The Evolution and Impact of Business VoIP: A Carrier’s View

Mark Fishler

Vice President – Product Management, Voice and Data Business Services

“Although the consumer market has attracted the most attention from the press, the fastest growing VoIP market is hosted IP voice services for business customers.”

– IDC, September 2004

Source: IDC U.S. Hosted IP Voice Services 2004-2008 Forecast, September 2004

39% of Respondents are Current IPT Users

Source: The Yankee Group 2004 IP Telephony Deployment Strategies Survey

Which best describes your current use of IPT?

PartiallyDeployed

25%

FullyDeployed

5%

CurrentlyTesting

9%

Future Users61%

Current Users39%

22% of “Future Users” Plan to Deploy Soon

Source: The Yankee Group 2004 IP Telephony Deployment Strategies Survey

Future Users: What are your future plans?

Budgetedw/ in

12 mos22%

Test/Planw/ in

24 mos24%

Test in 12 mos

15%

Future Users61%

Current Users39%

Source: Yankee Group

RevenuesProductivity

Mobility

Cost and Network

Complexity

• Unified Communications• Real-Time Customer Info• Enterprise-Wide Networking

• Reduced Toll Charges• Integrated Wiring and Maintenance• More Operational Efficiencies • New Multimedia Offerings

• Broadened Delivery Systems• Increased Customer Contacts

• Anywhere, Anytime Accessibility• Increased Employee Flexibility• More Collaboration Options

Maximize Operational Excellence and

Innovation

IP Services Present a Significant Value Proposition

Evaluating Critical Networking Needs

Business Imperatives

IT Application

s

LAN/WANImplications

one. two. three.

IP Telephony Deployment Questions

• What technology platform should I implement?

• Will I need to throw out my existing investment?

• Will I save money over my existing TDM solution?

• Can I operate in a hybrid environment?

• Do I have the staff to operate a VoIP network?

• When will my new VoIP investment become obsolete?

• Will my selected platform be able to support new applications?

• Do converged networks really work?

• Will my business really recognize the promise of VoIP?

• Can my LAN/WAN support VoIP today?

Hosted vs. IP PBX Preference Determinants

Factors Favorable to Hosted

• Requires little in-house management expertise

• Multiple sites

• High percent on-net calling

• Longer VoIP migration period

• Mixed existing telecom platforms

• Limited capital

Factors Favorable to IP PBX

• Available in-house management expertise

• Fewer sites

• Low volume of on-net calling

• Ability to perform a flash cut

• Available capital

• Existing WAN bandwidth

Customers Have Multiple VoIP Options

Economies for Customer

Reliance on Managed-

ServiceProvider

Low

Low

High

High

Primarily VoIP PBX Option Primarily Network Softswitch Option

OwnedOwned

ManagedManaged

OutsourcedOutsourced

HostedHostedHostedHosted

IDC Hosted VoIP Cost Analysis

• Hosted voice services are less expensive than PBX equipment and have a fundamentally different economic structure from PBXs because:

– Capital expense is reduced

– Maintenance and equipment costs are greatly reduced

– There is a wider opportunity to reduce long distance charges

Source: IDC U.S. Hosted IP Voice Services 2004-2008 Forecast, September 2004

U.S. Business Hosted IP Voice Forecast

2004 2005 2006 2007 2008

Sites (000) 5 15 50 200 400

Growth % NA 200 233.3 300 100

Users (000) 75 300 1,250 6,000 12,000

Growth % NA 300 316.7 380 100

Users Per Site 15 20 25 30 30

Monthly Revenue 65 62 59 56 53Per User

Total Revenue 58.5 222.3 879.9 4012.5 7647.9

Growth % NA 280.0 295.8 356.0 90.6

Source: IDC U.S. Hosted IP Voice Services 2004-2008 Forecast, September 2004

Growth Factors for VoIP

• Increased broadband penetration

• Improved voice quality

• Not subject to traditional telephony regulation

• Security

Core Network Evolution

FR/ATM

IP Backbone

Ethernet

FR/ATM

IP

Ethernet

FR/ATM

IP

Single Common Core NetworkTo Carry All

Layers of Services

Compressingthe Existing

Core Networks

Other Protocols Other ProtocolsOther Protocols Other Protocols

DWDMCore

Ethernet

FR/ATM

IP

Ethernet

FR/ATM

IP

IP MPLS Backbone

Other Protocols Other Protocols

DWDMCore

Ethernet

FR/ATM

IP

Ethernet

FR/ATM

IP

IP MPLS Backbone

Other Protocols Other Protocols

DWDMCore

Ethernet

FR/ATM

IP

Ethernet

FR/ATM

IP

IP MPLS Backbone

Other Protocols Other Protocols

Anytime, Anywhere Access: Integration Makes it Possible, Simple for Customers

Access from Any Place, Any Device

The Evolution and Impact of Business VoIP: A Carrier’s View

Mark Fishler

Vice President – Product Management, Voice and Data Business Services