding alternatives, compatibility costs, uncertainty costs, psychological costs, transaction costs, or contractual costs.

5.3.1 Switching Costs and Network Effects

For Skype, their greatest advantage in developing switching costs worked hand in hand with the network effect we discussed earlier. Basically, as more users adopt Skype’s services, the incentives to adopt increases. As the number of users of a communication service such as Skype increase, the more valuable the service is to each user. When value increases, the cost to switch to another communication service increases as well. You must consider that bringing all users or friends to another carrier is almost impossible. In a business environment where your customers are your contacts, there is an even stronger deterrent to switching. In any business setting, the ultimate goal is to increase revenue while bringing down the costs. Skype