WEBVTT - Kazaa, Skype, and the Worst Deal of All Time? 0:00:04.440 --> 0:00:12.399 Welcome to tech Stuff, a production from iHeartRadio. Hey there, 0:00:12.440 --> 0:00:16.160 and welcome to tech Stuff. I'm your host, Jonathan Strickland. 0:00:16.160 --> 0:00:19.840 I'm an executive producer for iHeartRadio. And how the tech 0:00:20.040 --> 0:00:22.560 are you? I've got a question for you. Do you 0:00:22.600 --> 0:00:27.120 all remember Skype? Which, actually, if I'm being honest, that's 0:00:27.160 --> 0:00:30.480 kind of a baited question because Skype is still a thing. 0:00:30.560 --> 0:00:33.760 It's not like it doesn't exist anymore. According to a 0:00:33.800 --> 0:00:38.000 Microsoft blog post from February twenty twenty three, quote, more 0:00:38.040 --> 0:00:42.159 than thirty six million people use Skype daily to connect 0:00:42.200 --> 0:00:45.960 through phone calls and chats across borders and around the 0:00:45.960 --> 0:00:51.200 world end quote. Skype is a communications app. It incorporates 0:00:51.320 --> 0:00:55.800 voice and video and text chat into the application, and 0:00:55.840 --> 0:00:59.160 it's been around for a while, and Microsoft was not 0:00:59.240 --> 0:01:02.920 always the own of that application. In fact, I've talked 0:01:02.920 --> 0:01:06.120 about Skype a few times over the history of Tech Stuff. 0:01:06.560 --> 0:01:10.600 I did an episode many years ago about some of 0:01:10.640 --> 0:01:13.800 the worst acquisition deals in tech history, or what are 0:01:13.880 --> 0:01:17.880 perceived to be the worst deals in tech history. These 0:01:17.920 --> 0:01:21.000 are deals that cost a lot of money, but ultimately 0:01:21.640 --> 0:01:25.480 they didn't perform the way the parties expected them to, 0:01:26.040 --> 0:01:29.120 or worse in some cases, they led to the downfall 0:01:29.240 --> 0:01:34.240 of one or all of the parties involved. Skype was 0:01:34.520 --> 0:01:39.480 arguably part of one of these massively bad deals, and 0:01:39.520 --> 0:01:41.520 I've talked about it several other times in this show, 0:01:41.560 --> 0:01:44.280 but I've never dedicated a full episode to Skype itself. 0:01:44.760 --> 0:01:47.120 So I thought it was high time to change that. 0:01:47.520 --> 0:01:49.640 And there's a lot to talk about. In fact, there's 0:01:49.640 --> 0:01:52.480 so much that it's going to be split up over 0:01:52.800 --> 0:01:56.680 two episodes. Now. Tomorrow we're gonna have another episode of 0:01:56.680 --> 0:02:01.280 Smart Talks with IBM, but on Wednesday, I plan on 0:02:01.440 --> 0:02:05.480 bringing the second half of this story, so we'll be 0:02:05.600 --> 0:02:09.560 back with more of this on Wednesday's episode. This whole 0:02:09.600 --> 0:02:12.000 idea was prompted, by the way, because while I was 0:02:12.000 --> 0:02:15.720 doing research for a totally different episode, I found an 0:02:15.800 --> 0:02:20.400 article from July of twenty twenty three titled the Rise 0:02:20.520 --> 0:02:24.040 and Fall of Skype. Now that stirred a memory in me, 0:02:24.720 --> 0:02:27.720 so I plopped on over to YouTube, and sure enough, 0:02:28.040 --> 0:02:31.480 I saw a video that I was on the channel 0:02:31.560 --> 0:02:35.600 Company Man that also was titled the Rise and Fall 0:02:35.720 --> 0:02:39.720 of Skype. Now. That video came out three years ago, 0:02:40.160 --> 0:02:42.639 so in twenty twenty there was the Rise and Fall 0:02:42.680 --> 0:02:46.360 of Skype. Then I found another video from May twenty 0:02:46.440 --> 0:02:49.200 twenty three, so from this year, and it was on 0:02:49.320 --> 0:02:53.240 Tech Inspection and it was called Skype the Rise and 0:02:53.320 --> 0:02:56.919 Fall and Rise again. Then there was another video from 0:02:56.960 --> 0:03:01.160 July twenty twenty three on CNBC titled what Happened to Skype? 