VOIP on the iPhone: Packets versus carriers

The good news is that with the announcement of Skype support on the iPhone via the Safari browser, the openness of Internet technology seems to have leaked into the iPhone. This breaks up attempts at traditional exclusivity and monopolism and replaces them with openness and innovation. Whether by design or by oversight, the first chink in the armor is the delivery of voice services in a way that keeps money out of the pockets of carriers.

There will be lots of others coming soon.

The details

When Apple released the iPhone, they did it in conjunction with an exclusive carrier. They needed the infrastructure, and they needed someone to build the network side of their Visual Voicemail. So they got AT&T, and in return AT&T got the iPhone.

But this isn’t going to stick. The first blow to iPhone exclusivity came yesterday from Shape Services. By browsing to http://skypeforiphone.com/ an iPhone user can run Skype via the web browser built into the phone.

It works on a normal data connection (but the cost for data services could be awful.)

But here’s the important bit: it works with built-in Wifi, which means all of the money AT&T would make from calls when you’re in a Wifi zone could potentially go away. And with Wifi blanketing the world (fueled by collaborative hotspots and civic initiatives) that’s a lot of lost revenue. As in, “gee, no phone calls from San Francisco this month.”

One wonders whether Apple foresaw this when it announced that apps for the iPhone would be built through the Safari web browser. At first there was a huge backlash against the company for locking the phone itself (and a race to try and break it.) But now, people seem to be coming around to the world of apps in browsers. It’s a real finesse for Apple, since it gets people off the operating system and onto the Internet, levelling the playing field to a degree in their rivalry with Microsoft.

More details after the jump.

A quick review of carriers and the Internet

The delivery of Skype on an iPhone is a huge issue. It serves as an excellent example of how Internet philosophy and protectionist, exclusive carrier relationships don’t work well together. Since the dawn of the Internet, carriers have fought to own their pipes. And Internet technology has worked to share those pipes.

Voice-over-IP (VOIP) puts voice data (traditionally delivered through point-to-point links) and breaks it into packets (using the Internet Protocol, or IP.) All of a sudden, the phone call doesn’t care who delivers it or how it gets there. VOIP is the ultimate example of how Internet technology doesn’t need traditional carriers any more.

One need only look at AT&T and Yahoo not getting along; T-Mobile in the UK banning VOIP and text messaging on its network; or AT&T goofing and sending gigantic phone bills with each object appearing as a separate charge, to see evidence of this all around us.

To understand how VOIP affects telcos– and what telcos want to do about it — we need to look at recent net neutrality discussions. Carriers want “common carrier” protection (i.e. “don’t blame me for what goes over my network because I’m just a dumb forwarding fabric”) but at the same time lobby lawmakers for net neutrality (i.e. “don’t force me to be just a dumb forwarding fabric.”)

(My inner cynic calls this “having your cake and eating it too.”)

Fortunately for well-monied telecom lobbyists, many lawmakers still think the Internet is a series of tubes, so with a series of semantic dance steps (not the least of which is that “neutrality” sounds benevolent) they get their way. Interestingly, Google’s push for unlocked spectrum (where handsets aren’t tied to carriers) and Congress’ hearings on phone exclusivity (termed the iPhone hearings by many) show the tide may be changing now that it’s cool to understand the Internet.

(Or maybe, chimes in my inner cynic, it’s because of the volume of campaign donations coming from online sources.)

Sadly, this is how carriers deal with innovation and competition. Instead of responding with innovation themselves, they try to lobby for protection.

Despite the fact that they received huge government funding from the Clinton administration to build a broadband network, they claim they need protection because they have to pay to build a broadband network. Stephen Colbert did a great job explaining the breakup of the Bell monopoly and the reassembly of its component pieces (the video has since been removed at Viacom’s request….)

Just to be clear: Net neutrality lets a carrier block your VOIP calls on your iPhone so they can charge you to make normal ones. But the carriers were smart enough to get that legislation done before laypeople realized what it meant.

Hopefully a new Congress and broader understanding of Internet issues will keep VOIP calls running without a “carrier tax” imposed on them.