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Study: Dipping costs to fuel corporate VoIP growth

The number of corporate telephone lines that use voice over Internet Protocol is expected to leap from 4 percent to 44 percent by 2008, according to new research.

The number of corporate telephone lines that use voice over Internet Protocol will leap from 4 percent to 44 percent by 2008, a jump that will be fueled by reduced equipment costs, according to a new study.

Corporate spending on VoIP will rise from this year's expected $1 billion to $5.5 billion by 2008, said Teney Takahashi, an analyst at the Radicati Group. The research company's study, released Tuesday, is called "Corporate VoIP Market, 2004-2008."

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The forecast is among the rosiest yet for VoIP, a decade-old technique for digitizing phone calls and dispatching them over either the public Internet or a corporation's own Internet Protocol network. VoIP calls are generally less expensive because they avoid traditional telephone networks, which are heavily regulated and taxed. But quality of service, in most cases, isn't as good.

The main reason for the growing popularity of this technology is the plunging cost of outfitting an office with VoIP gear, Takahashi said. Over the next four years, leading vendors, including Avaya, Alcatel, Nortel Networks, Cisco Systems and Siemens, are likely to lower their own manufacturing costs, as they become more adept at making equipment designed for Net telephony. By 2008, installation should cost corporations only about $75 to $600 per line, down from the current $375 to $1,000 per line, he said.

The biggest winners will continue to be equipment vendors that sell hybrid systems, which combine VoIP with traditional circuit switches. But these companies will see their current share of the market, nearly 92 percent, drop to 70 percent by 2008, as smaller companies upgrade to pure VoIP systems, Takahashi said.

"Hybrid will continue to be on top for some time," he said. "Folks just don't want to forklift in a whole new system. Rather, they just want to add a few IP phone line cards at a time."

A representative for Cisco Systems, which sells equipment for pure VoIP systems, said the company's revenue from IP telephone equipment sales grew 80 percent this year. Most of these sales came from corporate sources. "We're seeing a lot of momentum there," the representative said.