0:03:01.440 --> 0:03:04.440 So obviously Skype is something that's had a whole lot 0:03:04.440 --> 0:03:08.040 of ups and downs, and enough for folks to imply 0:03:08.400 --> 0:03:11.280 that the end days were near multiple times over the 0:03:11.360 --> 0:03:15.440 last several years. I'm reminded of those doomsday cults that 0:03:15.480 --> 0:03:18.720 would proclaim the earth would end on a certain day, 0:03:19.240 --> 0:03:22.000 and when that day would come and go, the cult 0:03:22.000 --> 0:03:24.520 would say, oh, you know what, we forgot to carry 0:03:24.560 --> 0:03:28.080 the one, so now it's actually this other date, rents 0:03:28.120 --> 0:03:32.560 and repeat. But why, what the heck has happened? What 0:03:32.680 --> 0:03:35.480 has gone on with Skype to warrant these kinds of 0:03:35.640 --> 0:03:41.400 articles and videos. Why during the lockdown of twenty twenty 0:03:41.920 --> 0:03:45.800 did Zoom take center stage. Why wasn't Skype the big 0:03:45.880 --> 0:03:49.760 name that we talked about. Why does Microsoft tend to 0:03:49.920 --> 0:03:53.440 de emphasize Skype in favor of other tools, notably stuff 0:03:53.520 --> 0:03:57.360 like Microsoft Teams. So we're going to look at the 0:03:57.440 --> 0:04:01.559 history of Skype. The company the app and the phenomenon. 0:04:02.200 --> 0:04:15.920 Let's begin. Our story begins not in video conferencing or 0:04:15.960 --> 0:04:21.800 even voiceover Internet Protocol aka VoIP. No, it actually it 0:04:21.839 --> 0:04:26.120 begins with an era of swashbucklers and buccaneers. Wait, no, 0:04:26.240 --> 0:04:29.360 I'm sorry, I'm actually thinking of the wrong kind of pirates. 0:04:29.480 --> 0:04:34.200 It begins in a tumultuous era in which massive media 0:04:34.320 --> 0:04:38.440 companies were going nuclear in an effort to totally wipe 0:04:38.480 --> 0:04:42.640 out piracy at IP theft, and they didn't care if 0:04:42.720 --> 0:04:46.080 innocent technologies were caught up in the process. It certainly 0:04:46.120 --> 0:04:49.560 didn't care if everyday normal people were caught up in 0:04:49.640 --> 0:04:52.880 the process. That was actually part of the intimidation campaign. 0:04:53.320 --> 0:04:56.279 But that's actually another story. But what we're talking about 0:04:56.320 --> 0:05:00.360 here are the early days of peer to peer technolology. 0:05:00.920 --> 0:05:03.760 So it actually benefits us to understand how this works 0:05:03.880 --> 0:05:07.279 because ultimately it's going to play a big part in 0:05:07.360 --> 0:05:09.880 the Skype story. And in my opinion, the best way 0:05:09.920 --> 0:05:12.320 to do that is to compare and contrast peer to 0:05:12.360 --> 0:05:18.720 peer networking with your typical server client situation. Okay, so 0:05:19.040 --> 0:05:23.760 in a traditional network, you've got servers, like on the web, 0:05:23.800 --> 0:05:27.240 you've got web servers for example. These are the computers 0:05:27.279 --> 0:05:31.000 that are housing the stuff that you want to access. 0:05:31.040 --> 0:05:33.520 This is where all the stuff you want to visit 0:05:33.680 --> 0:05:36.479 or see or interact with. It's where it quote unquote 0:05:36.600 --> 0:05:39.240 lives on the Internet. It's on one of these servers. 0:05:39.760 --> 0:05:42.720 So let's think of a basic function like visiting a 0:05:42.760 --> 0:05:45.240 web page. So what's really going on when you visit 0:05:45.240 --> 0:05:47.480 a web page is that you're a computer through a 0:05:47.520 --> 0:05:52.240 web browser. This is the client sends a request that 0:05:52.320 --> 0:05:56.040 goes out to a specific web server. It's the web 0:05:56.080 --> 0:05:59.440 server that is home to the document the web page 0:05:59.440 --> 0:06:02.920 in this case that you actually want to access and see. 0:06:03.000 --> 0:06:06.840 So your browser, the client asks the server, the computer 0:06:06.920 --> 0:06:10.280 holding the document, may I please have a copy of 0:06:10.320 --> 0:06:14.039 this specific web page? And assuming you have permission to 0:06:14.120 --> 0:06:17.240 access that web page, the server then sends it along 0:06:17.520 --> 0:06:19.560 and your browser will display the page for you to 0:06:19.560 --> 0:06:23.120 see and interact with. So in this system, you've got 0:06:23.160 --> 0:06:26.760 a centralized authority, the web server. So actually you've got 0:06:26.880 --> 0:06:30.719 lots of centralized authorities. They are authorities over whichever documents 0:06:30.760 --> 0:06:35.800 they host. So that means there's a single place for 0:06:35.839 --> 0:06:37.799 you to go in order