Enterprise Communications

SIP Trunking - Has it Reached Prime Time?

by Elka Popova 15 Apr 2010
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Subha Rama, and Industry Analyst with the Unified Communications & Collaboration team, recently completed a study on North American VoIP Access and SIP Trunking Services Markets. She shares some of her findings here:

In order to reach critical mass, SIP trunking needs commitment from both incumbent carriers and CLECs. Here is an insight on some of the key challenges faced by service providers in promoting SIP trunking services more aggressively among their customer segments.

Market watchers have been predicting the downfall of the PSTN for several years now. A close look at the balance sheets of service providers shows a steady decline in their voice revenues and continuous erosion in their voice ARPU (average revenue per user).  However, contrary to the predictions, the PSTN is still surviving, challenging the growth and pervasive adoption of IP-based technologies such as SIP trunking.

SIP trunking has been around since 2004, though it was not until 2009 when it took off in earnest (see Frost & Sullivan study, North American VoIP Access and SIP Trunking Services Markets, 2009). So why were enterprises shying away from mass adoption of a technology that promised a number of benefits, including consolidation of trunks and voice platforms, lower toll costs for long-distance and DID, centralized management and administration, self-service and overall better return on investments?

To SIP or Not to SIP?

The transition to IP has been faster in some geographies than in others, largely because it is dependent on the level of service provider commitment in terms of technology implementation and service promotion. Incumbents with substantial Class 5 infrastructure have been slow to acknowledge the relevance of IP-based services, so much so that SIP trunking has for long been considered a forte of alternative providers. Though SIP allows easy, rapid and inexpensive deployment of new services, large incumbents and nationwide carriers are finding that these new services are difficult to globalize and scale to the levels they require. 

Competitive local exchange carriers (CLECs) were quick to acknowledge the untapped potential of SIP and have started offering these services aggressively to both large enterprises and small and medium businesses (SMBs), traditionally a challenging market for large national carriers.
The SIP Business Case for Service Providers

SIP trunking offers a compelling business case for service providers in the long term, though in the initial years of deployment, telcos may face higher network costs and lower returns. Packetized technologies such as SIP and H.323 signaling protocols have the potential to reduce both CAPEX and OPEX through centralized application management and reduction in the number of media processing and application server platforms and local points of presence. Though there is a sound business case for migrating from legacy infrastructure to newer IP platforms, the differentiators are less powerful when migrating from an H.323 IP platform to a SIP platform. Value propositions get narrower in such scenarios, though SIP providers are touting presence-based services to drive home their business case.

However, the TDM-to-SIP migration offers a number of benefits from a service provider perspective:

• New multimedia, converged services that can be rapidly deployed
• Enhancement of existing services, as SIP allows the use of TCP-IP syntax and scripting technologies for voice
• Integration with a growing number of economical SIP-enabled endpoints
• Cost savings not limited to just transmission, but to the overall service provider environment that includ

Vendor Approach

Though all telephony vendors have a SIP story to tell, not all of them support end-to-end interconnectivity between SIP endpoints. A number of vendors still sell equipment with proprietary protocols, including Cisco’s Skinny protocol, Siemens’ CorNet-IP (an add-on to H.323), and Mitel’s MiNet.  Unified Communications (UC) vendors have, however, also launched products with native SIP call control, offering a UC core with end-to-end SIP message routing. Microsoft is certifying SIP trunking service providers for offering SIP interconnects to its Office Communications Server (OCS).

None of the service providers rely solely on SIPConnect Forum certifications for ensuring interoperability. Instead, many of them have started offering remote testing facilities and on-site testing through agents to ensure compatibility with different vendor equipment. However, many of these programs are not comprehensive, nor do they include tier-2 telephony vendors that are more entrenched in the SMB space.


Despite the challenges, all service providers acknowledge that SIP trunking can drive a more sustainable business model since they are constantly challenged to stem the erosion in their voice ARPU and consequently declining revenues. Though incumbents have been late to embrace this technology, they are well-positioned to exploit the full potential of SIP trunking given their extensive footprint, which allows them to offer these services nationwide.


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