x
Optical/IP

Softswitches Head for a Shakeout

A flurry of news about softswitches in the past week or so might give the impression that there's some life left in the market for next-generation voice equipment.

Analysts, however, paint a gloomy picture. They say the market is down a lot this year and isn't likely to bounce back anytime soon. Before it does, a big shakeout is likely, they add.

Softswitches were the darlings of the telecom boom, since they're designed to combine voice with data, creating new kinds of services and streamlining the management of converged networks. The segment filled will startups seeking to compete with existing voice switch suppliers, like Alcatel SA (NYSE: ALA; Paris: CGEP:PA), Lucent Technologies Inc. (NYSE: LU), and Nortel Networks Corp. (NYSE/Toronto: NT), which offered their own alternatives in the hopes that established carriers would rip and replace their PSTN gear.

But the capex famine has dashed the hopes of many companies, raising questions about the segment's future. "The softswitch market is in a bit of a mess right now... The major problem is that the RBOCs are not ready to start shelling out for these devices... and the existing players have just about tapped out the market for Internet offload and other applications that were representing the bulk of sales," writes Joe McGarvey, senior analyst at Current Analysis, in an email to Light Reading today.

But there are signs of hope as well. Indeed, recent headlines are a mix of good, bad, and puzzling. Here's a rundown, bad news first:


  • September 24: Sonus Networks Inc. (Nasdaq: SONS), the only publicly held company dedicated to softswitches, forecasts a 60 percent revenue slide this quarter. Sales are expected to fall to an estimated $7 million for the three months ended September 30, compared to $21 million for the quarter ended June 30. Those June results also were down a whopping 60 percent from the same time in 2001. The company, which has undergone sizeable layoffs (see Sonus Lays Off), attributes the plummeting sales to ongoing gloom in the telecom market. Sonus is set to announce its earnings tomorrow, October 9.

  • October 8: [email protected], a maker of call center applications, announces that its latest product contains a softswitch capable of translating among a range of different voice and multimedia protocols.

  • October 7: Telica Inc., a privately held company recognized by most analysts as a key player, announces a $10 million supply contract with KMC Telecom, an alternative carrier with services in 35 U.S. cities. The telco plans to use Telica's Plexus 9000, which features both a softswitch and attendant gateway functions, to roll out new services (see KMC Deploys Telica Switches). Telica claims to have over 25 customers, even though it's announced about 14, including a quintet of alternative service providers announced September 24 -- the same day Sonus warned.

  • October 2: CommWorks, another private company, announced last Wednesday that it's been approved for use on the network of Deutsche Telekom AG (NYSE: DT). CommWorks also counts WorldCom Inc. (OTC: WCOEQ), Telecom New Zealand, and several U.S. ISPs among its customers.

Analysts say these snippets typify several trends. First off, the mix of good and bad news is typical of the segment's peculiarity, they say. "Softswitching is very unusual technology that doesn't conform to traditional product adoption curves," says Tom Valovic, program director at IDC. While his firm forecasts a $3 billion market in softswitches worldwide by 2006, the going will be tough. Different technical approaches, carrier secrecy about replacing existing PSTN gear, and a host of other factors guarantee a "three steps forward, two steps back" progression for the foreseeable future, he says.

Others say the news shows how companies like Telica have sought and found alternatives to RBOC traction that's not forthcoming. "Given the overall economic malaise, a lot of suppliers have started targeting the cable market and independent operating companies," says Kevin Mitchell, directing analyst at Infonetics Research Inc. He says more than 1,000 rural LECs in the U.S. are looking for new equipment that gives them an edge.

Observers generally agree that the strategy of selling to alternative carriers will only go so far, though. McGarvey of Current Analysis says sales of softswitches to cable suppliers are likely to take off before the RBOCs start replacing their Class 5 residential voice equipment, "but it's going to be a slow climb and it's doubtful that the market will be able to support all of the players that are going after it."

In the meantime, McGarvey sees new kinds of products emerging, such as softswitches designed to replace old Centrex services with new "hosted PBXs." In this space, companies such as BroadSoft Inc. might make good with server-style products geared to specific applications (see BroadSoft OKs Ingate SIParator).

Predictions vary as to when the softswitch ship will finally come in. "Late 2003 or early 2004 if we're lucky, but later if the economic downturn continues to worsen," says IDC's Valovic. In the meantime, he says there will be ongoing consolidation in the form of mergers -- and outright failures. "It has to happen for things to move forward," he says.

Softswitches were the topic of a recent Light Reading Webinar and will be featured in an upcoming report. Click here for the archived Webinar.

— Mary Jander, Senior Editor, Light Reading
www.lightreading.com Want to know more? The big cheeses of the optical networking industry will be discussing softswitches at Lightspeed Europe. Check it out at Lightspeed Europe 02.