to get what you want. 0:06:38.480 --> 0:06:41.880 If that source gets overwhelmed for some reason, let's say 0:06:41.880 --> 0:06:44.640 there's a heavier than normal amount of traffic. Maybe there's 0:06:44.680 --> 0:06:49.279 a distributed denial of service attack against the server. Well, 0:06:49.720 --> 0:06:53.560 that affects your experience. The entire Internet is made up 0:06:53.600 --> 0:06:57.440 of servers that act as the sort of centralized silos 0:06:57.560 --> 0:07:01.320 of data. I should also mention that typically there are 0:07:01.320 --> 0:07:04.880 also backup servers, so there's redundancy in the case that 0:07:04.920 --> 0:07:07.240 primary servers go down. I say that just so that 0:07:07.279 --> 0:07:10.400 you don't think that there's one and only one computer 0:07:10.480 --> 0:07:15.400 out there that hosts your favorite website or whatever. Anyway, 0:07:15.520 --> 0:07:20.080 let's compare this with peer to peer networks. Back in 0:07:20.160 --> 0:07:24.520 nineteen ninety nine, a college student named Sean Fanning created 0:07:24.560 --> 0:07:29.280 a service built on top of this different approach to networking. So, 0:07:29.360 --> 0:07:35.320 instead of having centralized servers serving various clients, Fanning's approach 0:07:35.680 --> 0:07:40.760 had peers. Every computer that joined the network was a peer. 0:07:40.920 --> 0:07:44.240 It was equal to every other computer on the network. 0:07:44.680 --> 0:07:49.120 Each computer could share resources and information with other computers 0:07:49.600 --> 0:07:54.080 on that network. Fanning developed some software to facilitate this, 0:07:54.640 --> 0:07:58.280 and in the software, you could create and designate a 0:07:58.400 --> 0:08:02.880 folder as being shaable. Other computers that on that peer 0:08:02.920 --> 0:08:07.040 to peer network could access anything that was stored inside 0:08:07.080 --> 0:08:12.160 this shareable folder on the individual's computer, just as your 0:08:12.240 --> 0:08:15.920 computer could access similar folders on other computers that were 0:08:16.120 --> 0:08:18.960 joined to this network, which made it very easy to 0:08:19.040 --> 0:08:23.760 distribute files across the network. It was a very efficient approach. 0:08:24.160 --> 0:08:26.200 Let's say you joined the network after it's been around 0:08:26.240 --> 0:08:29.560 for a while, and a lot of computers on this 0:08:29.680 --> 0:08:33.120 particular network happened to have a file that you need, 0:08:33.640 --> 0:08:37.120 and they have stored that file in these shared folders. 0:08:37.559 --> 0:08:40.520 So your computer could start a download and even shift 0:08:40.640 --> 0:08:44.000 to pull data from a different source if for some reason, 0:08:44.040 --> 0:08:47.600 the connection between you and the first source you connected 0:08:47.600 --> 0:08:50.160 to starts to go bad. Let's say that there's like 0:08:50.240 --> 0:08:55.480 some Internet traffic spike or something. Your download could shift 0:08:55.679 --> 0:08:59.120 back and forth to continue downloading that file from different sources, 0:08:59.480 --> 0:09:04.800 assuming that all the same file. Fannings software was called Napster. 0:09:05.480 --> 0:09:07.600 Now you may have heard of it, and while you 0:09:07.640 --> 0:09:10.600 could use Napster to distribute pretty much any kind of file, 0:09:11.200 --> 0:09:14.680 Fanning's emphasis was on digital audio, primarily in the form 0:09:14.720 --> 0:09:19.800 of MP three files. The software took off at college campuses, 0:09:20.000 --> 0:09:23.720 where students had access to decent Internet connections. They could 0:09:23.760 --> 0:09:28.200 rip music off their CD collections. They could convert these 0:09:28.240 --> 0:09:31.120 digital audio files to MP three's, they could store those 0:09:31.240 --> 0:09:34.960 MP three's in a shared folder for Napster. Then they 0:09:34.960 --> 0:09:37.400 could hop on Napster and look for other music to 0:09:37.440 --> 0:09:40.120 fill out their collections while offering up their own collection 0:09:40.160 --> 0:09:43.400 for other folks to download. So folks were sharing music 0:09:43.480 --> 0:09:48.080 like crazy lots more. As these peer