Here's some news that raises as many questions as it answers: Cisco has announced that it is appealing the European Commission's approval of Microsoft's $8.5 billion acquisition of Skype. The company posted a blog on its website under the byline of Marthin DeBeer, SVP, Video and Collaboration Group, in which DeBeer writes:
"Imagine how difficult it would be if you were limited to calling people who only use the same carrier or if your phone could only call certain brands and not others. Cisco wants to avoid this future for video communications, and therefore today appealed the European Commission's approval of the Microsoft/Skype merger to the General Court of the European Union. Messagenet, a European VoIP service provider, has joined us in the appeal.
"We did not take this action lightly. We respect the European Commission, and value Microsoft as a customer, supplier, partner, and competitor. Cisco does not oppose the merger, but believes the European Commission should have placed conditions that would ensure greater standards-based interoperability, to avoid any one company from being able to seek to control the future of video communications. "This appeal is about one thing only: securing standards-based interoperability in the video calling space. Our goal is to make video calling as easy and seamless as email is today. Making a video-to-video call should be as easy as dialing a phone number. Today, however, you can't make seamless video calls from one platform to another, much to the frustration of consumers and business users alike."
"We did not take this action lightly. We respect the European Commission, and value Microsoft as a customer, supplier, partner, and competitor. Cisco does not oppose the merger, but believes the European Commission should have placed conditions that would ensure greater standards-based interoperability, to avoid any one company from being able to seek to control the future of video communications.
"This appeal is about one thing only: securing standards-based interoperability in the video calling space. Our goal is to make video calling as easy and seamless as email is today. Making a video-to-video call should be as easy as dialing a phone number. Today, however, you can't make seamless video calls from one platform to another, much to the frustration of consumers and business users alike."
The statement would seem to suggest Cisco's reason for not objecting to the merger from the get-go: They're not against the merger, or so they say. And indeed Cisco didn't make any such noises when the deal was first announced last year.
The EC approved the merger in October 2011, and included in its decision these remarks about interoperability:
The Commission assessed the possibility for Microsoft (i) to degrade Skype’s interoperability with competing services and/or (ii) to tie its own products, in particular its leading Windows operating system, with Skype, thereby limiting other players' ability to compete.
As regards consumer communications services, the Commission found that Microsoft would not have an incentive to degrade Skype’s current interoperability as it is essential for Microsoft that Skype's services are available on as many platforms as possible in order to maintain and enhance the Skype brand. As regards the risk of tying or bundling, the Commission noted that the vast majority of consumers who acquire a PC with Skype already installed are registered Skype users and that most of them subsequently download a version different from the pre-installed one. Therefore, the proposed transaction will not change the current situation. "As regards enterprise communications services, the Commission found that Skype is currently not an enterprise product, therefore its interoperability is not decisive for competitors and a bundle or a tie between Skype and Microsoft's products will not be a must have product for enterprises. Furthermore Lync faces competition from other strong players in enterprise communications, such as Cisco.
As regards consumer communications services, the Commission found that Microsoft would not have an incentive to degrade Skype’s current interoperability as it is essential for Microsoft that Skype's services are available on as many platforms as possible in order to maintain and enhance the Skype brand. As regards the risk of tying or bundling, the Commission noted that the vast majority of consumers who acquire a PC with Skype already installed are registered Skype users and that most of them subsequently download a version different from the pre-installed one. Therefore, the proposed transaction will not change the current situation.
"As regards enterprise communications services, the Commission found that Skype is currently not an enterprise product, therefore its interoperability is not decisive for competitors and a bundle or a tie between Skype and Microsoft's products will not be a must have product for enterprises. Furthermore Lync faces competition from other strong players in enterprise communications, such as Cisco.
It's this latter paragraph, specifically its downplaying of Skype in the enterprise, that Cisco takes issue with; DeBeer writes, "Microsoft’s plans to integrate Skype exclusively with its Lync Enterprise Communications Platform could lock-in businesses who want to reach Skype's 700 million account holders to a Microsoft-only platform."
It seems fair to wonder why Cisco seemed to be banking so heavily on the EC applying conditions related to interoperability--and why, once those conditions were not forthcoming, Cisco waited almost half a year to file the appeal. We'd ask Cisco, but their PR department said, in sending out DeBeers' statement, that "This is the only statement we are making on the record."
As much as anything, this filing heats up what had been a pretty quiet issue; the Microsoft-Skype merger looked like a fait accompli, and it looked like Skype really was fading from focus in the enterprise. Clearly, Cisco doesn't see it that way at all, and isn't at all sanguine about the prospect of Microsoft using Skype as its exclusive public-network service.
We'll have to see what becomes of the appeal, but one thing it's already done is put Skype back into the enterprise spotlight.
