From the Enterprise VoIP Experts

October 24, 2011

North American SIP and VoIP Trunking Market $2 Billion

By Contributing Editor

The revenue earned by providers of North American SIP and VoIP trunking services “is roughly $2 billion,” according to Elka Popova, Frost & Sullivan program director.

In 2010, the North American VoIP access and SIP trunking user base expanded at a rate of 65.6 percent and reached 7.2 million users, says Popova.  The installed base is expected to experience a compound annual growth rate of 35 percent to reach 59.1 million users in 2017 and generate service provider revenues of $7.44 billion.

At the moment, about 85 percent of sales are generated by organizations with 500 or fewer employees, considered to be small business by some, small and medium business by others.

It can be complicated to describe small and medium business SIP trunking and IP telephony revenues, for several reasons. A SIP trunk is a “voice service,” sometimes providing features, sometimes just the access to the long distance voice networks.

The Frost & Sullivan study, aside from including both U.S. and Canadian markets, defines “VoIP access” as  services including  VoIP trunking (converged access lines connecting with TDM enterprise telephony platforms) as well as Session Initiation Protocol (SIP) trunking (converged access lines connecting with IP telephony platforms).

The study also includes “basic VoIP access” services (converged access lines connecting with low-end key systems or directly with telephony endpoints).

The forecast does not include Time Division Multiplexing Centrex, Centrex IP, or hosted IP telephony (IP Centrex/hosted IP PBX) services.

So the Frost & Sullivan forecast includes both SIP trunking and “converged” IP telephony access, sometimes known as “integrated access.” That’s an important qualification. Other researchers, such as at Infonetics Research, point out that T1 lines are still the most commonly used trunking service today, and will be in 2013. T1 still dominant

SIP trunking adoption has been robust in 2010 and 2011, though. Popova’s own forecasts would suggest significant SIP trunking growth. SIP trunking grew more than 100 percent in 2010.

Revenue from SIP trunking services to businesses is forecast by Infonetics to grow at a phenomenal 52 percent compound annual growth rate (CAGR) from 2011 to 2015. 52 percent CAGR to 2015

So the $2 billion estimate for 2011 and the $7.44 billion estimate for 2017 include both SIP trunking and converged access.

The nuance here is that included within the “trunking” forecast are some amount of “line side” features that might otherwise be considered features of a hosted IP telephony service.

In a VoIP access or SIP trunking scenario, the service provider typically offers local dial tone, long-distance calling, and a limited set of call-management and control features such as extension dialing between intra- and inter-office locations, says Popova.

But Popova also notes that, increasingly, service providers are bundling VoIP access and SIP trunking services with various network-based communications applications and capabilities, such as hosted auto attendant, voicemail, unified messaging,  mobility, fixed-mobile convergence or some data services including Web hosting, Web e-mail, managed security.

The point is that what we generally consider “access” or “trunking,” and what we generally consider “calling features” and “voice services” is blurring. Over time, in fact, it is reasonable to assume that the line between “hosted IP telephony” and “trunking” will become rather porous in some ways.

The other nuance is that various companies will use different definitions when talking about “small” business,” mid-market or “medium-sized” business.

Frost & Sullivan includes within the small office and home office segment those organizations with five to 100 employees. Others might call that the “small business” or “micro-sized” segment.

The mid-sized business segment includes organizations with 100 to 499 employees, according to Frost & Sullivan. Others will refer to this segment as “small business” as well.

The large enterprise segment includes organizations with 500 or more employees, according to Frost & Sullivan. Some might say that is a “medium business” segment.

Some might wonder why SIP trunking hasn’t grown even faster than it has. “The gap is hard to explain,” says Popova. “Sometimes a SIP trunking provider doesn’t support the customer’s call control platform; sometimes the service level agreements are not right; in other cases there are important incumbent relationships and SIP trunking isn’t offered by those providers,” says Popova.

In other cases, buyers might simply not be comfortable buying from a smaller provider, Popova says.

Enterprise buyers are different from small businesses in several ways, and one difference is that larger companies might be more inclined to adopt hosted applications relating to video, mobility or fixed-mobile convergence, with value-added disaster recovery or security features, she says.

Gary Kim is a contributing editor for TMCnet. To read more of Gary’s articles, please visit his columnist page.

Edited by Rich Steeves