to peer networks grew, 0:09:48.480 --> 0:09:51.760 they became more efficient. Right, if you have lots and 0:09:51.800 --> 0:09:54.160 lots of people who all have the same files, it 0:09:54.200 --> 0:09:57.520 suddenly becomes much more efficient to distribute those files. And 0:09:57.600 --> 0:10:02.920 so music sharing or piracy, depending on your point of view, 0:10:03.760 --> 0:10:10.839 was really becoming very popular enter the music studios, primarily 0:10:11.120 --> 0:10:17.839 led by the band Metallica, which really went hard after Napster. Now, 0:10:17.840 --> 0:10:21.600 it's a pretty well known fact that established media will 0:10:21.720 --> 0:10:27.120 eye any innovation that involves home media with suspicion. The 0:10:27.240 --> 0:10:32.800 recordable cassette tape, the VHS tape, the writeable CD, digital 0:10:32.840 --> 0:10:37.680 audio files, all of these were viewed with consternation from 0:10:37.679 --> 0:10:41.200 the music industry. They pushed back against all of these 0:10:41.240 --> 0:10:44.120 innovations to some extent. In some cases, they tried to 0:10:44.200 --> 0:10:47.720 prevent it from even becoming a thing because they argued 0:10:47.800 --> 0:10:53.559 that it constituted an existential threat to the entire industry. 0:10:54.160 --> 0:10:57.120 But this time it really felt like an existential threat, 0:10:57.200 --> 0:11:00.600 right because recordable cassettes, Yeah, that could potent actually eat 0:11:00.640 --> 0:11:05.320 into a little revenue. But you know, making a copy 0:11:05.400 --> 0:11:08.560 of a cassette or copying music off of some other 0:11:08.960 --> 0:11:12.520 medium to cassette, that takes a lot of time. The 0:11:12.800 --> 0:11:16.880 quality isn't always there. It's not like the ideal way 0:11:17.040 --> 0:11:20.640 of pirating music. But here we were talking about addigital 0:11:20.720 --> 0:11:25.560 audio file that could end up spreading across hundreds of 0:11:25.600 --> 0:11:30.400 thousands of computers. Now it was getting scary. Folks could 0:11:30.480 --> 0:11:33.400 download the Napster software, they could hop onto a peer 0:11:33.440 --> 0:11:37.200 to peer network, and they could pirate tons of content. 0:11:38.000 --> 0:11:40.920 And like I said, the music industry would go nuclear 0:11:41.360 --> 0:11:45.720 against Napster and its users, demanding huge amounts in damages 0:11:45.800 --> 0:11:49.640 along the way, amounts that far outstripped anything that the 0:11:49.679 --> 0:11:53.320 company's lost. And also, as I've said many times before, 0:11:53.640 --> 0:11:56.800 you can't actually prove that there was a loss in 0:11:56.880 --> 0:12:00.520 revenue at all when someone downloads something with out paying 0:12:00.520 --> 0:12:03.480 for it. And the reason you can't prove a loss 0:12:03.520 --> 0:12:07.199 in revenue is you can't prove the person who stole 0:12:07.320 --> 0:12:10.640 the thing Otherwise would have paid for it, and no 0:12:10.840 --> 0:12:15.360 physical copy of the thing had been lost, so it's 0:12:15.400 --> 0:12:17.720 not like you can't sell the things. Still, the thing 0:12:17.800 --> 0:12:20.920 still exists. Someone just made an illegal copy of it. 0:12:21.360 --> 0:12:23.360 But you also can't say that the person who made 0:12:23.360 --> 0:12:26.960 the illegal copy would have otherwise bought the thing, so 0:12:28.040 --> 0:12:30.440 you can't prove there's a loss in revenue. This is 0:12:30.520 --> 0:12:33.240 like a fundamental flaw in the way the music industry 0:12:33.320 --> 0:12:38.880 went after pirates and services. It's entirely possible that the pirate, 0:12:39.360 --> 0:12:43.000 were they honest, just would have gone without rather than 0:12:43.040 --> 0:12:46.360 having bought the media or whatever, which means you haven't 0:12:46.360 --> 0:12:48.960 lost any revenue. Right Like, if I don't buy your thing, 0:12:49.000 --> 0:12:50.640 it doesn't mean I stole from you. It just means 0:12:50.679 --> 0:12:53.920 I didn't buy it. But the copying part made it 0:12:54.000 --> 0:12:56.880 much more complicated. Anyway, that's a rabbit hole we can't 0:12:56.880 --> 0:13:00.200 really go down. I've talked about it in previous episodes. Anyway, So, oh, 0:13:00.600 --> 0:13:03.280 what does all this have to do with Skype? Well, 0:13:03.360 --> 0:13:06.160 a judgment on the Napster case brought against the app 0:13:06.200 --> 0:13:10.480 by the aforementioned ban Metallica was going on. There was 0:13:10.559 --> 0:13:14.280 also a pair of developers out in Amsterdam who launched 0:13:14.320 --> 0:13:18.840 a similar peer to peer service. This one was called Kazah. 