Yes. he said the xbox one was sending out 720p video and I said the file says thats what the xbox is receiving and he never responded back. IF The xbox was sending out 720p video it wouldnt be pixelated .
I've been fighting this same issue, and noticed something interesting during a Skype call last night. I was using Skype on my xbox one, with my folks on their PC. They said the video was crystal clear, and looked beautiful, and it was this way for about 40 minutes straight. Then my daughter wanted to show a small toy to my folks, so she walked up and held the toy pretty close to the xbox one camera. Immediately after that, my folks said the video was now severely pixelated and aweful, and it never recovered during the addtional 10 minutes after that point. Several other people posting in this thread hint at the fact that video quality goes South after xbox one is auto-zooming. I'm wondering if Skype (or xbox one itself) flips to a different resolution, or a different quality setting when it has trouble focusing? I'm pretty confident that if my daughter had not brought the toy up close to the camera, the quality would not have suddenly dropped. It really seems like this triggered the pixelation somehow, and it aligns with others saying that pixelation was introduced after camera zooming. I highly doubt that my network conditions suddenly changed the very moment that my daughter stressed the xbox one's camera focus.
NOTE: The video appears very good in the little box that shows our own video - it is not blurry, or otherwise bad, but it's so small that it's hard to say if there is any pixelation within that little image. I thought I should also mention this to avoid any suggestion that my xbox one camera is out of focus, or otherwise not clear.
The fact that it never recovers again is a different issue - I would have hoped that skype (or xbox one itself) would re-evaluate conditions again after some (small) amount of time, rather than permanently sticking with low/bad settings.
Just for additional information, my NAT type is shown as "Open NAT", I have 50mbps down and 10mbps up, and have 100% of the skype ports (UDP and TCP) being allowed through my router to the xbox one.
What do you think...?
I have the same issue. I have high connection speed of 60 MB download and 20 MB Upload. I've had the problem with EVERY Skype call nationally and internationally. Using my Android tablet, or even my PC is fine. This poor quality is ONLY on the Xbox One.
I keep seeing people post "me too" replies to this thread. In the interests of directing people to useful information, gathering useful input and reaching resolution, I'm closing this thread and marking this reply as the solution.
For anyone that is experiencing video quality issues when using Skype for Xbox One, please see Ian's troubleshooting post.