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The trend towards replacing application-specific networks with converged networks continues, with IP telephony the one 'killer application" that is driving sales.

To underline the point, in 2000 there were fewer than 500,000 IP telephony ports installed worldwide. That figure was expected to have reached 11.5 million by the end of 2004, according to Avaya, a network equipment provider.

"IP end points, whether they are standard desktop telephones, Wi-Fi phones, PDAs, or PCs, hold the key to VoIP market development," says In-Stat/MDR analyst Keith Nissen. But it is not all about voice: increasingly, a variety of IP end points will be common in devices such as vending machines, cars and security webcams.

Bandwidth is also becoming cheaper and more widely available. Advisory group Gartner predicts that from 2004 to 2008, companies will increase bandwidth by 40% to 100% each year, in the process changing the way that humans interact and removing location from the equation altogether.

Voice over IP

In the US business sector, which usually leads European technology adoption, the percentage of companies using VoIP technology grew from 3% in 2003 to 12% in 2004, according to research by In-Stat/MDR. As ageing private branch exchanges (PBXs) reach the end of their lifecycle, businesses are starting to invest in VoIP telephony.

"Where today's services are associated with a connection or a device, VoIP services will be associated with the subscriber, and will be accessible from any device anywhere, over wireline or wireless access networks," says Nissen.

Another sign of the growth of VoIP can be seen in the sales of VoIP semiconductors. Sales are expected to reach $1.7 billion by 2008, with a compound annual growth rate of 48% for 2003-2008, according to IDC.

Cisco leads the market for VoIP servers, while, in late 2004, Siemens held the top spot in converged, or hybrid, enterprise telephony equipment shipped. Analysts at Canalys estimated Siemens' shipment value at €124 million in the third quarter of 2004, down from €139 million in the same quarter in 2003. This suggests a move towards pure IP, rather than hybrid, networks.

Routers and switches

The router is the workhorse of enterprise and carrier networks, and Cisco continues to dominate this buoyant sector.

Synergy, a research company, reported the router market to be worth $7.1 billion in 2004 and predicts it will grow to $11.6 billion by 2008. In the second quarter of 2004, Cisco held a massive 78.1% share of this market, Juniper a 12.7% share, and Nortel and Redback both claimed 1.5% shares, according to Dell'Oro statistics.

In the second quarter of 2004, high-end routers made up 49% of total enterprise router revenue, mid-range routers 39%, wired broadband gateways 9%, and low-end/SOHO routers 3%, say Infonetics Research. At the top end, where growth is around 10%, Juniper is expanding faster than Cisco, thanks to its specialised products. Cisco recently released new products which it believes will slow Juniper's success.

According to Dell'Oro, the switch market was worth $12.7 billion in 2004 and will grow to $16.2 billion in 2008. Cisco has more than 70% of the Ethernet Switching market, also a fast growing segment.

	Converged enterprise telephony value Source: Canalys

	European wireless LAN infrastructure shipments, 2003-2004 Source: Gartner

	Worldwide VPN and firewall appliance and software revenue Source: Infonetics Research

	Worldwide IP core router revenue market share Source: Infonetics Research