Businesses Find VOIP, SIP Technologies Cost-Effective, Study Shows

A Frost & Sullivan report predicts solid future growth for SIP and VOIP technologies, though it warns that stiff competition would drive down margins for service providers.

According to Frost & Sullivan's "North American VoIP Access and SIP Trunking Services Markets" report, the market earned revenues of $717.3 million in 2009 and it is estimated to reach $3.9 billion in 2016.

The report predicts the market will continue to build on its "impressive, downturn-defying" 40.1 percent growth in user base and 22.3 percent growth in revenues in 2009, as enterprises look for cost-effective alternatives to their legacy time division multiplexing (TDM)-based communication infrastructure.
The company also predicted "intense" market competition and the resulting price pressures, at least when concerning the lower end of the market, as factors likely to keep the subscriber base growing at a faster rate than revenues, translating to lower margins for the providers. The report explained that as session initiation protocol (SIP) emerges as the standard for IP telephony and broader multimedia communications, customers are increasingly requesting service providers to bridge UC islands. Company analysts argued SIP trunking allows enterprises to breach the confines of their voice-centric IP PBXs and embrace the broader multimedia communications environment enabled by SIP.
"The majority of the installed customer premises equipment is still TDM private branch exchange [PBX] and therefore, a large percentage of the installed services base requires the deployment of media gateways for protocol conversion, while only a small percentage is direct/native SIP trunks connecting to SIP-enabled IP telephony platforms," said Frost & Sullivan Program Director Elka Popova. "Going forward, that ratio is bound to change as customers increasingly replace their legacy systems with new, hybrid or pure IP telephony equipment."
Popova noted end users prefer IP-based technologies, such as SIP trunking, for their ability to save costs by converging voice and data access lines and reducing long-distance calling charges. However, further analysis in the report determined their real attraction lies in the ability to support a more centralized application management and the integration of the telephony infrastructure with a variety of enterprise applications such as e-mail, customer relationship management (CRM) platforms, and unified communications (UC) applications that include messaging, presence and conferencing.
"Service providers are investing in enhancing their VOIP access/trunking services in terms of survivability, redundancy and trunk pooling to be able to offer greater value," Popova said. "Service providers have more or less overcome voice quality issues with their ability to provide different classes of service, dynamic bandwidth allocation and voice prioritization capabilities."