News

Cisco Protests Microsoft's Skype Buy to EC

• By Kurt Mackie
• February 15, 2012

Cisco Systems Inc. has appealed the European Commission (EC) to reconsider its approval of Microsoft's proposed acquisition of Skype.

The EC "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," said Marthin De Beer, senior vice president of the Cisco Emerging Business Group, in a blog post on Wednesday.

De Beer didn't give details about exactly which standards Cisco wanted supported. Skype uses its own proprietary and closed-source Skype Protocol technology, which enables voice-over-IP calls across the Internet via peer-to-peer connections. Skype uses G.729 and SVOPC audio codecs for voice chats. For video, it uses the open source VP8 codec fostered by Google, plus the proprietary H.264 codec for high-definition video, according to a description compiled by Wikipedia.

The Skype service works across multiple platforms, including mobile devices and Sony PlayStation gaming consoles. According to comments made in May by Microsoft CEO Steve Ballmer, Skype's technologies may be rolled into certain Microsoft products, such as Outlook, Xbox, Kinect, Messenger, Hotmail and Lync.

Lync is Microsoft unified messaging platform for business users, but Microsoft has typically explained the Skype acquisition as enabling broader connections for organizations using Lync. Skype is primarily a consumer service that gives Microsoft access to about 170 million Skype subscribers. (Skype's numbers vary, with the company having said it had 30 million simultaneous users on Skype back in March.)

De Beer said that Cisco was only focused on "securing standards-based interoperability in the video calling space" in lodging its appeal with the European Commission. He also complained about potential vendor lock-in with the integration of Skype into Lync.

"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."

The EC dismissed competition concerns in October 2011 when it approved Microsoft's acquisition of Skype. It said at that time that Skype was a consumer product and that Microsoft's Lync faced adequate competition in the enterprise space from companies like Cisco. The U.S. regulatory approval of the deal happened earlier in June. The $8.5 billion deal was announced in May, representing Microsoft's largest acquisition purchase in its company history.

Microsoft issued a general statement to various media outlets, claiming that it will prevail against Cisco's appeal.

"The European Commission conducted a thorough investigation of the acquisition, in which Cisco actively participated, and approved the deal in a 36-page decision without any conditions. We're confident the Commission's decision will stand up on appeal," Microsoft's statement read.