Voice Over IP Sales to Reach $4 Billion

Voice over Internet Protocol (VoIP) gateway sales will increase 280 percent during the next five years, reaching $3.8 billion in 2003, according to research by Cahners In-Stat Group.

Cahners’ report “Voice Over IP: The Promises and Challenges of Internet Telephony” found that VoIP is driving the convergence of voice and data networks and promises to deliver significant cost-savings to both end-users and service providers. The research also found that equipment vendors and service providers will benefit the most from VoIP.

Other findings of the Cahners’ report include:

• ISPs are rapidly transforming themselves into Internet telephony service providers (ITSPs) and are tapping into a market that currently represents as much as 70 percent of traditional carriers’ revenues. The final competitive shakedown between carriers will drive innovation and result in more choices for end users.
• In the long run, quality and innovation will outpace price as the primary market driver — especially in the US, where long distance rates are currently in a downward spiral.
• Enterprise demand for VoIP will not take off until more vendors offer enhanced monitoring and support for Signaling Network Management Protocol (SNMP).
• VoIP traffic predominantly travels over private corporate Intranets or virtual private networks because of the Internet’s inherent unmanageability.

According to the report, many believe VoIP will lead to free long distance telephone service, but Cahners does not believe that is true.

“Many of us long for the day when we can just pick up the phone, dial a long distance number, and not pay a dime for the call, but it’s not going to happen,” said Laurie Gooding, senior analyst at Cahners In-Stat Group. “Service providers are in the business of making money, so while you might not pay per-minute charges, you’ll stay for the call.”

Cahner’s report includes five year projections for sales of VoIP gateways and market shares for the remote access concentrator (RAC) and router VoIP gateway segments, which represent most of the major networking vendors’ solutions.