Page 1 / 3   >   >>
neenie1 12/4/2012 | 11:11:15 PM
re: Softswitches Head for a Shakeout For a student paper, I am trying to understand what REAL telephony people think about NACT/Verso. Any unbiased opinions about anything in that regard?
BobbyMax 12/4/2012 | 9:35:47 PM
re: Softswitches Head for a Shakeout SoftSwitches were advertised as replecemennts for Class 5 and Class 4 Switches. Software switches were present as IP switch,DSLAM Connectivity switch.

Softswitch technology, if it can be called a technology, is not a carrier grade technology. It would be tremendous mistake if any carrier buys this technology.

If one looks at the background of management of Softswitch companies, a very few of them any sustantial telecom experience.

Softswitch will never become a carrier grdae product. There are no credible standard. Theswe guys have not gone through the Bellcore/Telcordia switching standards.

There are about 14 softswitch companies. In due course all these companies would close down as there is no market for these products.
jgh 12/4/2012 | 9:35:45 PM
re: Softswitches Head for a Shakeout I agree with most of what was said. Remember these companies were chasing the CLEC market, which today is non existent.
If you go any of their web sites, Sonus, Telica, Taqua, Santera, Convergent, etc, you'll see in their news releases some small sales to rural independent companies or in the case of Santera, an effort to sell overseas (China).
Convergent is now chasing the MSO market with their Cohesion product for VoIP, good luck in that dysfunctional industry.
BTW, has anyone heard of the state of Oresis.
nt_survivor 12/4/2012 | 9:35:44 PM
re: Softswitches Head for a Shakeout The Nortel CS2K is an exception as it is based on proven carrier-grade DMS technology. As such, it's more expensive than some other products.

The enterprise market may be an area where these other softswitches at least have a chance.
farmboy 12/4/2012 | 9:35:44 PM
re: Softswitches Head for a Shakeout You guys are forgetting that service providers like Verizon have live traffic on softswitches (Nortel's to be specific).
There is no way Verizon would have live traffic on a softswitch if it wasn't carrier-grade.
Half-Inch Stud 12/4/2012 | 9:35:42 PM
re: Softswitches Head for a Shakeout Ahem,

Softswitch methods don't have to be Carrier-Grade when applied to Cable (Lightning outages, heat/cold/wet exposure) Distribution. In fact, video-conferencing is the easy way out of any Telco requirement, imposed on CATV carriers. Video-Conf is construed as non-essential entertainment-based communication. Even when the users chooses audio-conference only.

Celluar system link budget outages (know affectionately as Coverage) don't even come close to requiring Carrier-Grade connectivity&reliability...so the hard&soft guts may as well be just rugged and pretty good. Billing accuracy seems to drive that Softswitch reliability.

Since the Cable guys are the near-term growth market, then do the crystal-ball thing on Communications&Data-Transfer Markets and the conduit of choice.

Cable
Cellular, wireless portable
DSL, Telephony

That's what I think, and I'm sticking to it.
H.I. Stud
gea 12/4/2012 | 9:35:42 PM
re: Softswitches Head for a Shakeout Actually it is not nesessary to know anything about Soft switcher, because no teknolgy develop after 1975 has ever proven to work. Because of this, it is obvious that Softswitcher does not work and never will work, even 100 years from now. In fact, not one softswitcher has ever been sold or builded or even working in laboratory ever.

And of course, electrical power is not very reliable, so all central officials have animal-powered generators. Animal power does not come from VCs or startups and so is 100% reliable.
gea 12/4/2012 | 9:35:42 PM
re: Softswitches Head for a Shakeout Actually it is not nesessary to know anything about Soft switcher, because no teknolgy develop after 1975 has ever proven to work. Because of this, it is obvious that Softswitcher does not work and never will work, even 100 years from now. In fact, not one softswitcher has ever been sold or builded or even working in laboratory ever.

And of course, electrical power is not very reliable, so all central officials have animal-powered generators. Animal power does not come from VCs or startups and so is 100% reliable.
dljvjbsl 12/4/2012 | 9:35:41 PM
re: Softswitches Head for a Shakeout
Softswitch methods don't have to be Carrier-Grade when applied to Cable (Lightning outages, heat/cold/wet exposure) Distribution.


What sort of services ould cable then supply if it could only supply non-essential services:

residential - 911 req'd so no
commercial - we can't gurantee connectivity to your customers s a big No
institutional - fire, plice, hospital, school -- very very very big No's

I just do not see the application that can be covered by a system that can be used only for non-essential services.

Half-Inch Stud 12/4/2012 | 9:35:41 PM
re: Softswitches Head for a Shakeout Hey, where did the Telco Market & Application go?

Uhm, adjacent markets are beautiful, approachable, and should be embraced.

H.I. Stud
Page 1 / 3   >   >>
HOME
Sign In
SEARCH
CLOSE
MORE
CLOSE