Voice over packet market projected to grow

The sluggish acceptance of voice over packet protocols isn’t stopping one of Canada’s largest telecommunications companies from moving over to an IP network.

Frost & Sullivan Thursday announced the results of the World VoP Equipment

Market Analysis study, which included a survey of vendors, carriers and financial executives. The research shows that the signs of life in VoP (which includes ATM, Frame Relay and IP networks) are weak globally but nonetheless endure, according Jon Arnold, Voice Over Packet Equipment program leader at Frost and Sullivan’s Toronto office.

“”For 2002 we are generally expecting a 20 per cent decrease in the market from 2001 levels,”” he says. “”But next year we are expecting a strong recovery which should carry through to 2006.””

Arnold blames the current state of the market on a general lack of understanding of how VoP can be used as a revenue-generating tool among competitive local exchange carriers and inertia among incumbent telecoms. VoP has also stalled due to low subscriber demand and lack of competition. On the other hand, Arnold says the enterprise market is slowly realizing the possibilities of the technology. As their interest grows, so will carrier support.

Telus Corp. is banking on enterprise interest. The company launched One-Click Calling, a Web-based real-time voice and IP enterprise solution, last year and a few weeks ago announced it is transforming its network from traditional circuit-based infrastructure to IP.

Switching over to a next-generation platform is going to allow Telus to deliver services to its enterprise customers, address service issues more quickly and allow users to simplify their infrastructure to just one IP network, says Dr. Girish Pathak, Telus’s chief technology officer. It will also save the customer money.

“”When you simplify the network, all of a sudden your capital efficiency goes up by 20 to 40 per cent,”” he says. “”When you factor that in together with the reduced operating costs of maintaining the different networks, you’re looking at another 20 per cent.””

Moving over to next-generation technology makes sense, Arnold agrees, and yet there has been significant resistance in the saturated North American telecom market. The most encouraging signs for VoP are coming from abroad, he says.

“”I really feel the bigger picture are these kind of global microdrivers — increased adoption of telephony being enabled by wireless, being enabled by IP. They are going to bring much bigger numbers of people over to VoP, whether it’s wireless or wire-line,”” he says. “”In 14, 16 months from now, I think the market is going to be much healthier then it is today.””

Though enterprises interested in implementing VoP systems is slowly building, most carriers are still cautious about it, so the pace of implementing next generation IP networks is slow, Arnold says.

“”To move the market forward, vendors need to show carriers how VoP can drive subscriber demand and how next generation networks can be deployed with minimal network disruption,”” he says. “” So far that’s not happening. The market remains supply-driven with fewer buyers. An implication of that, of course, is that the market really cannot sustain the current vendor pool unless demand really starts to build.””

Oversaturation and intense competition among CLECs is a big part of the fragile state of the VoP market, says Arnold, but it needn’t remain so.

“”The underlying motivator in telecom has shifted from greed to fear. Our view is that carriers should not fear next generation networks and that VoP users should not fear public switched telephone network. We feel that the future belongs to all of them.””

Comment: info@itbusiness.ca

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