SIP trunking growth a boom for challengers

Jessica Scarpati
15 Apr 2011
00:00

After years of anemic growth, global Session Initiation Protocol (SIP) trunking revenue more than doubled over the past year, making it one of the fastest-growing segments of the Voice over IP (VoIP) market.

Incumbent service providers see this growth as nothing more than money draining from their legacy enterprise voice services, but carriers with limited enterprise voice market presence recognize SIP trunking services as an opportunity.

Worldwide revenue for SIP trunking services reached $599 million last year, a growth rate of 143% from 2009, according to Diane Myers, a directing analyst at Infonetics Research.

SIP trunking services cannibalize a long-commoditized legacy TDM business for large enterprise voice carriers. They see little opportunity for growth simply because enterprise customers won't pay more for voice services. The reverse is true for providers with a smaller stake in the market: They have the chance to take business away from large incumbent local exchange carriers (ILEC) that aren't as aggressive on SIP trunking in a given market.

"Because we have a relatively low market share here, I like going out and stealing market share out of a declining market because if it's a declining market, the incumbents are less likely to be investing heavily to keep that share," said Bill Long, senior director of enterprise voice product management at Level 3 Communications.

"We have around 1% market share ... so the extent that I can go out and grow that market share to 2, 3 or 4% [translates into] new revenue for Level 3 that we've never had before."

Larger operators have been reluctant to go after the SIP trunking market because many enterprise customers were not ready to natively support SIP on their IP public branch exchanges (PBXs) and would require on-premises gateways, typically session border controllers (SBCs), Myers said.

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