0:13:19.320 --> 0:13:22.319 They had been working on it since two thousand and 0:13:22.400 --> 0:13:25.680 While Napster took a rather lackadaisical stance on the whole 0:13:25.720 --> 0:13:31.400 sharing of copyrighted material, Kazab at least outwardly urged users 0:13:31.440 --> 0:13:35.240 to not engage in piracy. You could still share files 0:13:35.280 --> 0:13:37.280 across the network, but they were supposed to be ones 0:13:37.280 --> 0:13:40.120 that you had the authority to share. Of course, lots 0:13:40.120 --> 0:13:43.960 of folks didn't really follow that philosophy, and piracy across 0:13:44.040 --> 0:13:48.400 Kazab wasn't really that different than piracy across Napster, which 0:13:48.440 --> 0:13:52.840 would ultimately lose its various court cases. Now. The developers 0:13:52.840 --> 0:13:57.880 for kaza were Nicholas Zenstrom and Janis Freese, who had 0:13:57.880 --> 0:14:01.480 been working together since the mid nineties. Zenstrom is a 0:14:01.480 --> 0:14:04.440 decade older than Freeze, and both of them worked at 0:14:04.440 --> 0:14:08.480 a telecommunications company in Denmark called Tella II. The two 0:14:08.520 --> 0:14:12.880 men are really interesting contrast. Zenstrom is from Sweden. He 0:14:12.960 --> 0:14:17.480 earned degrees in engineering, physics, and business administration. He started 0:14:17.520 --> 0:14:20.600 at Tella IO back in nineteen ninety one and rose 0:14:20.720 --> 0:14:24.400 through the ranks pretty quickly. He's an entrepreneur who has 0:14:24.480 --> 0:14:28.200 led numerous companies over the course of his career. Janas 0:14:28.240 --> 0:14:33.720 Freese is from Denmark, and unlike Zinstrom, Freeze doesn't hold degrees. 0:14:33.760 --> 0:14:36.400 In fact, he's a high school dropout. He was one 0:14:36.440 --> 0:14:39.120 of those kids who became fascinated with programming and networks 0:14:39.160 --> 0:14:42.600 early on, and rather than pursue an education, he jumped 0:14:42.640 --> 0:14:46.200 into working at companies that were introducing internet services. Now 0:14:46.240 --> 0:14:48.240 keep in mind this was in the early days of 0:14:48.280 --> 0:14:51.000 the general public even learning what the Internet was and 0:14:51.040 --> 0:14:54.480 how to access it. Freeze joined Tella two in nineteen 0:14:54.560 --> 0:14:57.520 ninety six. He would run the customer support department and 0:14:57.560 --> 0:15:01.080 worked with Zenstrom on a few projects at company. The 0:15:01.080 --> 0:15:03.800 two men worked well together and they decided to leave 0:15:03.880 --> 0:15:07.400 Tellatu to create their own company and product, and Kaza 0:15:07.440 --> 0:15:10.480 was born. I was born as the music industry was 0:15:10.520 --> 0:15:14.760 pushing hard against peer to peer networks. Okay, we're gonna 0:15:14.800 --> 0:15:16.760 take a quick break to thank our sponsors. When we 0:15:16.800 --> 0:15:31.120 come back, we'll talk more about Kaza and then Skype. Okay, 0:15:31.160 --> 0:15:35.000 before the break, I was talking about Zinstrom and Freeze, 0:15:35.040 --> 0:15:38.560 the two guys from Tella to who left the company 0:15:38.600 --> 0:15:41.600 to form their own company to create Kaza. They were 0:15:41.640 --> 0:15:45.720 also joined by a trio of Estonian software developers, and 0:15:46.400 --> 0:15:49.120 I'm going to butcher the pronunciation of these names, just 0:15:49.120 --> 0:15:52.960 as I always do. But here we go John Tollin, 0:15:53.720 --> 0:16:00.320 Atti Heinla and Pritt Casasalu. These developers would become the 0:16:00.320 --> 0:16:06.440 core team behind Kazah and later on Skyte Mike Napster. 