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Infonetics: VoIP Service Provider Equipment Market Saw Revenues Decline 29 Percent in 1Q 2009

June 15, 2009
By Patrick Barnard, Group Managing Editor, Business VoIP

Due to the rough economy, revenues for the global VoIP service provider equipment market declined about 29 percent in the first quarter of this year – the sharpest quarterly decline ever – according to a new report from Infonetics Research.

 
According to the analyst firm’s quarterly Service Provider VoIP Equipment and Subscribers report, most VoIP service providers are hunkered down and trying to ride out the economic storm. As a result, many are putting network upgrades on hold.

And with so many people ditching their land lines and opting to go with only mobile service, it’s no wonder that some providers are hesitant to make substantial investments in their networks. Many businesses are also looking to migrate to IMS (which requires almost completely different equipment) so they their mobile workers can have access to the company phone system while they’re on the road. Many of these companies are planning to upgrade to IMS in order to take advantage of the cost savings and productivity-enhancing features it brings.
 
"The service provider VoIP equipment market had a rough first quarter across all product segments and regions, declining 29 percent sequentially in worldwide revenue,” said Diane Myers, directing analyst, service provider VoIP and IMS, Infonetics Research, in a release. “The market pause for VoIP equipment is being exacerbated by the global economic downturn as service providers put VoIP equipment purchases on hold.”

Myers adds that there has been a noticeable shift in spending from stand-alone VoIP networks to IMS deployments.

“While the core IMS equipment segments, CSCF and HSS, are still small compared to the service provider VoIP market, deployments remain strong in EMEA and Asia Pacific,” she said. “The core IMS equipment market had an impressive quarter with $63.7 million in revenue.”

The IMS equipment market is measured in Infonetics’ quarterly IMS Equipment and Subscribers report.

The firm’s Service Provider VoIP Equipment and Subscribers report for 1Q 2009 shows that most of the large Tier 1 service providers are coming to the end of major VoIP projects, and, given current access line declines and fixed-to-wireless substitutions, most ILECs and PTTs have put PSTN migration plans on hold and will reassess after the economy improves.

Still, it predicts there will be “pockets of growth” in certain areas – for example, the media server segment proved a small bright spot in the quarter, with worldwide revenue down only 7 percent, compared to the previous quarter, but up 19 percent year-over-year. North American service providers and call center providers continue to drive the media server market as the largest segment.

Worldwide revenue for VoIP equipment totaled about $600.4 million for the first quarter – that’s down about 29 percent compared to the previous quarter and down 33 percent compared to the first quarter of 2008. No particular product segment or region was immune to this decline, the report finds.

While this might be bad news for equipment makers, it is actually good news for business VoIP providers which have already completed network upgrades.

Established business VoIP service providers such as Nextiva, for example, have already built out their networks and thus are in a good position to conquer those competitors which have not.

The two main competitive advantages for business VoIP providers which have already upgraded is that they already have the infrastructure in place to deliver excellent quality of service, plus they can keep their pricing structures stable due to the fact that they don’t have to shell out capital for future network upgrades. Nextiva, for example, prides itself on the quality of its service, which is crystal clear and highly reliable.

The company’s Connect360 business VoIP service offers unlimited local and long distance, free auto attendant, and 25 advanced features including call forwarding, three or four digit extension dialing, dial-by-name directory, voicemail-to-email, three-way conferencing and more, starting at $19.95 a month. What’s more you get to keep your existing number and there is no contract and no setup fee.

Business VoIP providers such as Nextiva are also well-positioned because, despite the economic downturn, many businesses are nevertheless planning to upgrade to VoIP this year. Infonetics recently released the results of a new survey showing that companies still plan to invest in voice communications, not slash budgets as is feared by many in the industry.

With all the companies out there that are planning to migrate to VoIP – and all the service providers that are holding back on network investments – providers such as Nextiva are now in a position to gain a larger slice of the business VoIP services market pie.

Patrick Barnard is a contributing writer for business-voip. To read more of Patrick’s articles, please visit his columnist page.

Edited by Patrick Barnard

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