SIP Trunking, VoIP Haven't Been Outrageous Successes

How big a deal are SIP trunking and business IP telephony? Sure, those services are foundation services for any number of competitive local exchange providers. Adoption slowly is increasing. But how big a deal are those services, or unified communications, for that matter, in the grand scheme of things, for tier one service providers? You might be surprised to learn that the answer is "not much."

The penetration rate of SIP trunking in the United States is somewhere between five percent and 30 percent of all trunk lines. Some believe it’s on the lower end of this, right around five percent in the United States, about 2.5 percent in Europe and is almost non existent in Asia right now.

That isn't to deny that SIP trunking is vitally important to service providers who sell to small and mid-sized businesses, or to some enterprises and enterprise locations. It is to point out that total revenue is not large, in relation to total communications revenues.


U.S. wireless revenue in 2012 will be about $335 billion, while fixed network voice revenue will be about $132 billion, with an additional $38 billion in broadband access revenue and $6 billion in television revenue, for a total of about $176 billion in fixed network revenue, according to the Telecommunications Industry Association. 

In the U.S. market, for example, wireless now is 66 percent of total revenue; all fixed network services just a third.

So what of voice, the traditional “most important” revenue source. As it turns out, legacy voice still is, far and away, the most important revenue source.

VoIP will continue to expand at double-digit rates in 2012 followed by high single-digit gains, averaging 9.4 percent on a compound annual basis for the forecast period to $18.9 billion.

That compares with circuit-switched voice revenue that, though declining at a 1.5 percent compound annual rate through 2015, still will represent, in 2015, a $127 billion revenue stream. VoIP will amount to about $19 billion in 2015.

In other words, as a revenue source, legacy voice is seven times bigger than VoIP, you easily can conclude. 

That is not to deny the importance of VoIP in the consumer market. In 2012, VoIP access lines will be about 49 percent as large as circuit-switched lines, for example, suggesting that perhaps 58 million VoIP lines are in service. 

But the notable point is that VoIP does not represent all that much revenue. In 2015, declining circuit-switched voice will still represent an order of magnitude more revenue than VoIP.

In contrast, fixed network broadband access services will amount to about $46 billion in annual revenue by 2015. Entertainment video will contribute about $14 billion in annual revenue in 2015.

So VoIP will be a bigger revenue stream than entertainment television, but not by much. In 2015, legacy voice still will be the single most-important revenue stream for fixed-line service providers, by far, even though it is declining.

That is worth putting in perspective.

By 2015, total U.S. telecom industry revenue might be $337 billion. If that turns out to br correct, and the Gartner forecast also proves substantially correct, then hosted IP telephony would represent less than six tenths of one percent of U.S. industry revenue, being generous.

That is not to dismiss the importance of the new revenue streams. They are vital. But neither should one ignore the dominance of legacy revenues.