0:16:06.720 --> 0:16:10.040 Kaza became the target of lawsuits. It was another peer 0:16:10.080 --> 0:16:12.520 to peer sharing network and lots of people were using 0:16:12.560 --> 0:16:14.920 it to share content that they didn't have their right 0:16:14.960 --> 0:16:18.240 to do so. In early two thousand and two, the 0:16:18.280 --> 0:16:23.080 company suspended downloads of the software because it was under 0:16:23.120 --> 0:16:26.400 so much pressure, and then Zinstrument Freeze made the decision 0:16:26.560 --> 0:16:30.960 to sell Kaza to another company called Sharman Networks, located 0:16:31.000 --> 0:16:34.520 out of Australia. A fun sign note. The owner and 0:16:34.520 --> 0:16:37.760 operator of Sharman Networks was a matter of secrecy, which 0:16:37.800 --> 0:16:40.320 was probably necessary due to the scrutiny of the music 0:16:40.360 --> 0:16:45.000 industry at the time. Nicki Hemming served as CEO, but 0:16:45.160 --> 0:16:47.840 the music industry suspected that there might have been a 0:16:47.920 --> 0:16:51.880 co owner lurking in the shadows and really went after them. 0:16:52.200 --> 0:16:55.360 Others suspected that Hemming was the sole owner, that she 0:16:55.400 --> 0:16:58.200 had done just a bang up job at creating a 0:16:58.240 --> 0:17:03.440 complicated corporate structure that obfuscated that fact. Now, I suppose 0:17:03.480 --> 0:17:06.000 that's a story for another time, but it does point 0:17:06.040 --> 0:17:10.199 out that selling off Kaza was a really good and 0:17:10.240 --> 0:17:15.240 timely decision, particularly since Australian authorities, under the direction of 0:17:15.280 --> 0:17:19.359 the music industry, raided Sharman Network's offices in relation to 0:17:19.440 --> 0:17:22.720 Kaza in two thousand and four. By that time, the 0:17:22.800 --> 0:17:25.680 original team was well clear of it. But let's get 0:17:25.720 --> 0:17:29.720 back to Zenstrom and Freeze and the Estonian developers. It's 0:17:29.760 --> 0:17:33.720 two thousand and two. They've sold off Kaza, and they 0:17:33.800 --> 0:17:36.360 started to ideate on how to leverage peer to peer 0:17:36.400 --> 0:17:39.800 technology in a way that you know, wouldn't necessarily bring 0:17:39.880 --> 0:17:42.920 down the music industry's wrath upon them or any other 0:17:43.280 --> 0:17:47.639 media industry. So they started looking at stuff like voiceover 0:17:47.720 --> 0:17:52.119 Internet Protocol or VoIP. To do that, they founded a 0:17:52.200 --> 0:17:57.200 new company called Jolted Joltid, And while VoIP was an 0:17:57.200 --> 0:17:59.760 early focus, the company really was about creating a way 0:17:59.800 --> 0:18:04.240 for here to peer networks to scale quickly. We'll chat 0:18:04.240 --> 0:18:07.440 about that in just a moment. To be clear, though 0:18:07.600 --> 0:18:10.400 VoIP wasn't brand new in two thousand and two, they 0:18:10.400 --> 0:18:14.439 didn't invent VoIP that actually had its history back in 0:18:14.480 --> 0:18:17.560 the mid nineteen nineties when a company called vocal Tech 0:18:18.080 --> 0:18:21.399 developed this protocol, and it does just what it says 0:18:21.400 --> 0:18:25.199 on the ten. It utilizes the Internet to facilitate voice 0:18:25.200 --> 0:18:28.920 calls between people. So instead of connecting via the plane 0:18:28.960 --> 0:18:34.119 old telephone service aka POTTS and yes it's a real acronym, 0:18:34.440 --> 0:18:38.520 users would instead make calls over the Internet, and thus 0:18:38.560 --> 0:18:42.560 they would bypass things like those pesky long distance phone charges. 0:18:43.200 --> 0:18:44.800 For those of y'all who have never had to deal 0:18:44.840 --> 0:18:47.480 with that, it used to cost extra to make telephone 0:18:47.520 --> 0:18:51.120 calls outside of your immediate service area. In a few 0:18:51.119 --> 0:18:53.800 places like here in the United States, you used to 0:18:53.800 --> 0:18:55.720 have to pay extra for a phone call if you 0:18:55.720 --> 0:18:58.000 wanted to call someone who lived further than a couple 0:18:58.080 --> 0:19:02.080 hundred miles from you. With VoIP, you could even make 0:19:02.119 --> 0:19:06.399 an international call and still bypass those expensive fees. So 0:19:06.440 --> 0:19:09.360 you could see why it would be really attractive. Now. 0:19:09.400 --> 0:19:13.679 Some of the early VOPE applications were purely PC based, 0:19:14.040 --> 0:19:17.200 