Internet Voice Applications Taking Off

Voice over Internet Protocol is the fastest-growing market in global communications, according to research conducted by Frost & Sullivan, and this growth will be most most explosive in the IP appliance segment, which includes IP phones.

IP phone and appliance shipments for 2000 will total more than 790,000 units, and unit shipments will almost double each year for the next several years, Frost & Sullivan found. Revenues in the IP phone and appliance market are projected to reach $2.7 billion worldwide in 2006.

“Small to medium-sized businesses are increasing in number faster than any other group within the enterprise community. Given the similarly explosive growth in broadband local services such as DSL, the demand for IP phones will be tremendous,” said John Kincaide, director of Frost & Sullivan’s VoIP equipment research program. “The beauty of IP phones is that small businesses can now enjoy the robust communications capabilities that were previously only available to large enterprises through much greater investment in PBXs [definition]. This trend will be most prominent in conjunction with broadband local services like DSL coupled with softswitch deployments.”

The VoIP market has developed in stages; where initially the only application for enterprises was simple toll bypass, Kincaide said it is now entering a stage where IP phones will proliferate, and the application value of VoIP at the desktop will begin to drive the market.

The market for IP phones will accelerate more quickly once new, revenue-generating applications emerge from softswitch vendors for service providers to deploy. Softswitch vendors have been focused on Class 4 tandem routing or Internet offload types of applications, which are of little benefit to IP phone vendors, and do not bring new applications to users. The climate is shifting toward demand for new, richer applications that will entice end users. Class 5 features like call waiting and call forwarding are beginning to be offered, but they are only the start.

International Data Corp. (IDC) forecasts that Web talk applications such as high-fidelity PC-to-phone calling, unified communications, voice-enabled e-commerce, and Web-based conference calling will drive total IP telephone traffic to 470 billion minutes in 2005.

“This increased usage is nearly 100 orders of magnitude greater than the 5.5 billion IP telephony minutes projected for 2000,” said Mark Winther, IDC group VP of telecommunications research. “By 2005, IP telephony will account for more than 47 percent of total US long distance and international voice traffic.”

To put the growth of Web talk services into perspective, Hotmail, the first Web-based free email service passed 1 million subscribers in its first six months; ICQ, the first real-time text chat service took five months to reach 1 million registered users. Dialpad.com, the first to launch free PC-to-phone calling services, reached 1 million registered users in 60 days.

According to IDC, emerging communications ASPs and traditional carriers alike face enormous opportunities to capitalize on the potential of Web talk services. “Telephony is the next breakaway IP opportunity. Even more significantly, enhanced Web talk applications are the solution to the death spiral of long distance telephony pricing. Smart companies will integrate the power of the Internet with the familiarity of the telephone to revitalize the global $800 billion telecommunications industry.”

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