SIP (Session Initiation Protocol)

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1 SIP (Session Initiation Protocol) 1. INTRODUCTION SIP is a text-based protocol, similar to HTTP and SMTP, for initiating interactive communication sessions (voice, video, chat, interactive games and virtual reality) between users. The SIP protocol and the resulting infrastructure will supplement, and possibly supplant, the current (circuit-switched) way of delivering these communications sessions at a much lower cost. 2. TECHNOLOGY SUMMARY 2.1 Core The Session Initiation Protocol (SIP) is a signalling protocol used for establishing session in an IP network. A session could be a two-way telephone call or a collaborative multi-media conference. The ability to establish these sessions means that a host of innovative services become possible such as voice-enriched e- commerce, web page click-to-dial, instant messaging and IP-centric services, referred to in the industry as convergence of services 2.2 Evolution The ascent of the Internet as a rival to the circuit-switched telephone network has given rise to strong economic and technological reasons for converged services and architectures. In order to assimilate telephony services with the ubiquitous technology of IP, a signalling protocol was required to set up and tear down connections 1. A number of different communities put forward solutions, with their own priorities and interests at stake. The Internet community wanted to introduce innovative services based on enhanced web-authoring tools like XML and more open, peer-topeer protocols and call models. The Internet Engineering Task Force (IETF), the global non-profit Internet technical standards body behind HTTP and Internet Protocol (IP), offered SIP 1. SIP was originally intended to create a mechanism for inviting people to large-scale multipoint conferences on the Internet Multimedia channel. Because of its simplicity, power and extensibility, it was rapidly adopted for other uses across the IETF, most notably Voice over Internet Protocol (VoIP) standard. Communication service providers saw VoIP as a way to merge their disparate voice and data networks. SIP has offered them a new degree of scalability, interoperability and ease of building new services that was lacking in the earlier, more telecom-centric VoIP protocols such as H www.sipcenter.com What is SIP? 2H.323 is not a single protocol, but an entire suite of protocols that cover everything from soup to nuts codec, call control, conferencing and many other functions. The downside to this is that it s very heavy and cumbersome and one becomes tied to a single proprietary set of technologies 1

2 2.3 Revolutionary or Supplant? SIP will eventually supplant the current switch-circuit based way of providing voice and data telephony. The primary advantage that SIP offers is lower cost, which is mainly due to the nature of the infrastructure (the Internet or any IP network) needed to provide these services 3. Industry research predicts that the evolution of changing from circuit-switched 4 to packet-switched 5 based technology will take 10 years 6. This evolutionary change will take place in three stages: Network Triage - Service providers will selectively deploy softswitches 7 to resolve capacity issues of dial up overload. Application Proliferation - Carriers will take advantage of packet voice technology to introduce new services and applications System wide Retrofit - Once packet voice technologies prove greater revenue and efficiency, carriers will replace aging PSTN gear network wide 2.4 Opportunities and Limitations SIP is a disruptive technology with huge market potential. There are a number of SIP-related products starting to hit the market like SIP-enabled phones, SIP network servers etc, and there is still a huge potential for SIP-related products that will enhance the customers experience as the market for SIP is just starting to be adopted and will soon enter the growth phase. Though a limitation with the SIP technology is the adoption rate by the crucial players in the value chain i.e. network operators. The reason behind this is that the network operators have circuit-switching based equipment to the tune of hundreds of millions of dollars in their infrastructure and will be reluctant to get rid of them until packet switching technology is fully proven 6. Another limitation is the stability and tolerance of the technology. IP-based telephony networks are not yet as highly reliable as their counterparts i.e. circuitswitching networks, though it s fast catching up. 3It costs $12 for a VoIP (packet-switched) trunk Vs $90 for class 4 (circuit-switch). 4A circuit-switched network is a network in which a physical path is obtained for and dedicated to a single connection between two end-points in the network for the duration of the connection. 3A packet-switched network (IP-based) is a network in which small units of data (packets) are routed through a network based on the destination address contained within each packet. This type of communication is connectionless, rather than dedicated like the circuit-switched network. This means that once the data is sent, the connection is broken until further information is either sent or received. This allows the communication network to be shared by a larger number of users. 6The Forrester report Voice s Next Evolution (Aug 2001) 7Softswitch is control software that coordinates between signalling and actual IP packets streams generated by calls. It is used to find the right gateway to redirect a call back to the PSTN, so it can be correctly terminated 2

3 3. COMMERCIAL POTENTIAL AND APPLICATIONS 3.1 Commercial Potential There is currently a flurry of interest in SIP protocol and standard because of its inclusion into the 3G mobile standards. One example of just how large the SIP market potential has become was released on Oct. 25, , when Microsoft unveiled its Windows XP operating system and its new SIP-based Messenger client, which included PC-to-phone calling capabilities. While this PC-to-phone termination market will offer strong rewards for carriers offering wholesale termination / origination services, these carriers will need to have the flexibility to support their customers with new business models such as application hosting and new SIP-based services that go beyond simply terminating Messenger-based traffic. ( 9 Example of IP communication using Microsoft Messenger) Messenger termination 8 is only one of many SIP-based services that wholesale carriers can offer. The network must enable the rapid deployment of feature-rich applications that can be quickly developed with today's application server development environments. Applications can include enhanced applications such as presence-enabled conference calling as well as revenue-generating traditional voice applications such as one-number or prepaid calling services. 8http:// 9http:// 3

