Consolidation threatens SBC market

From the time they hit the market in the late 1990s, session border controllers were labeled short-timers. Experts said they wouldn't last as a standalone network element. So far they have, but consolidation in the space and changes in network architecture could be signaling the end.

Despite the dire warnings, entrepreneurs believed there was plenty of time to make their mark or their fortunes, whichever the case. Thus, new companies such as Acme Packet, Data Connection, Jasomi, Kagoor, Netrake, Newport Networks and more sprung to life to fill a legitimate need: security and access services in voice-over-IP (VoIP) networks, peering and other interconnection functions.

Just one year ago, at Fall VON 2005, Malik Khan, chairman and CEO of NexTone Communications, reiterated that session management would be among the most important aspects of the Internet of the future and that a new generation of session-layer specialists would run the networks of tomorrow.

Yet speculation continued that while session management was indeed an important function, it just might not be represented as a standalone network element, that it would be subsumed by the softswitch or one of the gateways.

Fast forward to July 2006 and NexTone is crowing about record bookings through the first six months of the year thanks to growth in intercarrier VoIP peering and enterprise session initiation protocol trunking. The company added 66 service-provider customers in that time and in the second quarter alone grew revenues by 59% sequentially and 187% from the same quarter in 2005.

“We believe NexTone is well-positioned to continue its sales momentum and leadership for the rest of 2006,” Khan said.

NexTone's primary competitor, Acme Packet, also has had a good year. As of Aug. 1, Acme had more than 275 interactive communications service provider customers in more than 55 countries. And at the end of June, the company had earned more than $38 million compared to 2005 full-year earnings of $36.1 million. The company filed for an initial public offering in June.

Kevin Mitchell, director of solutions marketing at Acme Packet, said the SBC is part of the next-generation infrastructure migration, just like softswitches and loop carriers. And Infonetics Research still sees the SBC market practically doubling this year and next to reach $310 million by 2007.

So why the persistent talk about the death of the standalone SBC? First, the rest of the market has not fared as well as Acme Packet and NexTone in terms of number of customers and revenue generated. Netrake, which according to Frost and Sullivan led the pack in February 2005 with a 29% market share, accepted a paltry $10 million from Audiocodes last month to be acquired. Kagoor went to Juniper, which recently sounded the death knoll for its standalone SBC line, and Ditech Communications bought Jasomi in 2005.

But more important, companies such as Sonus Networks have begun incorporating more SBC functionality into their products, as it did with a new release of a network border switch earlier this month.

“The SBC is really an edge element designed to secure the network, but if you ask yourself what it is you want to do with traffic once it's in your network, you want to switch it and apply all the necessary service logic,” said Hassan Ahmed, chairman and CEO of Sonus. “There is no point in having a separate box in the network to do that.”

Ahmed said that in the long term there really isn't a sustainable standalone SBC market. “It will end up being absorbed into another network element,” he said.

Mitchell doesn't buy it. “It's not like SBCs aren't in demand or that people don't need them,” he said. “Our numbers just show a different story.”

Still, the pace of consolidation in all segments of the market suggests it is only a matter of time. Then again, people have been saying that since 1998.

Related Articles

Closed mergers face more scrutiny

Sonus adds SBC function to small border switch

Acme Packet gets RUS for session border control