Optical/IP Networks

Where Is VOIP?

Despite setbacks and delays, vendors of packetized voice products that run voice over Internet Protocol (IP) or Asynchronous Transfer Mode (ATM) networks insist their future will be solid in carrier networks -- even if it takes a while to get there.

”Trial activity has never been stronger, particularly in Asia and among U.S. incumbent carriers,” Hassan M. Ahmed, CEO of Sonus Networks Inc. (Nasdaq: SONS), a leading supplier of softswitches and media gateways, told Wall Street analysts this week. “We remain confident.”

But so far, the numbers speak differently.

After all, the point of Sonus’s conference call was to declare that earnings for the quarter ending March 31 will be about 46 percent lower than last quarter's, falling from $38.9 million to $21 million, a loss of $0.08 per share versus last quarter's loss of $0.04 per share (see Sonus Estimates 1Q02 Results). Sonus will make its official earnings announcement April 9.

Sonus isn't alone in expressing confidence in packetized voice in the face of market gloom. Even as rumors sprout in the dusky financial foundations of Nortel Networks Corp. (NYSE/Toronto: NT) (see Nortel: Dark Rumblings From Ottawa), that vendor is aggressively pursuing a voice over IP (VOIP) strategy worldwide.

Indeed, Nortel claims to have scored about $2 billion in contracts for its Succession series of VOIP and voice-over-ATM products to date (see Nortel Network Deployed in Romania, Nortel Deploys in China, Bell Canada Trials Nortel VOIP, Sprint, Nortel Ink Billion-Dollar Deal, and Qwest Pushes Packets).

Analysts confirm that the packetized voice market will be strong. The question is: When? "I don't think there's a service provider out there that doubts that voice over IP or voice over packet is the network of the future," says Tom Jenkins, VP of consulting at TeleChoice Inc.

Jenkins says carriers are increasing their use of packetized voice connections, but they are stalled in plans to expand them greatly or to add new kinds of applications, such as conferencing and messaging, that build on basic packetized capabilities. Those deployments probably won't pick up until the downturn diminishes.

"Carriers see voice over IP or voice over packet as efficiency measures that are cost reducing, as opposed to revenue generating," Jenkins says. And he's not certain when the trend will change: "No one knows just when the voice network will become fully packetized -- next year, in two years, in 15 years... It's also not clear how much of it will based on IP versus ATM."

In Jenkins's view, vendors such as Nortel, whose products are based on ATM, aren't moving too quickly to change. "Some say that only ATM can furnish 100 percent guaranteed quality of service," he says. While packet-based approaches like Multiprotocol Label Switching (MPLS) are moving toward guarantees, they're far from offering them. (For a recent take on the ATM/MPLS argument, see MPLS Will Outgun ATM, Says Poll.)

Kevin Mitchell, directing analyst at market research firm Infonetics Research Inc., says the current delay in adoption of enhanced services favors established vendors such as Nortel, Lucent Technologies Inc. (NYSE: LU), and Siemens AG (NYSE: SI; Frankfurt: SIE), which have an in with carriers through existing circuit-switched voice gear.

It's relatively easy for these players to add gateways and softswitches that work with carriers' existing kit, without threatening the service providers' infrastructure -- or their own contributions to it.

Once the market starts moving again, Mitchell says, things are likely to open up for newer players like Sonus and CommWorks, as well as for startups like Acme Packet (see Acme Software Vets VOIP ). But there will be consolidation too, he says. Indeed, Sonus recently was rumored to be a possible target for acquisition by Cisco Systems Inc. (Nasdaq: CSCO).

Despite the ups and downs, Mitchell remains optimistic, predicting that voice-over-packet revenues will increase more than 450 percent in North America over the next four years.

— Mary Jander, Senior Editor, Light Reading
sofswitch 12/4/2012 | 10:41:37 PM
re: Where Is VOIP? Talking about confidence, there are companies like Nexverse Networks that have the only cass 4 deployed softswitch with commendable performance
taking as many as 6 million minutes at the datavon site comprising traffic from worldcom, qwest etc. I differ what Kevin Mitchell opines; even though established circuit based deployments offer an existing platform for Nortel and their kinds, they have to prove their worth ; there are more small players in this space which are outdoing giants, which are usually overlooked santera, syndeo, unisphere etal.
ram1403e 12/4/2012 | 10:41:24 PM
re: Where Is VOIP? I agree, Nexverse has the product which is truly multi-vendor open, distributed softswitch platform. Nexverse softswitch delivers breadth of features which took decades for the big giants to built in. Big vendors had initial success because of their half-gen solutions which works in tandem with their existing switches.

Kevin Mitchell 12/4/2012 | 10:41:19 PM
re: Where Is VOIP? OK, so what about customers and revenues? No (or very few) new comer is powerful. Small, yes, but not powerful. Softswitches and new telephony products in PowerPoint looks fantastic and unbeatable. This market is just getting started, so no vendor has an unassailable position at this point, but some have an inherent advantage. Some small upstarts may get bought and even fewer may be succesful, but all the legacy voice players realize that packet voice is the future.
MP_UK 12/4/2012 | 10:41:03 PM
re: Where Is VOIP? I've seen it pointed out that many of the large incumbents are not _yet_ interested in VoIP - the logic being that they all ready have a working voice network, and introducing a cheaper (and maybe less reliable,) service would be like shooting themselves in the foot.

Are the current VoIP platforms based on end-to-end IP for national / international calls over the internet? Or are they IP voice gateways that convert from packet to V5.2 / SS7 interfaces?

I'm confident this technology makes sense - not sure when I expect to see lots of it deployed though...
mespinoz 12/4/2012 | 10:39:37 PM
re: Where Is VOIP? This document don-¦t tell us that solutions over H.323 and SIP aren-¦t scalable for SP services.
MPLS is a great advance in QoS over IP, but many VoIP platforms are using voice specific data networks only for international calls.

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