Internet telephony revenue to explode by 2001

New research by Frost & Sullivan of Mountain View, CA, for Internet and intranet telephony predicts that revenues for the total Internet telephony market are expected to grow at a compound annual growth rate of 149%, from $19.8 million in 1996 to $1.89 billion by the end of 2001.

The report attributes revenue growth to toll-bypass or -reduction capabilities; rapid product quality improvements; spreading interoperability; growth of the Internet and intranets; growth of multimedia communications; and integration of voice and data networks into a single system.

Telecommunications analyst Francois Eric de Repentigny says there are also several restrictions facing the market.

"Revenue growth will be restrained by the lower sound quality of Internet telephony as opposed to public-switched telephone networks, and by the lag in [Internet service providers`] and corporations` infrastructure upgrades," says de Repentigny. Increased Internet charges and decreased prices for circuit-switched communications, along with increasing market saturation, will also shape the market.

North America will account for 26% of the total market by 2001, with the growing markets in the Pacific Rim, Europe, and the rest of the world accounting for 73%, according to the report.

The report notes that leading vendors trying to beat the competition are "racing" to develop products that comply with industry standards and have multimedia capabilities such as video- and data-conferencing. Additionally, vendors are trying to secure value-added reseller agreements.

The report examines the client software and gateway market and qualitative trends and analyses; it also contains profiles and a database of companies involved in the industry. It concludes with recommendations for those who want to participate in the Internet and intranet telephony markets.

For additional information, contact Frost & Sullivan at tel: (415) 237-4383, fax: (4415) 903-0915, or e-mail: kbarney @frost.com. u