NGN spending outlook mixed as VoIP slows, policy grows

Large service providers are already pulling back on VoIP equipment purchases, though other key components of next-generation IP-based networks – such as policy servers, for adding intelligence and control to the network – are expected to grow even in the face of an overall spending downturn, according to market research firm Infonetics Research.

Led by a decline in purchases of high-density media gateway servers and a corresponding dip in softswitch buys, the VoIP market fell 8% sequentially to $816 million in the third quarter of 2008, Infonetics said in a report released this week on service provider VoIP and IMS equipment spending.

Yet not all sectors of NGN are seeing a pullback. Infonetics also reported that purchases of mobile and fixed-line policy servers are expected to double in 2008 versus the previous year and double again in 2009. Overall, it predicts policy server revenue to reach an accumulative total of $1.6 billion between 2007 and 2011.

The predictions reflect the economic downturn and expected reduction in carrier capex spending. But they are also in line with general trends in the deployment of NGN and IMS networks, in which straightforward service replacement – such as in the case of VoIP calling replacing existing landline services – is often hard to justify.

At the same time, when deployments are in support of an important new service or network capability – such as is the case with policy servers – carrier pocketbooks open up. Policy servers allow providers to add rules-based intelligence into the network, for instance creating rules to manage consumption of broadband data usage or to route personalized content or advertising to a subscriber.

“Policy servers are fast approaching ‘must-have’ status,” said Jeff Heynen, Infonetics analyst and author of the policy server report, in a statement. “Our discussions with service providers either currently deploying or planning to deploy a policy server indicate that the incremental cost of a policy server platform is well worth the capital outlay, especially in mobile networks where broadband data usage is soaring.”

Infonetics expects spending on policy servers for mobile applications to be triple that for fixed-line servers by 2001. It named Alcatel-Lucent, Bridgewater Systems, Camiant, Ericsson, Juniper and Nokia Siemens as the major policy server players in the market today.

The spending story was not as rosy on the VoIP front, which had already been slowing before the economic downturn. Infonetics expects some new VoIP projects to be postponed, and some cancelled altogether, crediting not only the economy but consumer moves to ditch landline service entirely for mobile phones. Infonetics predicted a two-year “pause” in overall carrier VoIP spending, accelerating again in 2011, according to Stephane Teral, Infonetics principal analyst and author of the VoIP spending report.