IMS equipment sales set to grow by 50 percent. Will it matter?

IP Multimedia Subsystem (IMS) is a classic. Several years ago it hit the news as the ‘next big thing.’ Then, in time honored traditional it all but disappeared.

Now Infonetics predicts that the IMS equipment market is on track to gain over 50% in global revenue in 2011, compared to 2010. Behind the growth are telco giants China Telecom, China Unicom, and Deutsche Telekom who are undergoing significant ‘Class 5’ replacement projects, while other huge players – AT&T, Verizon and Comcast – launch LTE or enhance cable services. According to Diane Myers, directing analyst on the study, “most incumbent operators have migrated to IMS for their fixed VoIP networks. IMS has become the de facto next generation voice architecture away from a softswitch architecture.”

Over half of this growth comes from North America, and driven in large part by Verizon Wireless and its LTE ambitions (CP: AT&T, Verizon meet 2011 LTE goals). Asia Pacific competes for strongest sales, though, winning 40 percent of the equipment revenue in the third quarter, according to Infonetics.

It turns out that IMS remains important as an invisible and very important glue.

It is important because it is possibly the telcos’ answer to the perceived threat from OTT players. When discussing OTT players the discussion about whether they are ‘friend or foe’ tends to concentrate around the ‘top end’ – commerce, video and games. However, there is an area where telcos are vulnerable. At a recent brainstorm event, STL Partners polled their audience of senior telco decision makers about the future of telco ‘basics’ – voice and messaging. The consensus was that messaging revenues would decline by 37 percent over the next three years, voice by 21 percent. The statistic itself is gloomy but not surprising, however in the current climate where economic doomsday scenarios seem probable, if not possible, the prospect of losing almost 40 percent of the revenue from a once solid line of business is daunting.

Messaging does not consume noticeable bandwidth (a megabyte of text messages would cost $1,250 if priced according to the average data plan) and so the ‘telcos can provide guaranteed quality of service’ argument does not fly, nor do any of the ‘telcos know their customers best’ arguments because messaging is a customer-to-customer concept.

The hope of the GSMA and industry Goliaths is that IMS will defeat the siege of Skype and other hordes. They have built RCS and now RCS-e around IMS. Embedded in a mobile phone’s address book – whether dumb or smart – RCS-e allows customers to seamlessly message each other without having to launch an application.

There are advantages and disadvantages to the RCSe/IMS approach and much of the fight back will depend on brand, trust and convenience and the hope that no new, universal messaging service is offered ‘over the top’ – free and by someone really cool.