so it wasn't super convenient. You had to be at 0:19:17.240 --> 0:19:20.720 your computer to make a call, and the person on 0:19:20.760 --> 0:19:22.639 the other end had to be at their computer to 0:19:22.680 --> 0:19:26.680 receive a call. Early VOPE systems didn't allow for voipe 0:19:26.720 --> 0:19:30.760 to landline or cell phone calls or vice versa. But 0:19:30.800 --> 0:19:33.080 we're talking about the mid nineties when a good chunk 0:19:33.119 --> 0:19:36.240 of folks didn't even have a cell phone, and smartphones 0:19:36.280 --> 0:19:38.520 were essentially another decade out. I mean, there were some 0:19:38.640 --> 0:19:42.359 early smartphones, but consumer smartphones wouldn't become a thing until 0:19:42.359 --> 0:19:45.480 two thousand and seven. So most people who are making 0:19:45.520 --> 0:19:47.920 a phone call were doing so when they were at 0:19:47.920 --> 0:19:50.160 home or they were at work, and they were using 0:19:50.240 --> 0:19:54.440 a landline anyway. Later on, companies would create telephone handsets 0:19:54.680 --> 0:19:58.520 that could connect to a PC network and make voipe calls, 0:19:59.080 --> 0:20:01.320 where you would have of what looked like a normal 0:20:01.359 --> 0:20:04.479 cordless telephone, but it would connect to your computer as 0:20:04.520 --> 0:20:08.600 opposed to your phone line. By combining VOPE services with 0:20:08.800 --> 0:20:12.600 peer to peer infrastructure, the group hit upon a phenomenon. 0:20:13.200 --> 0:20:16.040 You see. One of the challenges when you offer any 0:20:16.080 --> 0:20:18.600 service does not have to be VOIPD. It could be anything. 0:20:19.040 --> 0:20:21.160 One of the challenges that a lot of young companies 0:20:21.200 --> 0:20:24.919 face is scalability. So you might easily be able to 0:20:24.920 --> 0:20:28.520 handle demand in the early days of your product or 0:20:28.560 --> 0:20:31.960 service when very few people have access to it. But 0:20:32.080 --> 0:20:36.840 obviously you want your product to be a big success, right, Well, 0:20:36.880 --> 0:20:40.960 the challenge comes when demand starts to outpace your ability 0:20:41.080 --> 0:20:45.080 to meet that demand. If your servers can comfortably handle 0:20:45.119 --> 0:20:48.640 a few thousand users at once, but tens of thousands 0:20:48.680 --> 0:20:52.320 of people are trying to access it, you've got a problem. 0:20:52.680 --> 0:20:56.040 Scaling can be expensive, and often it can become more 0:20:56.080 --> 0:20:59.560 complicated than just throwing more resources at it. This is 0:20:59.560 --> 0:21:01.920 one of those big challenges that startups face to this day. 0:21:01.960 --> 0:21:04.040 It's also one of the big reasons for the dot 0:21:04.080 --> 0:21:06.360 com crash. There are lots of reasons for the dot 0:21:06.480 --> 0:21:09.800 com crash, but one of them was that there were 0:21:09.800 --> 0:21:13.199 a lot of companies that had a good idea, but 0:21:13.400 --> 0:21:16.600 it was way too expensive to scale it to a 0:21:16.680 --> 0:21:19.680 point where they could actually do what they were hoping 0:21:19.760 --> 0:21:23.520 to do beyond a small service group. Now, the beauty 0:21:23.560 --> 0:21:27.040 of peer to peer networks is that computers that join 0:21:27.119 --> 0:21:30.520 the network share their resources with one another, so you 0:21:30.560 --> 0:21:34.320 aren't reliant on a centralized server or even a collection 0:21:34.400 --> 0:21:39.159 of servers. The capacity to meet demand grows as the 0:21:39.240 --> 0:21:44.639 actual network grows. It sidesteps the scalability issue, and arguably 0:21:44.720 --> 0:21:47.600 this was the most genius aspect of Skype in those 0:21:47.640 --> 0:21:52.879 early days, so the founders called their solution Global Index 0:21:53.200 --> 0:21:58.000 or GI software. The core group built Skype on top 0:21:58.080 --> 0:22:01.920 of GI software, and they launch on August twenty ninth, 0:22:02.160 --> 0:22:06.320 two thousand and three. So we've just passed the twenty 0:22:06.440 --> 0:22:10.479 year anniversary of Skype this year. The name Skype actually 0:22:10.480 --> 0:22:13.679 came from a combination of the word sky and the 0:22:13.680 --> 0:22:17.760 