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Microsoft Corporation (MSFT): Comcast Corporation (CMCSA)’s Skype Problems

I guess there’s a limit to how much money Comcast Corporation (NASDAQ:CMCSA) can milk from its customers.

Comcast is reportedly killing off the premium Skype service that it tried to lump with XFINITY last year. is reporting that the country’s leading cable company will stop selling the $10 a month Skype service that it offered subscribers to its higher-end service bundles.

It was a bad idea from the start.

There’s nothing wrong with Microsoft Corporation (NASDAQ:MSFT)‘s popular Web-based videoconferencing platform itself. The problem is that most people use Skype to make free calls over the Web. Why would someone pay $10 a month for modest camera set-top solution?

“Comcast Corporation (NASDAQ:CMCSA) will probably blow this opportunity,” I wrote at the time, after Comcast had announced the partnership with Microsoft Corporation (NASDAQ:MSFT), but before announcing its pricing strategy.

There’s a reason why Comcast has been shedding net video customers over the past few quarters: The company overestimates both its market position and what the market will bear. Instead of using the Skype package as a way to boost its retention rate, it’s probably going to see this as yet another juicy profit center.

Why did Comcast Corporation (NASDAQ:CMCSA) think that it could get away with charging $10 a month for what was essentially a webcam rental? Didn’t Comcast know that Skype users can call one another for free? Didn’t it see what happened to Cisco Systems, Inc. (NASDAQ:CSCO)?

Comcast CorporationCisco thought it could make a difference in the consumer videoconferencing market, but offering Umi Telepresence at a whopping $600 attached to a $25 a month subscription service was out of touch. Cisco eventually slashed hardware prices, and dropped the monthly service fee to the same $10 that Comcast Corporation (NASDAQ:CMCSA) was offering. It didn’t matter. Folks weren’t paying.

Umi got nixed last year. Now it’s time for Comcast to bury the dead.

It didn’t have to be this way. Cisco had no choice but to turn a profit. Comcast Corporation (NASDAQ:CMCSA) could’ve used this as a retention tool, keeping around folks on its lucrative Triple Play packages. Instead, the cable giant went for money.