Demand Up, Prices Down for VOIP Equipment: Report

Market research firm Infonetics Research released its third-quarter Service
Provider VOIP Equipment and Subscribers and IMS Equipment and Subscribers
market share and forecast reports, which found the total service provider VOIP
equipment market, including trunk media gateways, SBCs, media servers,
softswitches and voice application servers, decreased 9 percent from Q2 to Q3,
to $511 million.

While revenue is down for the quarter, shipments for almost all segments in the
market are up sequentially, with Asia Pacific the only region expected to post
year-over-year revenue growth in 2010 for service provider VOIP equipment. In
the third quarter 2010, Genband led the combined carrier VOIP and IP Multimedia
Subsystem (IMS) equipment market for worldwide revenue.

The worldwide IMS equipment market, including IMS core equipment and
application servers, grew 4 percent in Q3, on the heels of a 34 percent jump in
the previous quarter. In Q3, the four top vendors—Alcatel Lucent, Ericsson,
Huawei and Nokia Siemens Networks—continue to fight it out for new deals and
replacement RFPs. Ericsson and Nokia Siemens saw revenue growth with Call
Session Control Function (CSCF) in a relatively flat quarter.

"The No. 1 story that will come out of 2010 for the IMS and carrier VOIP
equipment markets is China,
where conditions are driving volumes up and pushing prices down. There are
large network transformation projects under way in China, so demand for
equipment is very strong, but at the same time, vendors are willing to push the
pricing limits to get into strategic accounts,” said Diane Myers, directing
analyst for VOIP and IMS at Infonetics. “In the third quarter of 2010, every
product category except media servers was impacted by pricing pressures, so
while shipments were up for most segments, total worldwide revenue took a hit.”

Overall, the IMS equipment market is experiencing strong and healthy growth,
the report concluded, driven in the near term by the continued adoption of VOIP
services and service provider migration of VOIP services to IMS networks.
Longer-term, the report predicted the IMS market will get a boost from the push
for enhanced mobile services, with Long Term Evolution (LTE), a preliminary mobile
communication standard, being the most significant driver.

“Looking at the long-term prospects, the network elements that are best poised
for solid growth are those that facilitate the migration to all-IP networks,
such as session border controllers (SBCs),” Myers added.