Consumer cutbacks freeze carrier spend on VoIP

Home foreclosures and a generally bad economy are driving down demand for wired phone lines, which will freeze much carrier spending on VoIP infrastructure until 2011, according to a new Infonetics report.

Service provider spending on key VoIP gear to transition their networks from TDM dipped 8 per cent in the third quarter, the second quarter in a row for such declines, according to an Infonetics report, “Service Provider VoIP and IMS Equipment and Subscribers.”

As consumers buy fewer phone lines — because foreclosed homes don’t need phones, and in tough times consumers cancel them and rely on cell phones — carriers have less need to provision new ones, says Infonetics analyst Stephane Teral.

He projects that the economic downturn will last through 2009. “The math at the moment looks like in 2010 things will start back on track. In 2011 we’ll see the real pickup and the start of deployments,” Teral says.

Meanwhile, mobile carriers will likely continue to invest in IP infrastructure as demand for mobile services continues to grow. But while mobile carriers will buy more session border controllers (SBC) for negotiating connections across carrier networks and softswitches that provide intelligence for network services, those increases won’t offset the decline in sales to wired carriers, he says.

Infonetics had an inkling of this decline in the second quarter when sales of SBCs dipped, indicating that carriers had enough of the devices to handle demand for IP call setups across disparate networks. “That’s how we figured the VoIP subscriber rate was slowing down,” he says. The trend was confirmed in third quarter with declines in sales of media gateways and softswitches, he says.

Service providers have been carrying out a transformation of their Class 5 TDM networks to IP as increased demand for landlines warrants upgrades, Teral says. Carriers still want to carry out that transformation, but will wait until they need added capacity, he says.

Cable providers that have been planning to adopt new cable voice infrastructure will also likely put their plans on hold, since customers tend to retreat to basic cable services during recessions, not upgrade to more services, he says.

Some of the decline in sales of VoIP infrastructure can be blamed on the completion of major projects by Bell Canada, Verizon and others, he says.

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