Market Insight

RESEARCH NOTE - Service Provider VoIP and IMS Market Hits Record High; Transition to Virtualization Underway

March 13, 2017

Diane Myers Diane Myers Senior Research Director, VoIP, UC, and IMS

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Following is information and insight from IHS Markit about our Q1 2017 Service Provider VoIP and IMS Equipment and Subscribers Quarterly Market Tracker, which contains data and analysis for the quarter ended December 31, 2016. 

Highlights

  • Global service provider voice over IP (VoIP) and IP multimedia subsystem (IMS) revenue hit a record high—$5.4 billion—in 2016
  • Still, growth slowed in 2016 as operator spending on voice over LTE (VoLTE) tapered following a big ramp the prior two years, particularly in North America and Asia Pacific
  • The transition to virtualization is in motion; virtualized solutions will contribute a larger portion of overall VoIP and IMS sales as operators continue to migrate to network functions virtualization (NFV) environments

Our Analysis

Worldwide service provider VoIP and IMS revenue totaled $1.5 billion in Q4 2016, rising 1 percent from the year-ago quarter. The increase was due to VoLTE spending and softswitch/gateway upgrades in North America and the Caribbean and Latin America (CALA). Combined revenue in these regions was up 59 percent year-over-year in Q4 2016.

The carrier VoIP and IMS market posted a record year in 2016, narrowly squeaking out a gain (+1 percent) due to strong activity in CALA, where VoLTE deployments are just beginning, and in Europe, the Middle East and Africa (EMEA), which was bolstered by VoLTE and network upgrades. The market didn’t post the big gains seen in 2014 and 2015, and we don’t expect it to in the foreseeable future. Leading the way in the taper was North America, with Asia close behind with its own slowdown.

Currently, growth is coming from VoLTE projects in EMEA and CALA, as well as Class 5 network transformation projects. Fixed network expansions and upgrades, particularly for softswitch and trunk media gateways, continue at a steady rate. As of February 2017, 100 operators—up from 48 in January 2016—have launched commercial VoLTE services, with more coming online each month across every region.

Network transformation projects, particularly in NFV, are well underway. In 2016, virtual network functions (VNFs) comprised 46 percent of media resource function (MRF) sales, 25 percent of call session control function (CSCF) and home subscriber server (HSS) sales, 33 percent of voice application server sales and 4 percent of session border controller (SBC) sales. These splits are trending as anticipated, and virtualization will make up a larger portion of revenue as operators continue to migrate their networks to NFV.

Looking ahead, worldwide service provider VoIP and IMS revenue is forecast to reach $4.8 billion by 2021, a -2 percent 2016–2021 compound annual growth rate (CAGR). New VoLTE network deployments are expected to slow and overall spending will fall into a steady pattern. Growth will also be dampened by downward pricing as a result of competitive pressures and large deal sizes.

Report Synopsis

The quarterly IHS Markit VoIP and IMS equipment report provides worldwide and regional vendor market share, market size, forecasts through 2021, analysis and trends for trunk media gateways, SBCs, media servers, softswitches, voice application servers, HSS, CSCF, IM/presence application servers, fixed versus mobile IMS core network equipment and subscribers.

Geography
Global
Research by Market
Enterprise & IT
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