Study: IP service take-up in Europe below expectations

Despite massive capital investment in telecommunication infrastructures across western Europe, sales of IP (Internet Protocol) services in the region are much lower than projected and will grow only moderately over the next two years, according to a report published Wednesday by the Frankfurt office of industry consultancy Cap Gemini Ernst & Young and Dresdner Kleinwort Wasserstein, the London-based market research arm of Dresdner Bank AG.

The study forecasts sales of IP services to grow from their current US$14 billion to around $17.5 billion over the next two years. Authors of the study say this growth is “too little” to help the financially troubled sector get back on its feet.

For the study, Cap Gemini Ernst & Young and Dresdner Kleinwort Wasserstein conducted interviews with 50 corporate users, 15 service providers and 10 equipment suppliers on service, IP migration and QOS (quality of service).

Interviews with corporate users, service providers and vendors revealed several benefits of IP-based services. To name a few:

• Open standards accelerate the development of new applications;

• Users can easily connect to all networks regardless of operating system;

• Packets are dispersed and assembled using resources only when required.

Still, the reality over the past two years, the authors write, is that “IP’s promise of delivering better, cheaper and simpler service has not always been fulfilled.”

Of the 50 users asked about VoIP (voice over IP), 30 cited shortcomings in quality and reliability for not using it. The benefits of VoIP, they said, are hard to justify when QoS issues are not yet resolved.

Around 90 per cent of the companies said security is a key barrier to deploying IP-VPN (IP virtual private networks).

Equipment costs remain high, with payback still uncertain, according to the study’s findings. Corporate users say IP phones are too expensive, with cost savings possible only when unit costs reach $100 each.

The cost of a traditional PBX (private branch office exchange) is lower than that of an IP PBX when its implementation costs are included.

Moreover, falling PSTN (public switched telephone network) prices have eroded VoIP’s price advantage.

As for simplicity, 60 per cent of the corporate users said ease-of-use issues remain a barrier to IP-VPN. Migration to new IP services has often resulted in requirements to operate simultaneous systems. And service providers have not resolved all issues related to interoperability, billing and customer care,

A copy of the report can be obtained at: