International IPX revenue to grow by 55.6% over the next 4 years
By Isabelle Paradis, HOT TELECOM
As a result of the exponential growth of mobile data services anticipated over the next 5 years, a majority of the IPX revenue increase is expected to come from IPX data services.
IPX is increasingly popular with Wholesale operators as it opens up opportunities for voice carriers to move away from the minutes-based model and towards alternative methods of charging. Carriers with IPX hubs will have the opportunity to provide and charge for services such as routing transparency, low latency and number portability, or roll this into a subscription fee for using its IPX platform. At this point in time however, no single player is able to provide complete global IPX coverage using its own network. Even the largest IPX players such as TATA, BICS, BT, iBasis/KPN and DT ICSS must interconnect with others.
It is likely that in the medium term, most IPX providers will ultimately deliver IPX platforms that are interconnected. However, this will take considerable time and in the interim, there will be more bilateral couplings such as the TI Sparkle/iBasis relationship.
On the whole, players in the IPX arena are currently in the market entry stage and in the process of launching services. Most have entered the market by providing VoIP over their IPX networks, nevertheless, some are already migrating data services onto their IPX networks too.
As a general rule, carriers are approaching IPX from different directions, with the majority addressing first and foremost voice interconnection, whilst others such as DT ICSS seem more focused on data to enable new and innovative services. The second direction we are witnessing includes service providers such as iBasis/TI Sparkle and BT Wholesale who are positioning themselves to help mobile operators reduce their reliance on TDM and migrate to all-IP.
The next steps for differentiating in the market will be based on the ability to innovate on traditional network strengths such as reach and performance, and then other sales and support factors. White-label IPX services are further out on the horizon and IPX hubs managed by third-party arbitrators are also a potential business model.
The IPX market is populated by an increasing number of players, with the key players in the IPX market outlined below:
|Citic Telecom||Telecom Italia Sparkle|
|iBasis (KPN)||Telefonica Wholesale|
|Orange Wholesale Services||Telekom Austria|
‘IPX data services are expected to have generated 39.2% of the total International IPX revenue in 2011 with the remaining 60.8% coming from IPX voice services’ HOT TELECOM president Isabelle Paradis said. As a result of the exponential growth of mobile data services anticipated over the next 5 years, a majority of the IPX revenue increase is expected to come from IPX data services. Over the next 4 years, total International IPX revenue is forecasted to grow by a CAGR of 55.6% and by the end of 2015, International IPX data service should account for 72.3% of the total revenue, with voice expected to account for 27.7% of the total. (It is important to keep in mind that in our evaluation of the IPX market, IPX voice revenue is net of termination rates, while IPX data revenue includes interconnection payments to be transferred to the end carrier).
When analysing the total International IPX revenue on a regional basis, HOT TELECOM concluded that Asia-Pacific is the largest region and should remain so over the forecasted period. Asia-Pacific should have generated 46.2% of the total International IPX revenue in 2011 and the region is expected to benefit from total International IPX revenue CAGR of 53.8% over the forecasted period. Europe is the second largest IPX region in terms of revenue with 23.5% of the total in 2011 and by the end of the forecasted period, the region’s total International IPX revenue should have increased by a CAGR of 53.9%.
IPX Voice revenue is forecasted to grow by a CAGR of 27.7% over the next 4 years. Europe is and should continue to be the largest market for IPX voice services (based on location of traffic origination) over the next 4 years as the region is forecasted to account for 41.5% of all IPX Voice traffic origination revenue and this ratio is expected to have decreased marginally to 39.7% by the end of the forecasted period.
Asia-Pacific follows with 35.3% of the world IPX Voice revenue in 2011 and should have grown to 36.9% in 2015, mostly as a consequence of the sheer enormity of the population, and rapid take-up of IP services. North America is the third largest market, with 18.8% of the IPX Voice revenue in 2011.
Latin America and MEA, although by far the smallest markets currently in terms of percentage growth, are expected to be the fastest growing over the next 5 years. IPX Voice CAGRs are expected to have reached 75.4% and 59.5% for Latin America and MEA respectively, growing their share spend from 1.9% and 2.3% respectively in 2011 to 3.4% and 4.2% in 2015.
In addition to revenues derived from the provision of voice services, there is also a market opportunity to provide data services over IPX networks. These data services will come in four main guises:
- LTE data roaming
- Migration of GRX traffic to IPX networks
- Migration of some mobile data currently transported over the Internet onto IPX networks
- Migration of some fixed Internet traffic onto IPX networks
The migration of GRX traffic onto IPX networks will generate the fastest growth; although in many cases this will simply be a migration of convenience or for marketing. In other words, the GRX traffic will be treated no differently than it is now, and will be charged on the same basis, and will likely even be travelling over the same physical network – nevertheless, because the network will have been upgraded from a GRX network to an IPX network, the traffic and revenue will be reclassified. Subsequently this is not really new revenue for wholesale operators.
The real growth in wholesale opportunity comes from traffic migrating from GRX networks which is treated differently, given quality of service guarantees and charged for at a premium; and from the migration of mobile Internet services to IPX on the same basis (for instance to deliver an improved customer experience). In some cases, the extra fees for delivering these mobile Internet services will be borne by the content providers themselves – and IPX providers are working hard to encourage content and application providers, such as BlackBerry for example, into the IPX ecosystem.
IPX data revenue is therefore expected to grow by a CAGR of 83.3% over the next 5 years. Asia-Pacific is by far the largest region in terms of International IPX data revenues with 46.2% of the total. Europe follows as the second largest market with 23.5% of the total revenues and this ratio is expected to have increased to 30.2% in 2015. North America is estimated to account for 16.5% of the total IPX data revenue in 2011.
The International IPX data market is and will continue to be dominated by the migration of GRX traffic (primarily GPRS and 3G roaming) onto IPX networks, as well as the emergence of LTE data roaming later in the forecast period.
In 2011, roamed mobile IPX data was by far the largest service, generating 58.8% of the total IPX data revenue and by the end of the forecasted period, roamed mobile IPX data should generate 61.6% of the total International IPX data revenue representing a 4-year CAGR of 85.4%.
Based on HOT TELECOM’s estimates, the next largest category of revenue comes from the migration of fixed network traffic onto IPX networks. In fact, we have assumed very small percentages of global fixed data traffic will move onto IPX networks in the forecast period but as the market is so significant this still equates to an important portion of revenue. Fixed IPX data is expected to have generated 20.6% of the total International IPX data revenue in 2011 and this ratio should have increased to 21.2% by the end of 2015.
Close behind is non-roamed IPX data – essentially the migration of mobile Internet traffic (such as Blackberry traffic) onto IPX networks. Non-roamed mobile IPX data is expected to have grown by a CAGR of 73.4% over the next 4 years, generating 17.2% of the total.
Carriers should evaluate their strategies for TDM-to-IP voice migration to decide what role they want to play in the next-generation voice market. LTE will change the rules of business models for voice interconnection and carriers must decide whether to:
- Own an IPX hub and be a dominant player in high quality VoIP interconnection
- Strategically partner with one or more IPX hub owners
- Remain the circuit-switched voice carrier of choice, serving the legacy voice market
- Position themselves as a low cost provider of VoIP transit services and avoid the IPX market altogether
Carriers with IPX hubs need to follow Voice over LTE developments closely and should start implementing support for Voice over LTE interconnection and roaming, such as support for HD codecs and signalling, as well as establishing innovative and enticing pricing models. Carriers taking a leading role in that segment are likely to sign up the early Voice over LTE adopters, which are some of the world’s largest mobile operators and by the same way secure a significant portion of their wholesale revenue.
For more information on the IPX market or any other project in this segment, please contact Isabelle Paradis at:
+1 514 270 1636