February 17, 2011

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SIP Trunking in Latin America and Europe
By: Joel Maloff, Maloff NetResult



The North American VoIP access and SIP trunking services market grew by 40.1% in user base and 22.3% in revenues in 2009, according to a report published by Frost and Sullivan. They also indicated that VoIP access and SIP trunking services generated revenues of $717.3m in 2009 that are estimated to reach $3.9 billion in 2016. Because of such gaudy reports, there is a tendency to extrapolate this to all regions of the world.

Nothing could be further from the truth!

SIP trunking WILL grow internationally but there are various factors that will impact how quickly and to what extent. For example, the driver behind the growth of SIP trunking in the US has been reduction of cost for telecommunications operating expenses. Off-the-wall estimates often assert savings of 35% to 70%! This is based on the ability to reduce fixed costs from PRIs, the reduction of usage sensitive costs from toll calls, and the ability to reduce telecommunications carrier’s fees such as EUCL and RCRF. These are US-centric issues that are not always the same internationally. In addition, the availability of broadband Internet access in the US is now almost taken for granted. A recent estimate indicated that more than 65% of American adults have access to broadband. That is not true elsewhere in the world.

In Latin America, for example, the highest percentage for broadband availability is in Chile with 17% with other major economic powers well behind that! If you do not have access to broadband Internet, SIP trunking is going to be a problem. Conditions are changing however. Broadband penetration will nearly double across Latin America, increasing from 7 percent in 2010 to 12 percent by 2015. (Research and Markets, January 2011). As a result, Internet Telephony Service Providers (ITSPs) in Chile are expecting the demand for SIP trunks to double in 2011.

Beyond broadband Internet availability, there are still other issues that make the US model different from elsewhere. Regulators in each country have been slow to address the evolution of Internet telephony and they retain archaic rules that inhibit or prevent the use of these services. For example, in Argentina, you can have a softphone on your laptop with a Buenos Aires telephone number, but it is technically illegal to use it anywhere other than in Buenos Aires! Regulations are going to change but it will be years, and this also will slow the growth of SIP trunking.

Cost savings that have been seen in the US may not be available internationally. In some cases, the major telecommunications companies require businesses to have a minimum charge service agreement. Reducing costs via SIP trunking is useless if the business still must pay the carrier regardless! In other instances, the major carriers have dropped their rates so low that SIP trunking may offer little direct savings.

Lastly, the dominant telecommunications carriers in each country have much greater control than in the US. They have the ability to constrain competition unless forced to comply by government authorities. For that reason, a truly open, competitive, and vibrant Internet telephony environment is not prevalent in many other parts of the world. This too will change but it will take time.

SIP trunking will become the dominant form of voice communications worldwide but it will happen more slowly than in the US, and a US model for growth is not applicable.




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