In the absence of VoIP traffic, mobile operators do not have a pressing need to adopt IMS as a mechanism for call control and subscriber management. For converged operators (operators with both fixed and mobile subscribers and networks), the ability to substantially reduce the number of network cores, equipment vendors and application providers via adopting an IMS core network offers great promise for cost savings.
Dell'Oro believes that the economics of this type of convergence have encouraged much of the merger and acquisition activity among both service providers and equipment vendors. It is likely that the promise of cost savings will drive IMS into mobile applications in converged operators before mobile-only operators.
Nearly all mobile voice traffic is currently based on legacy digital technologies; consequently, mobile-only service providers will have no incentive to replace their considerable installed-base of circuit and packet core equipment. When operators begin to deploy VoIP in the radio link, we expect to see an aggressive shift in spending on mobile core equipment to the IMS components of call server control function (CSCF) and home subscriber server (HSS). CDMA 1X EV-DO Revision A subscribers notwithstanding, this shift will likely not occur until 2010 at the earliest when operators migrate their subscribers to radio technologies that enable VoIP, namely 3G LTE, WiMAX and CDMA 1X-EV-DO Rev A.
Mobile operators are currently deploying IMS-complaint applications like push-to-talk (PTT) and location-based applications as an overlay to their existing mobile core equipment. This core equipment consists of either MSCs or mobile NGN equipment, (media gateways and softswitches). We do not consider these overlay deployments and application servers as part of our accounting of the IMS core, as our forecast focuses on the basic call control and subscriber management aspects of IMS, specifically the CSCF and the HSS. As a result, the Dell'Oro Group's forecast for core IMS is relatively muted in the short term as it parallels the adoption of VoIP in the radio link.
Limited mobile IMS core revenue
As a result of these trends, we forecast that the market for IMS core equipment, driven by mobile subscribers, will increase from $65 million in 2007 to $1.1 billion in 2011, for a compounded annual growth rate of 102%. While the market is expected to post explosive growth rates, we expect that in the short-term IMS core revenues will account for less than 15% of the total mobile core market, including circuit MSCs, NGN and IMS core equipment, in 2011. Nevertheless, as network operators conduct trials and deploy IMS-based applications in an overlay fashion, they will be laying the framework for even more substantial revenues in the years beyond 2011.
We expect that the total market for subscriber licenses spanning circuit MSCs, NGN softswitches and IMS CSCF will closely follow net subscription additions - upgrades should help to offset decreasing net subscription additions, which will likely begin to decline in 2007. Moreover, we believe that replacements or upgrades will comprise about 25% of subscriber license shipments; net subscription additions will account for the balance. We expect that the upgrade portion of the market will increase to 43% of total shipments in 2011.
IMS (or CSCF) subscriber licenses will likely account for 20% of total mobile core subscriber licenses in 2011, up from less than 2% in 2007. We expect NGN softswitch subscriber licenses to peak in 2009 at 25% of the total mobile subscriber licenses and then will decline on both an absolute and a relative basis as NGN sales are displaced by IMS.