IP service take-up in Europe below expectations

Despite massive capital investment in telecommunication infrastructures across western Europe, sales of Internet Protocol...

Despite massive capital investment in telecommunication infrastructures across western Europe, sales of Internet Protocol services in the region are much lower than projected and will grow only moderately over the next two years, according to a report published yesterday.

The report, which was published by the Frankfurt office of industry consultancy Cap Gemini Ernst & Young and Dresdner Kleinwort Wasserstein, the London-based market research arm of Dresdner Bank, forecast sales of IP services to grow from $14bn (£9bn) to around $17.5bn (£11.3bn) over the next two years. Authors of the study say this growth is "too little" to help the financially troubled sector get back on its feet.

Cap Gemini Ernst & Young and Dresdner Kleinwort Wasserstein conducted interviews with 50 corporate users, 15 service providers and 10 equipment suppliers on service, IP migration and quality of service.

Interviews with corporate users, service providers and vendors revealed several benefits of IP-based services. To name a few:

  • Open standards accelerate the development of new applications

  • Users can easily connect to all networks regardless of operating system

  • Packets are dispersed and assembled using resources only when required

The reality over the past two years is that "IP's promise of delivering better, cheaper and simpler service has not always been fulfilled," the report said.

Of the 50 users asked about voice over IP, 30 cited shortcomings in quality and reliability for not using it. The users believed the benefits of VoIP are hard to justify when quality of service issues had not been resolved.

Around 90% of the companies said security is a key barrier to deploying IP-VPN (IP virtual private networks).

The study found that equipment costs were high and the payback still uncertain. Corporate users said IP phones were too expensive, with cost savings possible only when unit costs reach around £65 each.

The cost of a traditional PBX (private branch office exchange) is lower than that of an IP PBX when its implementation costs are included. Moreover, falling public switched telephone network prices have eroded VoIP's price advantage.

As for simplicity, 60% of the corporate users said ease-of-use issues remain a barrier to IP-VPN. Migration to new IP services has often resulted in requirements to operate simultaneous systems. And service providers have not resolved all issues related to interoperability, billing and customer care,

Read the report at: www.de.cgey.com/servlet/PB/show/1004820/IP-Services%20report%20Ch%200%20-%20Exec%20summary.pdf

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