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Service Provider VoIP Market Down, But Shows Signs of Recovery

November 21, 2008
By Michelle Robart, Business VoIP Editor

With everyone thinking twice about making purchases, thanks to a declining economy, the service provider VoIP market took a hit for the third quarter this year.
 
The market saw an eight percent drop during 3Q08, falling to $816 million. This decrease was mainly due to cut backs from large RBOCs and ILECs, who reduced their spending on VoIP equipment purchases, says a new report from research firm, Infonetics Research.


 
The research report shows that the overall market weakness in 3Q08 was led by a significant drop in the high density media gateway segment, as well as a decline in the softswitch segment.
 
Despite this decline, there were some positive findings in the research. Sales were up for session border controllers and media servers in 3Q08, although not enough to make up for losses in other segments in the next generation voice market.
 
"Third quarter service provider VoIP equipment sales confirmed what we started seeing in the previous quarter: in North America, carriers were already slowing their VoIP investments after completing major projects; in Western Europe and some parts of Asia, such as South Korea, inventories were already high. The quarter also reflects the global economic downturn, which is turning the expected VoIP deployment dip into a drop,” explained Stephane Teral, principal analyst for VoIP and IMS at Infonetics Research.
 
He added that new VoIP projects will be delayed at best, and some may be cancelled altogether, as more consumers ditch their fixed lines, thus cutting the need for wireline upgrades.
 
“As such, we are predicting a 2-year pause in the overall carrier VoIP space, with a pick up expected in 2011," said Teral.  
 
Another positive, the report showed that sales were up for softswitches, SBCs, and media servers year-over-year from 3Q07.
 
Cisco shook up the worldwide trunk media gateway market with a 37 percent sequential jump in revenue in 3Q08, moving them to the number-one spot, followed by GENBAND and Huawei. Nortel maintains its number-one position in the worldwide softswitch market.
 
The report also showed that cable MSOs are likely to postpone PacketCable 2.0 deployments for residential VoIP due to the weak economy. However, given how bad the current economic situation is, the 5-year outlook for service provider next-generation voice is looking brighter. Voice over broadband (VoBB) will continue to be the big driver across the board.

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The Infonetics' report tracks VoIP subscribers and carrier VoIP equipment, including high-, mid-, and low-density trunk media gateways, SBCs, media servers, class 4 and class 5 softswitches, and IP Centrex/hosted IP PBX, IP trunking, and residential voice application servers. The report tracks at fixed-line and mobile network IMS core equipment, including HSS, CSCF servers, media resource function, breakout gateway control function (BGCF), application servers, and PSTN gateways.
 
Since 1990, Infonetics Research has been providing international market research and consulting to the communications industry. An innovator in defining and tracking emerging and established technologies in all world regions, Infonetics helps clients plan, strategize, and compete more effectively.

Michelle Robart is a contributing editor for business-voip. To read more of Michelle's articles, please visit her columnist page.

Edited by Michelle Robart

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