VoIP industry defying investor sentiment
As has been the underlying characteristic of VoIP industry over the last 7 years, the growth pattern refuses to change direction. Our 9th annual industry update published today reveals a yearly increase of 67% in VoIP access server licenses shipped worldwide, and a 35% increase in VoIP traffic.
There is no evidence yet of a long term slowdown in carrier spending. It seems that despite the risk of recession (especially in the US) carriers have no choice. They have to build out the IP infrastructure if they are to remain relevant.
The new investment cycle that started in 2004 to do with access part of carrier networks continues into 2008 and is likely to remain so through to 2009. That can be said with confidence in case of European countries at least. On a global level, even if the investment slows down due to financial issues, the carriers have to spend nonetheless. They have little choice, it seems. Due to the losses in landlines, wireline operators are expanding into mobile and mobile operators on the other hand are looking to leverage fixed broadband networks for voice offload or over-the-top services. The underlying technology that lets them both achieve those objectives tends to be VoIP.
The report covers various aspects of VoIP industry and is quite comprehensive as the previous annual reports. A lengthy post would not be possible. I have however listed a few bits from the Executive Summary below. A big thank you to those who ordered the report in advance. We appreciate your vote of confidence. There are also two other reports we announced today (Voice 2.0 and Mobile VoIP).
• SIP trunking has gained significant traction over the last 18 months. SIP trunking brings a few interesting opportunities. One is the possibility of services from the cloud. The enterprise segment has so far been a slow adopter of Voice 2.0 services that are hosted in the core. That will change with SIP trunking. SIP trunking is also driving Peer-to-Peer VoIP in enterprises as the trunking goes beyond IP PBX on to the end points as well.
• For the second consecutive year, Europe outpaced rest of the world in VoIP penetration. All major European operators – whether wireline or wireless – have a VoIP offering in place and have announced that they will be deploying IMS platforms.
• In the US, Cable companies are leading the deployments. That however is likely to change with the Voice-over-Fiber offerings from AT&T (and possibly from Verizon in the near future). We expect AT&T to become the market leader in the segment overtime. Verizon could have scalability issues due to its use of Open Source telephony platform for VoIP service.
• Two of the biggest trends in VoIP are Voice 2.0 (Communications aware mashups) and Mobile VoIP trends. See the previous two posts from today’s lot.
• Year 2007 saw emergence of SOHO and micro-enterprise focussed VoIP service providers. Some of the vendors have enabled mobile Centrex platforms for mobile operators that will be targeting this segment as well. These mobile operators are looking to offer PBX type features and features such a parallel ringing etc.
• Bilaterlal peering is driving a lot of switch migration. Multi-lateral or federation peering is not picking up speed yet although two of the biggest peering RFPs – GSMA and CableLabs - have been contracted out (both to Neustar). Cable companies in the US may have some incentive to not peer just because they have a regulated tariff that they can charge for traffic coming into their networks. In the US the companies that have the most incentive to do peering are wireless service providers because they do not have any kind of tariff protection that allows them to charge for access to their networks. So they are free to peer and do bilateral deals. But the challenge is that most of the dollar value opportunity in North American termination is to wireline numbers, not wireless just because of regulatory tariff structure. So while there is a big opportunity in doing peering for wireless in North America, the value is actually in wireline.
• Among larger/legacy vendors NSN and Huawei are doing well in the NGN voice. European and North American vendors are now able to compete on price and therefore able to compete with Huawei. That has also re-opened the Chinese market for North American and European VoIP vendors. Sonus continues to sign up tier 1s and is now considered as the VoIP incumbent. On the enterprise side, shipments are still dominated by Cisco and Avaya.
• There are over two dozen IMS projects worldwide that have reached an advanced stage of trial. Using applications servers as multiplay platforms across both wireline and wireless networks is already a reality. Swisscom and Korea Telecom are examples where this is happening.
• It is interesting to note that the traditional telecom vendors are starting to develop capability for ad supported telephony offerings. Some vendors are ready to support service providers that decide to adopt this type of model. Their application servers are able to mix existing and new services with advertising. Ad supported telephony is yet to be proven but there are various media oriented telephony companies in the field.
