Despite Hype, IP Telephony to Account for Less Than 10 Percent of Voice Revenue

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BOONTON, NJ. August 15, 2000:

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North American packet telephony revenue, which includes IP telephony, will top $33.9 billion in 2004, but will only account for 10 percent of total North American voice revenue, says a new report by Insight Research.

According to Insight's report IP Telephony versus Circuit Switching: Service Revenue and OSS Expenditures in Voice over Packet Networks 2000-2004, IP telephony is part of all voice over packet (VoP) calls. VoP includes all packetized voice such as VoIP, voice over frame relay, voice over ATM, and voice over DSL, plus combinations. Over the next few years, digital packet-switched technology will displace circuit-switched technology because of the lower cost of transporting and managing packetized traffic. However, incumbent carriers cannot totally abandon the billions of dollars already invested in circuit-switched technology; existing infrastructure will heavily influence the speed at which the larger carriers will deploy IP telephony. Moreover, customers may be attracted to the lower price of IP telephony, but quality-of-service and ease-of-use––unsettled issues with IP telephony––are still required to produce widespread acceptance.

"We consider our forecast of IP telephony to be somewhat conservative,as our model assumes only minor moves by AT&T, MCI WorldCom, and Sprint to voice over packet," says Robert Rosenberg, president of Insight. "But we're still forecasting a 120 percent compound annual growth rate for voice over packet from 2000 to 2004. A major commitment by any one of these incumbent long distance carriers would increase our estimates. However, we just don’t see the traditional IXCs adopting VoP as aggressively as the ILECs, CLECs and ISPs. Instead, they may wholesale services from other VoP providers."

Additional data in IP Telephony versus Circuit Switching: Service Revenue and OSS Expeniditures in Voice over Packet Networks 2000-2004 includes forecasts of total carrier revenue, voice revenue, and VoP revenue in North America and International markets. A free report excerpt and table of contents is online at www.insight-corp.com/iptele.asp.

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Donna Savino

at Insight Research

973-541-9600