Mechanism 1: Technology Leadership

As mentioned in the previous section, the symbiotic relationship between market and technology growth will allow a company with superior technology to remain a leader in the industry for much longer than in an environment with rapid technological development (Suarez

& Lanzolla, 2007). Skype uses a number of internet protocol methods to offer free VoIP service to anyone willing to download their proprietary software. Skype’s P2P infrastructure for telephony was the first of its kind and has remained a secret to outside developers. Many have tried to reverse engineer the Skype protocol; however its closed source status has remained true to this day. Skype protocol is useless on other VoIP networks unless given permission and licensed out by Skype itself (Baset & Schulzrinne. 2004).

5.1.1 Skype P2P Architecture

The IP network that the programmers at Blue Moon Interactive, which later became Skype, consists of three different types of programmed entities within the decentralized network.

These are super nodes, ordinary nodes, and the login server. Every person that downloads the Skype software on their smart phone or computer actually agrees to be a host for the Skype community. This means that any Skype user’s Skype call may be routed through your device or PC without you even knowing it. Most users are just ordinary nodes which are used primarily to

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initiate or receive a Skype call. Ordinary nodes also contain the user directory, meaning they can store the IP addresses of local ordinary and super nodes and therefore be able route calls of other users through these networks. The super node network was comprised of users with good bandwidth, no firewall restrictions, and enough processing power, however may not be used to connect each call. If a user was trying to contact another user who was too distant (in network addresses), or behind a firewall, then a super node would be utilized to bridge the gap or punch a hole in the firewall. If two ordinary nodes were close in network proximity and not behind any firewalls, then the call would be directly linked together without using super nodes.

Since 2012 Microsoft has centralized the super node network in servers located in a large data center. The design is the same; however firewalls and network address translations have become more complex. By centralizing the super node network, each user isn’t required to upgrade their software in order to upgrade the network as a whole. Instead Microsoft and Skype can simply upgrade the servers at the data center and achieve the same results in a much shorter amount of time. As previously mentioned, many have researched and attempted to reverse engineer Skype’s proprietary network and protocol design, however nobody has been able recreate it with the same accuracy and security. Some countries, including the USA, have even made it illegal to attempt to do this on proprietary software such as Skype’s.

Skype P2P Network Architecture

Figure 2 5.1.2 Skype Security

Skype’s security methods were designed to work only with the Skype protocol (Baset &

Schulzrinne, 2004). Skype claims to have a number of encryption methods for usernames,

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login, communication and post communication. When a user downloads the software and registers their unique username, a random 256-bit number key is generated and paired with the encrypted key of Skype’s server. The key and username are stored on person’s pc or smart phone and an identity certificates are made in order to authenticate this user and password in the future for login and making calls. When a call is placed a 256-bit session key is created by Skype. The session key is used to encrypt the call for the duration and for a fixed time afterward.

There have been some recent reports that question Skype’s security. Many critics have said that the actions by Skype and Microsoft to centralize their servers in a data center were so they can more easily monitor the calls and messages (Diffie & Landau, 2007). The FCC requires digital phone networks to allow wiretapping if warranted by the FBI. These allegations have been denied by Skype and Microsoft, in addition Skype has said that they should not be included in the category of digital phone networks because they do not own any actual wires or cell towers (Beard, 2010). Skype has never had a major breach of security; however this doesn’t mean they’ve been perfect with their service. They experienced outages in both 2007 and 2010. Neither of these incidents was caused by an individual or group looking to disrupt the network (Rossi, et al., 2009).

5.1.3 Skype Quality of Service

Skype claims that audio calls should have no problem being placed with most internet connections. Video calls and group calls obviously will require more bandwidth. The average bandwidth around the world as of April, 2014 is as follows (all figures are for download speeds and measured in Mbps):

Top 5

Romania Korea Switzerland Lithuania Japan

56.0 Mbps 52.4 Mbps 49.8 Mbps 45.9 Mbps 40.9 Mbps

Bottom 5 (some countries have no servers at all)

Benin Congo Cuba Syria Mali

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1.0 Mbps 1.1 Mbps 1.2 Mbps 1.7 Mbps 2.1 Mbps

Table 1: Top and Bottom 5 Countries Based on Average Available Bandwidth Source: http://www.netindex.com/download/allcountries/

Now if we compare these numbers with the number worldwide Skype users arranged into regions, you can see the importance for a strong network condition in order for Skype to guarantee high quality services.

Europe Asia Pacific US/Canada Rest of World

148,000,000 147,000,000 52,000,000 59,000,000

Table 2: Number of Registered Skype Users in Specific Regions Source: skypenumerology.blogspot.com

Europe has the most Skype users and its due in great deal to their high speed networks, but it also is important to note that Europe is made up of so many different countries with their own telephone carriers. This is the perfect environment for Skype to allow people to call across borders without having to pay long distance charges. USA and Canada contain only about a third of the users found in Europe, and a possibility for this may be because the USA and Canada have a much more consolidated telephone service industry. Interstate or inter province calls are relatively cheap compared to those of Europe and Asia. The most interesting fact is that throughout the rest of the world Skype still has 59,000,000 users. A lot are coming from Africa where the cellular network is still in its first generation. For these people to still be able to use Skype with such poor network conditions is a real feat in service for Skype.

If you look at the table below you can see that for a simple Skype call the recommended bandwidth is only 100kbps, however the minimum is 30kbps. This is extremely low which allows third world countries to be able to use Skype and broaden the reach of its network. On the opposite, if you live in a highly developed/modern network nation, like Korea, you will be able to seamlessly have video calls with 7 or more people at the same time. This is extremely important in a business setting where conference calls commonly take place. We will talk more about Skype’s customers later in the chapter when we cover the switching cost advantages that Skype has developed.

20 Call Type Minimum Download/Upload

Speed

Recommended Download/Upload Speed

Calling 30kbps / 30kbps 100kbps / 100kbps

Video Call 400kbps / 400kbps 300kbps / 300kbps

Video Call (HD) 1.2Mbps / 1.2Mbps 1.5Mbps / 1.5Mbps

Table 3: Skype Recommended Bandwidth for Call Types Source: https://support.skype.com/