Is There Any Hope for AT&T?

Finally. I've been waiting for Skype to come to the iPhone for two years, since before Apple (Nasdaq: AAPL  ) shipped the now-iconic device.

"Everyone likes free calls. Skype on the iPhone could give users that without the angst of relying on VoIP as a line replacement. Would that be worth $600? At least -- and that's just one feature," I wrote at the time.

Today, my wait ends.

You can go to bed now, Ma Bell
Early reviews of Skype for iPhone are positive. Writes tech columnist Om Malik:

Of course, what really matters about this Skype app is its communication quality. To that end, a call I made to a friend in Israel sounded better than a regular mobile phone call. Few of the calls I made got dropped, and those that were can be attributed more to network congestion than to Skype. [This section was later updated to clarify the app only works on Wi-Fi, not 3G networks]

I've yet to download the software, but I'm excited to try it. When I do, it'll be my first time using Skype in months. I had all but given up on the desktop version of eBay's (Nasdaq: EBAY  ) VoIP service because call quality was too often lousy. I also regularly blew through flimsy headsets.

Yet Skype on the iPhone could solve a big problem for me. AT&T (NYSE: T  ) wireless service is poor where I live. If Skype, using Wi-Fi, can substitute for regular cell service in my home office, it'll save me frequent trips up two flights of stairs every time one of my editors calls. (Yes, that's true; I can't hear well unless I go to the top floor of the house.)

The platform we've been waiting for?
Fools may remember that I once viewed Skype as the killer app for the iPhone, the one that would make its $600 price tag worthwhile.

Much has changed since then. For one, the high-end version of the device now sells for $299 rather than $599. For another, the App Store is now home to about 25,000 software applications; some for games, some for social media like Twitter and Facebook, and some for business.

And while the App Store has limits -- only 20% of those who grab iPhone software use it the day after downloading -- I find it instructive that Palm (Nasdaq: PALM  ) and Research In Motion (Nasdaq: RIMM  ) are building stores of their own. Skype is big, but it's also just one app.

This rebellion won't be crushed
What matters is the context. Having Skype and tethering (i.e., using your phone to connect your computer to the Web) in the 3.0 version of the iPhone software says that we're unbound, that we choose connectivity on our terms, rather than those imposed on us by telecoms like AT&T.

Or at least that's what we hope.

The truth is that Ma Bell profits plenty from the iPhone and will continue to. So confident is she that AT&T is now selling unlocked versions of the device for between $599 and $699 each. Voice and data plan prices, meanwhile, remain the same. Those who don't want an AT&T plan are free to choose T-Mobile.

If Ma Bell is scared, she isn't showing it. But that's today, when Skype and similarly-styled VoIP iPhone software -- Truphone and JAJAH, for example -- are limited by the range and pervasiveness of Wi-Fi networks.  There's little danger in allowing consumer choice right now.

What would Darwin say?
That won't always be the case. Thanks to Clearwire (Nasdaq: CLWR  ) and Sprint Nextel (NYSE: S  ) , among others, the Wireless Web is expanding via WiMAX. Make it successful enough, the theory goes, and you no longer need classic telephony.

Maybe. We've really no idea if WiMAX can disrupt telecom as thoroughly as we'd like to believe. At the very least, AT&T and its peers are fighting back with an advanced technology entitled LTE, for "Long Term Evolution."

An appropriate name, don't you think? Skype for the iPhone is just the beginning -- the beginning of a revolution that demands open telephony choices. Ma Bell will either adjust, or die trying.

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Fool contributor Tim Beyers is a member of the market-beating Rule Breakers team and had stock and options positions in Apple at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool is also on Twitter as @TheMotleyFool. Its disclosure policy still plays the classic PC game DOOM from time to time.


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  • Report this Comment On April 01, 2009, at 1:53 AM, JostaJTF wrote:

    Why dont you just switch to Sprint, who has much better coverage than AT&T. I mean is the iphone THAT important to you, that you're willing to walk up to the 3rd floor just to answer a call??? Seriously...get a Sprint phone that has all the features of an iphone and has better coverage and faster 3g speeds, AND is cheaper monthly.

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