Internet Telephony Market /////PASTED from
deltathree.com
Experts say that the question is no longer whether but when many consumers and businesses will start using the
Internet in big numbers, particularly for faxing.
"This is the start of the next generation telephone industry",
says Jeff Pulver, an Internet analyst leading the group Voice on Net Coalition, an organization originally formed
to resist phone industry attempts to regulate the use of the Internet for voice calls.
Forecasts show that by the year 2000, a strong population segment will use Internet-based calls routinely. The
President and CEO of RSL COM, Itzhak Fischer, estimates that 15% of all international phone calls will be carried
over the Internet by year 2000, and some claim the figure will be as high as 34% by 2005. Phillip Tarifica also
reports that there will be an increasing abandon of traditional telephony in favor of Email and Internet
telephony.
Traditional international phone calls will amount to 79 billion minutes by the end of the year and are growing at
15% annually as estimated by IDC, and is a $60 billion market today according to Mr. Fischer. According to the
same source, Internet telephony amounts today to only 198 million minutes will be growing by 220% annually
(Evagora, 1997; Frost &Sullivan, 1997; Macavinta, 1997; The Wall Street Journal, 1997).
The market is estimated to be worth some $ 600 million by the end of 1999, when there will be more than 16
million users. The total market of Internet telephony is estimated to be 1.89 billion by the end of 2001.
According to Frost & Sullivan, the market should experience a five-year compound annual growth rate of 149%.
*****According to Killen & Associates, revenues from Internet telephony will reach $63Billion by 2002. Killen currently pegs
revenues at $741Million.
According to Forrester Reasearch of Cambridge, Mass. Internet telephony is expected to reach $2 billion by 2004.
Total Internet Telephony Market: Revenue Forecast (World),
1995-2001
Revenues ($Billion) Graph-see Link=2Billion
deltathree.com
(Frost & Sullivan, 1997)
Market saturation should be low because of the recent technology. This implies a smaller contribution to the
market and investments in marketing compared to a saturated market. Client software and gateways both have
a high innovation rate; vendors release upgrades frequently. This is typical of the IT industry.
The Pacific Rim, European and rest of the world markets are growing in importance on a world scale, in relation to
that of North America. In 1996, 65% of revenues came from North America. In 2001, it is projected that only 26%
of revenues will come from North America, while 28 % will come from the Pacific Rim, 31% from Europe and 14%
from the rest of the world.
The estimated revenues by geographic region for the total Internet telephony market is: 500 million in North
America, 523 million in Pacific Rim, 592 million in Europe and 274 million in the rest of the world.
Market potential for Phone-to-Phone or Fax-to-Fax services is over 800 million telephone, mobile phone and fax
users.
Increase in revenues will likely be driven by the following factors:
Toll-bypass capabilities
Rapid product quality improvement
Spreading interoperability
Introduction of gateway technology
Growth of Internet and Intranets
Desire to maintain a single voice and data network
Greater efficiency of packet switching technology
(Frost & Sullivan, 1997, p. 3-12)
Trends for the future will be to offer multimedia communication and to deploy Internet telephony products with
computer telephony integration (CTI) equipment.
Ip faxing
Fax is one of the most frequent communication tools used in today's companies. Fortune 500 employees
responsible for fax transmissions sends an average of 41 five-page documents per day, (in mid-sized companies,
the average is 36 four-page documents) (Tarifica, 1997, p.67). The market for IP faxing services is also very
fragmented because competitors from what were traditionally two distinct markets, the enhanced fax service
bureau and the ISP markets- are converging to create the IP faxing market, says de Repentigny from Frost and
Sullivan (PR Newswire, 1997)
Client Software Market
In 1996, revenues from the client software market reached $15.1 million. Revenues are expected to grow with a
compound annual growth rate of 39 percent, to $79.7 million in 2001.
The reason for the above figures (much lower than for the hardware market) is that three largest companies in
the industry, Netscape, Microsoft and Intel, have each launched high-quality Internet telephony packages that
are either completely free or bundled without charge into broader products for sale. This means in reality that
nobody is going to make money from selling stand-alone Internet telephony software.
According to Frost & Sullivan (1997), a company should focus on client software if it can use it to add value to
other products such as a software suite and thereby raise profit. Prices are also dependent on software
functionality; software with more sophisticated capabilities tend to be more expensive. Many companies are in
the client software market because it is an older market (than hardware), but also because a large number of
these vendors do not rely solely on Internet telephony products for revenues.
Total Internet Telephony Client Software Market:
Unit Shipment and Revenue Forecasts (World),
1995-2001
Revenues ($Million)
(Frost & Sullivan, 1997)
Growth in revenues is driven chiefly by the following factors:
Media attention
Growth of the Internet and intranets
Rapid quality improvement- most software offers full duplex communications and the transmission delay
associated with most products has decreased from a few seconds to 200 milliseconds.
Acceptance of multimedia computers (requisite for IT) and hardware. In addition it is expected that most
multimedia computers will soon come equipped with IT software.
A desire to integrate voice and data networks (call centers): telecommunications and computer
technologies are converging. IT is the first step towards a "single-client desktop".
Trends:
Emergence of interoperable products
Increase in number of OEM agreements
Increase in the number of bundles with software suite
Product migration from voice to multimedia communication (Frost & Sullivan)
Gateway market
In 1996, revenues for the gateway market reached $4.7 million. Revenues are expected to grow, with a
compound annual growth rate of 229 percent, to $1.81 billion by the end of 2001.
Total Internet Telephony Gateway Market: Unit Shipment and Revenue Forecasts
(World),
1996-2001
Revenues ($Million)
(Frost & Sullivan, 1997)
Growth in revenues is driven chiefly by the following factors:
Sound quality and reliability
Toll bypass capabilities
Need for companies to cut telecommunication costs
Adoption of Internet telephony by carriers: Carriers are willing to offer cheaper long distance calls to be
competitive.
Trends:
Move towards interoperable products
Integration of circuit-switched and packet-switched networks
Transformation of gateways from a switch-type device to an intelligent agent with advanced call
management capabilities
Rapid growth for gateways with fax capabilities
REFERENCES
Evagora, Andreas, IP Voice seeks a pitch - Internet telephony providers ponders marketing options, tele.com,
November 1997.
Flynn, Laurie, More using Internet to send faxes, phone calls, Austin American-Statesman, November 22, 1997.
Goodin, Dan, Hands-off policy on Net phones, The Net, September 8, 1997.
Internet Telephony Consortium, Bristol, England, 12th &13th June, 1997.
ITU, Challenges to the network: Telecoms and the Internet, 1997.
Jacksom, Tim, A Small Earthquake Shakes The Telcos, 1997.
Macavinta, Courtney, Big AT&T loss to PC phone, The Net, May 7, 1997.
PR Newswire: Frost & Sullivan: Internet Protocol (IP) Faxing, How to Find Your Niche in a Highly Fragmented
Market, December 8, 1997.
Tarifica, The Internet Telephony Report: An Analysis Of The Threats & Opportunities For Market Entry, 1997.
TeleGeography (George C. Staple, Ed.), Global Telecommunications Traffic Statistics & Commentary, 1997 98.
The Wall Street Journal, AT&T Startup Plans Service Allowing Internet Calls Using Traditional Phones, December
1997. |
