VoIP Adoption Soaring -- But Not Revenues

If consumer Voice-over-IP (VoIP) is surging, why are VoIP equipment revenues -- especially in a market segment that includes gargantuan players such as Cisco Systems Inc. and Alcatel-Lucent -- softening?

It depends on how you look at it, market watchers say.

First, if there's any softening, it's happening in the service provider segment. Second, service providers are still buying more VoIP gear than ever before (on a year-over-year basis). It's just that the VoIP equipment segment's second quarter performance fell off a bit from the torrid pace it set in Q1.

According to market watcher Infonetics, the worldwide VoIP market was down by 4 percent, thanks largely to a double-digit decline in the session border controller (SBC) and softswitch segments. That's the first-ever sequential decline for SBC, which dropped 14 percent between Q1 and Q2 of 2008.

If there's any softening, however, it's quarter-to-quarter, not year-over-year. Compared to 2007, the overall VoIP market is up by 3 percent -- spurred by strong gains in the media server and (surprise!) SBC segments.

For the rest of 2008, Infonetics projects, the VoIP should post strong growth.

"While down in the first half of 2008, we expect the carrier VoIP equipment market to bounce back in the second half, ending the year on a positive note. The five-year outlook looks good as well, as demand for VoIP networking gear continues unabated, driven by a long term migration from circuit switched to packet telephony," said Stéphane Téral, principal analyst for VoIP and IMS at Infonetics Research, in a statement. "Similarly, while the session border controller segment saw its first sequential decline this quarter -- due to a pause in deployments in North America and Europe where large service providers are maxing out their installed base rather than purchasing new equipment -- we expect it to pick up nicely in the second half of the year,"

In fact, Infonetics projects robust VoIP market growth through 2011, with the combined VoIP and IMS segments nearly doubling in revenues over the next four years. During that period, Infonetics says, IMS core equipment -- particularly for home subscriber servers (or HSS) and call session control function (CSCF) servers -- should account for most of that growth.

During the quarter just past, Alcatel-Lucent -- which seems to be hitting its post-merger stride -- rocketed up the charts, posting 173 percent sequential growth in DS0 shipments and landing in the No. 3 spot for DS0s and revenue.

Cisco, for its part, has had mixed results in the VoIP service provider segment. According to a recent survey of service provider customers, for example, Cisco ranks as one of the top five VoIP vendors in the industry, alongside rival Alcatel-Lucent and VoIP specialists Acme Packet and Sonus. Cisco was tops, overall, in terms of brand recognition, but trailed other players in the technology, product roadmap, security, management and price-to-performance categories.

About the Author

Stephen Swoyer is a Nashville, TN-based freelance journalist who writes about technology.


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