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February 09, 2006 (IDG News Service) -- Carriers' large-scale transition to voice over Internet Protocol (VoIP) may not begin in earnest until 2010, though spending on gear for the new calling technology will roughly double over the next five years, according to research company Dell'Oro Group Inc.
Network equipment providers sold about $2.4 billion worth of dedicated VoIP infrastructure products in 2005, a number that will grow to $4.7 billion by 2010, according to Steve Raab, an analyst at Dell'Oro in Redwood City, Calif. Dell'Oro counted soft switches (servers that switch packet-based calls), media gateways (devices that translate between packet and circuit-switched networks) and products that combine those elements, Raab said. It did not include VoIP elements built into other products such as multiservice switches.
Competitors to the incumbent telephone companies, such as cable operators and pure VoIP providers like Vonage Holdings Corp., have led the way on the new technology. VoIP typically is less expensive to provide and lends itself to new features such as click-to-dial and unified voice and e-mail messaging. Traditional carriers have rolled out services such as Verizon Communications Inc.'s VoiceWing but have not marketed them aggressively, Raab said. They would rather keep customers on the existing public switched telephone network (PSTN) in which they have so much already invested.
"They want to have a competitive solution, but they don't want to push the transition now," Raab said.
Established carriers are carrying more voice calls as data packets in the core of their networks and will eventually replace their circuit-switching technology with VoIP, but that older equipment has depreciation cycles as long as 30 years, Raab said.
"That transition is extremely young right now," Raab said. Entire networks, including customer-facing infrastructure at the edge, may start to get a wholesale retrofit starting around 2010, he said, though there are many variables that could change that picture over the next five years. Key questions include how many consumers simply drop land lines for cell phones and how quickly they adopt the emerging fixed-mobile convergence technology, which replaces cell phones and fixed-line phones with a single device that can operate over a wireless LAN at home and on a cellular network outside.
Growth over the next five years will come from a combination of replacing existing infrastructure and overlaying VoIP on current broadband networks in highly developed countries, along with the use of VoIP to reach new phone users in less developed regions, Raab said.
Meanwhile, the explosive growth in VoIP gear revenue in recent years may be slowing down because of falling prices and the dynamics of a market that's no longer growing up from almost nothing, Raab said. In the product categories noted above, Dell'Oro reported 48% revenue growth for equipment providers between 2004 and 2005, but it forecasts only about 25% growth in 2006.
Reprinted with permission from
For more news from IDG visit IDG.netStory copyright 2006 International Data Group. All rights reserved.
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