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Mind Share
October 2001

Marc Robins

Hard Numbers For The Softswitch Market



I was recently made privy to a comprehensive new report on the softswitch technology marketplace, researched and written by Herb Tinger, someone I consider to be one of the best and most knowledgeable communications technology analysts around today. Herb currently serves as lead analyst of the Communications Infrastructure practice at Advest, an investment research and services firm based in Hartford, CT.

The study, Softswitch Technology: Communications Infrastructure for the Next 100 Years, takes an in-depth look at the emerging opportunities for softswitch technology in today's communications networks, and provides a wonderfully lucid background of the technology leading up to the development of these "legacy circuit-switch killers." The report also provides numbers for the projected size of and growth opportunities for the market, and offers concise profiles of 48 softswitch vendors.

Salient highlights from Herb's softswitch research neatly sum up the opportunities facing vendors in this space:

  • Ever since the invention of the phone in 1875, the PSTN has evolved into the most reliable network in the world, designed to have 99.999 percent availability, or just 5.25 minutes of downtime per year. However, the rapid rise in data communications and Internet usage has taxed the limits of the circuit switched infrastructure, and new, packet-based switching solutions are poised to take center stage as the next generation network technology.
  • At the heart of this evolution are softswitches, which allow service providers to separate the proprietary functionality of legacy circuit switches into three distinct layers: Transport, call control, and applications and services. This new, open standards-based architecture offers both efficiency and cost savings for service providers, enables new revenue sources, and ultimately increases customer loyalty.
  • The softswitch solution, which is made up of four separate components including the media gateway controller, media gateway, SS7 signaling gateway, and the applications server, is still in the early stages of development. The softswitch seeks to surpass the functionality and performance of legacy circuit switches by providing drastically lower cost, higher scalability, easier management and deployment, and solid reliability and performance.
  • Softswitches only have a limited track record to date, they have not yet been able to equal Class 5 switch functionality, and they face several significant obstacles to deployment including unproven technology, scalability, and perceived reliability. Despite all this, technology and solution performance is doubling every 18 months, and the latest softswitch iteration reached the market earlier this year. It's a good bet that Class 5 capabilities are likely to be available by the end of the year.
  • The softswitch potential market is quite large, and worldwide revenues are expected to expand from approximately $700 million in 2001 to $7 billion in 2004, according to most market research estimates. Recognizing this opportunity, nearly 60 vendors supply some type of softswitch solution, and industry consolidation and segmentation is already occurring on a fairly regular basis.
  • The switch replacement opportunity for softswitch solutions is very meaningful, as Advest's research estimates that a total of 25,512 Class 5 switches and 1,428 Class 4 switches will be installed by 2003. The combined switch replacement opportunity does not take into account international markets, or the number of softswitch deployments that have and will occur without actually replacing a legacy switch, which would push the revenue potential even higher.

Softswitch technology is a major catalyst for the transformation of the PSTN network to a next-generation environment. Once the hanging technical issues are resolved, and full Class 5 functionality is achieved, softswitches promise to impact the communications industry in a number of major ways.

For one, the technology promises to ultimately collapse the existing circuit switched and packet-switched networks into a single, highly efficient network. It also can enable new enhanced services creation and use by taking advantage of both packet switching and VoIP technology, and perhaps most important of all, leverage a new, modular network architecture (which includes open, standards-based hardware and software) to simplify and expand upon the current capabilities of packet switching solutions.

To contact Herb Tinger and get more information about his research, call 518-226-7324, or e-mail [email protected].

Marc Robins is vice president of publications at TMC and associate group publisher for INTERNET TELEPHONY magazine. Marc has been covering the communications industry since 1980, and his column takes a look at some of the more interesting trends vying for attention in our industry. Please contact Marc with comments at mrobins@tmcnet.com.

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