phrase peer to peer. At least one online source I 0:22:17.760 --> 0:22:20.560 saw said that the name initially was going to be Skyper, 0:22:21.359 --> 0:22:23.800 but they ended up shortening it to Skype because there 0:22:23.840 --> 0:22:28.800 were some competing products some Internet domains that had Skyper 0:22:29.040 --> 0:22:31.640 as the domain, and they just wanted to avoid any 0:22:32.080 --> 0:22:35.360 issues with that, so they switched to Skype instead. As 0:22:35.400 --> 0:22:38.520 Skype launched, it was free to use, or initially it 0:22:38.560 --> 0:22:41.879 was Windows based. You would download a client and you 0:22:41.880 --> 0:22:44.600 could use Skype for free. There were no fees for 0:22:44.680 --> 0:22:48.439 long distance or international calls. For folks who lived in 0:22:48.440 --> 0:22:51.480 remote places but who still had internet service, it could 0:22:51.480 --> 0:22:55.800 be a big plus over traditional telephone service. The only 0:22:55.840 --> 0:22:59.320 limiting factor, at least initially, was that the person with 0:22:59.359 --> 0:23:02.240 whom you were trying to have a conversation also needed 0:23:02.280 --> 0:23:06.320 to have Skype installed. On their computer. Both parties needed Skype. 0:23:06.840 --> 0:23:09.440 If you had it and no one you knew had it, 0:23:09.760 --> 0:23:12.800 well it doesn't do you much good. So it was 0:23:12.840 --> 0:23:16.359 the kind of service that only has value as people 0:23:16.440 --> 0:23:20.840 adopt it. But once they did, it was easyps limon 0:23:20.880 --> 0:23:24.400 squeeze and the elegant solution of using peer to peer 0:23:24.440 --> 0:23:28.359 technology really paid off. As long as folks in your 0:23:28.440 --> 0:23:32.800 region had Skype installed, service was pretty darn good. The 0:23:32.800 --> 0:23:35.840 more people who adopted it, the better the service got, 0:23:35.920 --> 0:23:39.880 because again that meant that these computers were sharing resources. 0:23:40.920 --> 0:23:42.479 Got to remember that a lot of people just let 0:23:42.520 --> 0:23:45.560 their computers stay on all the time, and so it 0:23:45.600 --> 0:23:48.720 could run the Skype peer to peer software in the 0:23:48.760 --> 0:23:52.359 background even if someone wasn't actively using their computer, and 0:23:52.400 --> 0:23:56.159 so it could contribute to the service this way. The 0:23:56.200 --> 0:23:59.840 more folks who downloaded and installed it, the better it got. 0:24:00.520 --> 0:24:03.480 This was key to Skype's success as it was not 0:24:03.680 --> 0:24:06.240 the first VoIP product on the market right like it 0:24:06.320 --> 0:24:10.240 was almost a decade out from when Voipe first appeared, 0:24:11.000 --> 0:24:16.200 but other VoIP services followed the traditional client server infrastructure, 0:24:16.520 --> 0:24:19.400 so they had challenges with scaling the service up as 0:24:19.440 --> 0:24:23.080 adoption increased because the servers were running all the systems 0:24:23.080 --> 0:24:26.919 in the background, so if more people were using your service, 0:24:26.960 --> 0:24:29.440 you had to add more servers. The beauty of Skype 0:24:29.960 --> 0:24:33.000 was that it just got better as more people joined it. 0:24:33.520 --> 0:24:37.000 Now at this stage, the team referred to Skype as 0:24:37.000 --> 0:24:40.080 being in beta. For those of y'all who are not 0:24:40.160 --> 0:24:43.720 familiar with the term beta testing, it is a stage 0:24:43.760 --> 0:24:47.520 in development where the programmer or programmers who are responsible 0:24:47.600 --> 0:24:50.359 for this app or service or whatever, they roll it 0:24:50.400 --> 0:24:53.120 out to a test group and that test group use 0:24:53.200 --> 0:24:55.560 the app, and then they give feedback on it, and 0:24:55.600 --> 0:24:59.680 they also alert if they run into any bugs or anything. 0:25:00.040 --> 0:25:03.080 It's a way to make sure that the service is 0:25:03.119 --> 0:25:07.320 actually stable and useful, that the features make sense and 0:25:07.359 --> 0:25:09.800 everything before you roll it out to an even larger 0:25:10.160 --> 0:25:13.080 group of people. Skype would stay in beta for quite 0:25:13.080 --> 0:25:16.000