So Microsoft has decided to terminate Skype, the internet telephony company it bought in 2011 for $8.5bn (£6.6bn). Its millions of hapless users are to be herded into Microsoft Teams, a virtual encampment with a brain-dead aesthetic that makes even Zoom look cool. This eventuality had been telegraphed for quite a while but, even so, it comes as a jolt because Skype was a remarkable venture, and its demise closes a chapter of an interesting strand of technological history.
The internet has been around for much longer than most people realise. It goes back to the 1960s and the creation of Arpanet, a military computer network that emerged after the US had its “Sputnik moment” – the awful realisation that the Soviet Union seemed to be racing ahead in the technology stakes. The design of Arpanet’s successor, the internet we use today, started in the early 1970s and it was first switched on in January 1983.
The designers of the network were, from the outset, determined to avoid the limitations of earlier communication systems, particularly the analogue telephone network, which was optimised for voice, hopeless for digital signals and owned by corporations which resisted innovations that they themselves had not originated. So the new network would not have an owner or be optimised for any particular medium, and would therefore be more permissive than any earlier network. Anyone could access it, and create services that ran upon it, so long as their computers conformed to the protocols of the network.
The result was the explosion of creativity – good and bad – that we are still living with today. What the internet’s designers had built was what a scholar later called “an architecture for permissionless innovation”; or, put another way, a global platform for springing surprises.
The world wide web, created by Tim Berners-Lee in the late 1980s, was one of those surprises. But so too was something called VoIP (voice over internet protocol). Speech could be digitised (converted into ones and zeroes) and put into data packets which could be sent over the internet; and then, having reached their destination, converted back into audio. The result: free telephony to anywhere in the world!
Skype was the first company to bring this magic to ordinary consumers. It was founded in 2003 by Janus Friis (a Dane) and Niklas Zennström (a Swede) and headquartered in Luxembourg; but the software that powered it was written by three Estonians who also wrote software for peer-to-peer file sharing. In 2005, eBay bought it for $2.6bn (£2bn). By 2006 it had 100m registered users and by 2009 was adding about 380,000 new users each day and generating around $740m (£575m) in annual revenue. So you could say that Skype was the first European company to reach US-level scale.
At which point the inevitable happened: in 2011 Skype was bought by Microsoft and absorbed into the maw of the tech colossus. Many observers, including this columnist, wondered what Microsoft thought it was doing with its new toy. Last week’s news suggests that the company never quite figured it out. And in any event, once the pandemic arrived in 2020 and people started working from home, it was clear that Microsoft would need to have something to ward off the threat posed by Zoom. Skype conceivably could have been at the core of its response, but instead the decision was made to put all the energy into making Teams the behemoth’s answer to remote working. From then on, Skype was surplus to requirements and the die was cast.
Before it disappears, though, it’s worth remembering what an energising newcomer it was on the scene two decades ago. Most people nowadays have no idea how closed and depressing telephony was in the analogue era. It was an industry run either by complacent, unresponsive and domineering monopolies (AT&T in the US) or government agencies (the GPO in the UK). It could take months to get a telephone installed in your home. Phone calls were expensive and international calls positively prohibitive.
I grew up in a country (Ireland) with a huge diaspora in a time when a phone call from the US meant only one thing: a death in the family. If emigrants kept in touch with the folks back home, it was only by letter and perhaps the odd parcel; never by phone. In rural Ireland, on the night before a son or a daughter departed for America or Australia, their family would sometimes hold a wake, because they assumed they would never hear their voices again.
And now? The VoIP technology that Skype brought into people’s lives has been commoditised. Social media platforms such as WhatsApp and Signal offer unlimited – and free – audio (and video) connections with friends, families and colleagues all over the world. Phone calls that would once have bankrupted a family are made every day. Microsoft may not have found Skype useful in the end. But the rest of us certainly did.
What I’ve been reading
Three-market economy
Dave Karpf’s sharp essay identifies the three types of money behind Silicon Valley’s power.
Bringing back sovereignty
An insightful editorial in Noema by Nathan Gardels on why the current and 47th US president is behaving like the 25th.
Fighting talk
A seismic regulatory clash is in the offing, says David Allen Green’s prescient analysis in the Financial Times.
