Report: Subscribers Continue To Push VoIP-Gear Growth

The growing momentum of Internet telephoning is driving a boom in VoIP gear, which jumped 69 percent, to $452 million, in the third quarter, according to a report released Monday by Infonetics Research.

"And this is still in the early stages," said Kevin Mitchell, the co-author of the report, in an interview. "The service providers are moving from providing VoIP infrastructure for traffic between carriers. Now they're moving into providing VoIP gear directly to subscribers." Mitchell said sales of VoIP next-generation equipment are growing across-the-board, from voice application servers and session border controllers to softswitches.

While sales jumped 69 percent in the quarter from the same period last year, Infonetics said revenues were up 13 percent from the second to third quarter. Long term, annual revenue should grow to $4.8 billion in 2007, from $1.3 billion in 2003.

Mitchell, who is an Infonetics managing director, noted that telephone-service providers are still spending billions on traditional voice switching, although they would prefer to be spending more on VoIP and less on legacy infrastructure. "Over the next 10 to 15 years, the equipment is eventually all going to be next-gen [for VoIP]," he said. "But billions are still spent on legacy technology for traditional voice switching."

Voice-application servers are beginning to sell in ever-increasing numbers, he added. The leading suppliers in voice-application servers are Sylantro, Broadsoft, and VocalData.End-user demand is driving a boom in Class 5 softswitch revenue, which Infonetics pegged at $76 million in the third quarter. Although revenue from Class 4 softswitches is still higher than is revenue from Class 5, Mitchell said end-user and subscriber VoIP growth is increasingly pulling up the Class 5 products. Infonetics said Nortel Networks accounts for nearly 50 percent of the Class 5 switch market; Siemens is second.

Driven by the demand for switching between legacy TDM and new-generation switching, worldwide media gateway revenue is also increasing, Mitchell said. This market segment is led by Cisco Systems, followed by Sonus, a relative newcomer to the market.

Mitchell predicted the next-generation VoIP product mix will record a strong compound annual growth rate moving toward 2007.