Service providers are upgrading the systems used to provide voice services for the first time in many years. But the upgrades come at a time when the industry is in the early phase of a technology transition to software-defined architectures.
The last big buying cycle for voice services was driven by growth in mobile subscribers. Service providers bought a growing number of soft switches and media gateways to meet the demand until about 2008. Since then, subscriber growth has leveled off, and service providers cut their spending on voice systems in half.
Thanks in part to the advent of 4G LTE networks, service providers are back in an upgrade cycle, and spending on voice systems is on the rise. Revenues for the carrier IP telephony market grew about 19% in the first quarter of 2014 and are likely to increase in the coming year driven by the rise of Voice over LTE (VoLTE) and the need to replace aging 2G and 3G gear.
In mid-May 2014, AT&T, NTT DoCoMo, and Hong Kong Telecom launched commercial VoLTE services in limited markets, a year after operators in Korea and the US had their first VoLTE deployments. They all used the same phone, the Samsung Galaxy S4 Mini, which suggests handset support is still limited.
To deliver VoLTE, service providers need to deploy three classes of systems in the following order: IP multimedia subsystems (IMS) and voice applications services in the core network and session border controllers toward the network's edge. To date, it's taken service providers nearly three years from the time they start deploying IMS until they switch on VoLTE, but that lag time may decrease as technical hurdles become better understood.
While this upgrade cycle is going on, the communications industry is in the process of embracing virtualization.
In the past, new features were delivered by vendor-specific bundles of hardware and software. But the move to network function virtualization (NFV) lets vendors deliver features as software that could run on a variety of hardware platforms, including x86 servers. In addition, NFV promises to ease the job of automating network configurations as traffic patterns shift.
Incidentally, NFV doesn't necessarily imply Intel and AMD will reap a windfall. The x86 is already a widely used processor in communications appliances and ATCA-based systems.
The NFV change is coming on fast. In the first six months of 2014, almost half of all requests for proposals specified some level of support for NFV. Dell'Oro projects that in about five years as much as 25% of all licensing revenues in the carrier IP telephony market will be for software-only products.
The jury is still out on the question of just how much the move to software-only products could lower revenues for systems vendors.
Some of the first NFV-related contracts are under negotiation right now, and many NFV projects are still at the lab or field trial stage. In some cases, vendors are paying the costs of these trials.
The rollout of LTE and voice systems for it will last for the next decade. Vendors benefiting from today's resurgence in voice systems will have to embrace NFV if they want to participate in future waves of upgrades, however large or small those waves may be for them.
— Chris DePuy is Vice President of Market Research for carrier IP telephony at the Dell'Oro Group in Redwood City, Calif.