For the sake of analysis, we have segregated carrier switches and VoIP switches. Things are moving fast on the VoIP front whereas there is saturation in the carrier switch front. VoIP equipment has undergone a bifurcation. Today, there are two clear segments of VoIP equipment. First, the VoIP gateways and gatekeepers installed mainly in the Class 4 Tax/Tandem layer of telecom networks. Second, the VoIP softswitches deployed by operators in the Class 5 layer of telecom networks. These switches have a lot more intelligence as compared to Class 4 switches. In addition to the traditional VoIP vendors, the Class 5 softswitches have an array of well-known traditional TDM switch vendors vying for this crucial piece of the next-generation telecom network. Deployment action in this space has also begun in India with the Tatas conducting a commercial trial during the last fiscal. H.323-based equipment still rules the roost, with SIP-based equipment beginning to make a mark. With several standards of VoIP being there in the market, equipment coming out in the market has support for several of these standards.

The switching space in India is a highly-competitive market, with prices of TDM switches hitting rock bottom. Though VoIP equipment are only now getting deployed in India, they compete with TDM switches. Thus, TDM switch prices play a significant role in price determination of VoIP equipment. And VoIP vendors targeting India have not had the buffer of a new market when it comes to price competitiveness. VoIP equipment prices are calculated for every unit of port equivalent to every DSO circuit or line in the case of TDM switches. Per port prices of VoIP gateways during FY 2002–03 varied from Rs 4,500–7,000 ($90–150), depending on the size of deployment.

The traditional TDM voice switch, the future of which has been a subject of intense debate over the last few years, still ‘stands strong’. In India, where the network infrastructure build-up got accelerated in the last 10 years or so, the addition of switching capacity by BSNL has been really impressive but has slowed down in the last two years. In FY 2002–03, for the first nine months, the addition was just about 2.4 million lines, as compared to 7.5 million lines in the preceding 12 months. The total local switching capacity by the end of December 2002 was 49.8 million lines. Expectedly, there has been no tender for switching by BSNL in the entire fiscal 2002–03.

The total voice switching market in FY 2002–03 has been estimated at Rs 1,588 crore. Lucent, with almost all major orders from private basic service providers, except Bharti, and its share of BSNL’s GSM as well as fixed line orders, emerged a clear leader with a revenue of Rs 605 crore and accounted for a market share of 38 percent. Alcatel, based largely on its supply to BSNL fixed line and Tata Teleservices/VSNL, emerged as No. 2 with an estimated revenue of Rs 396 crore. Siemens, with BSNL’s fixed line orders, Bharti’s local and trunk orders, and a part of BSNL’s GSM switching order, emerged No. 3.

While, ITI’s share has gone down considerably, Fujitsu, and NEC have almost vanished from the market. Only
Ericsson has a different story. Though it did score on the GSM front, it did not execute anything for BSNL or private fixed operators (except TAX for Reliance) in wireline. And it is not active in CDMA. However, as GSM networks keep on expanding, it will bounce back. That is something one cannot say for the rest.

And that includes C-DoT manufacturers. BSNL, it seems, has also almost stopped procurement of C-DoT switches. Till 2000–01, C-DoT switches were procured regularly. In fact, in 2000–01, about 4.6 million C-DoT lines were procured, about ten percent more than the previous year. The government had promised to continue with the procurement.

VoIP Switch
The voice over IP (VoIP) equipment industry took a quantum leap in year 2002–03, driven by significant deployments in ILD operations. The VoIP equipment market, which was negligible in the previous fiscal, registered a healthy first year sales of Rs 48 crore. Unit-wise, an estimated 77,000 ports of VoIP equipment were shipped during the fiscal.

VoIP deployments during the fiscal 2002–03 were primarily led by the ILD operators. Data Access, in particular, focussed heavily on this new technology. Its core infrastructure, connecting the US, the UK, and Japan with points of presences (POPs) in India was totally based on VoIP technology. The VoIP vendor, which benefited out of this full-throttle VoIP play by Data Access was Israeli player Vocaltec Communications. Vocaltec received as many as three separate deals from Data Access during a short period of 10 months. And thus, it clearly was the market leader in India during the fiscal. It effectively captured 65 percent of the VoIP equipment market.

The other two ILD players, though late to take up VoIP, had begun the process of embracing VoIP towards the end of the fiscal. In particular, Bharti Telesonic took upon itself to regain grounds lost to Data Access, by going for a significant deployment during the last quarter. VSNL, which had gone for rudimentary VoIP equipment towards the earlier part of the fiscal, was also looking at a more aggressive VoIP act in the forthcoming months of fiscal 2003.

The market today is in very early stages. Deals in the current year could go in any direction. And each of the deals could result in dramatic shifts in standings of players in the market. However, fiscal 2002–03 ended with Vocaltec taking market leadership with 65 percent market share, followed by Ericsson at 14 percent and Cisco Systems at 10 percent.

Almost all global players were vying for both market share as well as mind share. There were two types of players. The IP players like Cisco, Vocaltec, Commworks, Sonus, Winphoria, Nuera, Arelnet, and Verso Technologies are holding the VoIP-only banner.

On the other hand, the traditional TDM switch vendors like Alcatel, Siemens, Ericsson, Motorola, and Nortel prescribe a more sequential migration from TDM to VoIP. The second group likes to call its VoIP product lines (in many cases TDM switches with VoIP capability) as NGN switches. During 2002–03, Vocaltec, Cisco, Veraz and Verso were the VoIP vendors which achieved the TEC certification for deployments in India.

It was the government’s dramatic go-ahead to VoIP implementation by both ILD operators and ISPs in April 2002, that gave impetus to VoIP implementation in the service provider space. The market, though still at an infantile stage, is growing very fast. iLocus estimates India’s VoIP traffic in calendar 2003 to touch 1320 million minutes.

In fiscal 2003–04, it is expected that ILD operators will come under intense pressure from competition, compelling them to deploy VoIP equipment. Data Access has signed a global framework deal with Vocaltec for supplying $8 million worth of equipment for its global expansion during the currrent fiscal. A part of this deal has already been implemented. VSNL has also started deploying Alcatel’s NGN-ready switches in its network.

What could make fiscal 2003–04 an even better year for VoIP is the fact that for the first time, one is likely to see significant rollouts of VoIP in national and local networks. India’s largest operator, BSNL, which had already deployed VoIP equipment in six locations during the last fiscal, could go in for expansions. Tata Teleservices is known to be carrying out a commercial trial of the next-generation softswitch from Winphoria Networks (now acquired by Motorola) in its Western India network.

Commercial induction is expected around mid-2003. Aksh Broadband, a broadband operator in Rajasthan has already ordered for Versio Technologies’ Clarent softswitches. The deal worth $5.7 million (licenses for 256,000 endpoints) is for an end-user level implementation of VoIP across Rajasthan, which is slated to be completed by end 2004.

Considering the already booked orders and the likely VoIP implementations from various service providers, Voice&Data estimates that the market for VoIP equipment will grow by over 100 percent to touch Rs 100 crore in fiscal 2003–04.