Carrier Evolution

Businesses continue to migrate to VoIP on their premises, but when it comes to calling outside their business, legacy technologies are not disappearing any time soon: T1 lines are still the most commonly used trunking service today, and will be in 2014, Infonetics Research says.

The use of SIP trunking is growing, as you might expect. Of the North American enterprises participating in Infonetics’ survey, a third use SIP trunks today, and a total of 42 percent plan to do so, by 2014.

Global service provider revenue from business and residential and small office and home office VoIP services totaled nearly $58 billion in 2011, up 16 percent from the previous year.

The number of seats for hosted business VoIP and unified communications services is on track to more than double between 2012 and 2016, according to Infonetics.

Whether those trends are a “good thing” or a “bad thing” probably depends one’s expectations. The consumer VoIP figures mostly are a “good thing” for cable companies and competitive telecom services providers, and arguably are not a good thing for most tier-one service providers and incumbents.

The revenue contributed specifically by business IP telephony, in the form of hosted PBX services, probably is a disappointment to many.

Over the next five years, all of the major U.S. telcos and cable TV companies are expected to lose small business customers to independent hosted IP telephony providers, according to Insight Research Corp.

Some might disagree with that analysis, arguing that cable operators will gain market share while telcos lose share, with the caveat being that “competitive local exchange carriers,” often operated by telcos, also will gain share. What might happen to independent CLEC share is less certain.

Whether that happens, or not, the larger point might be that in early 2012, hosted PBX revenue might amount to about $500 million annually, but that revenue wil grow to about $1.2 billion by 2015, Insight Research predicts.

Some might note that this is not a lot of revenue in a communications industry with the size of the U.S. market, representing wireless revenue of about $335 billion, while fixed network revenue will be about $176 billion, for a total of about $511 billion, annually, according to Telecommunications Industry Association estimates.

“The hosted PBX/VoIP service providers had only garnered less than four percent of the small business lines (seats) as of year end 2010,” Insight Research says. “This low penetration level, can be attributed to the lack of knowledge about the cost and functionality benefits of hosted PBX/VoIP services among the business community.”

Insight Research Corp. analysts apparently believe that understanding will grow, and so will acceptance. In fact, Insight expects a compounded annual growth rate of almost 25 percent between 2012 and 2015.

Growth of the whole market to about $1 billion by 2015 is within the bounds of reason, one might argue. In 2012, U.S. enterprises will spend about $1.7 billion on unified communications services, for example, after more than a decade of sales activity. So growth to about $1 billion annually wouldn’t be unrealistic.

U.S. spending on data communications is said to amount to about $34 billion worth of revenue in 2012, of which about $13 billion will be leased lines (T-carrier services such as T1s), according to TIA. About $12 billion will be spent on IP-VPNs, some $6 billion on ATM and Frame Relay. Business Ethernet will generate about $3 billion in revenue.

The point is that SIP trunking will grow; in fact even grow at double-digit rates, albeit from a relatively low base. If one assumes that SIP trunking comprises about half of all IP telephony revenues, then a current hosted IP telephony revenue stream of about $500 million implies a U.S. SIP trunking market possibly of $500 million or so.

Legacy voice revenues continue to represent an extremely-important revenue source, by way of comparison. Circuit-switched voice will in 2012 represent $132 billion of fixed network revenues, the TIA estimates.