4 Current estimation is that monthly SIP minutes terminated to the Public Switched Telephone Network (PSTN) by Messenger users will rise from less than 500 million in 2001 to nearly 3 billion by 2005, a 70 percent combined annual growth rate. SIP will also provides a framework for developing an enriched mobile communications experience in the all-ip third generation (3G) mobile networks, for which SIP has been designated as the signalling and call control standard 10. (Source: Analysys Research, SIP-related revenues for Western Europe by service type, ) In the short term, as figure above shows, the dominant revenue stream will come from linking fixed and mobile SIP to SMS messaging, a service which has the potential to grow the SMS market too. The scenario, on which the figure is based, assumes that instant messaging will take-off and that all new handsets support SIP, forecasts that revenues from SIP SMS gateways (available from next year) will be worth over 650 million by 2004, and will then peak at 2.3 billion in 2006, before tailing off as the installed base moves to 2.5G and 3G phones 11. Because of its flexibility, extensibility and integration with Internet standards, SIP has enjoyed phenomenal market introduction success. SIP is being used extensively today to support a broad range of voice, instant messaging and presence-based services over mobile, wired and IP-based networks 12. A major risk involved is the adoption rate of the SIP infrastructure (see 2.4), but due to the intense interest, support and adoption of SIP standard by major players in the market like Microsoft, Cisco etc, it is safe to presume that this risk will gradually be eroded. 10http:// 11SIP related European Revenue Forecasts , Margaret Hopkins Analysys 12http:// 4

5 3.2 Major Applications The major services and applications of this emerging standard are as follows: Location-based presence services, Personal reach-ability management services, IP-based voice and multimedia conferencing Web co-browsing, Web click-to-talk, Unified messaging Voice portal services 3.3 Scale and Window of Opportunity There exists a window of opportunity to enter into the market now, and focus on a niche area, within the SIP market. The timing, industry and market, is right as the one of the first main SIP infrastructure-enabling product (SIP-SMS gateway) will just be hitting the market in In terms of scale and scope, the opportunity is huge. As industry experts envisage SIP networks gradually being adopted and used in all areas of communication i.e. mobile, fixed and IP-based. In effect, the PSTN will either be supplemented or replaced by this new protocol, which offers greater applications usage and allows for innovative services being produced for enhance customer experience. This will in turn lead to wider and greater revenue streams for the network, mobile and fixedline operators. 13SIP related European Revenue Forecasts , Margaret Hopkins Analysys 5

6 4. Industry Structure 4.1 Competitive Landscape The SIP market is very competitive with a lot of major software and telecommunication providers adopting the SIP standard in their offerings. The main players currently in the market are Microsoft, Sun Microsystems, Cisco and other major telecommunication providers. Also, medium-sized telecommunication providers like Mitel Networks, have built their entire business model around the IP protocol and have taken full advantage of the emerging SIP standard. In addition, they have built or are about to release SIPrelated infrastructures to the market e.g. SIP network servers. Other players with products on the market are Mediatrix, PingTel, Siemens and WorldCom. SIP-based networks is largely software-based and hence the barrier to entry are low (currently), and hence there are a number of start-ups like Ubiquitous, NMS networks, Hughes communications, SnowShore etc, are rapidly developing and deploying new products and services onto the market. The fact that the SIP network is largely software based will definitely change the playing field of the telecommunication industry, especially as convergence of services are now becoming a reality. Looking ahead and the emerging telecommunications industry, major software / telecommunication providers will be the winners in this industry i.e. converged services. As the new telecommunication infrastructure largely becomes packetswitched and software-based, companies strategically positioned to leverage their strengths in these areas will succeed. 4.2 Competitive Strategy To enter this emerging and competitive market, one strategy could be to focus on a low-value, but highly strategic area within the SIP-based communication infrastructure. Another strategy will be to start evaluating and building products that will enhance the SIP 3G WLAN (Wireless LAN) user experience. The widespread adoption of the 3G network is not expected till late 2004 / early

7 5. Conclusions Betting on the commercialisation of this technology is a no-brainer, looking at the support, adoption and investments being pumped into the continuous development of the SIP infrastructure. The sheer cost advantage that this solution has over its telecom-centric cousin (PSTN) is enormous and will affect the bottom-line of companies and organisations that use or provide communication services. From an investor point of view, I will invest in a company looking to start up in this arena, but will pay due diligence to ensure that the area the company is entering into i.e. SIP related product or service has not been looked at or focused yet. The window of opportunity is fast approaching being closed and I predict a maximum of months before it finally shut. Author Charles Ashaye Date 12 th Oct

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