by Peter Davidson

The fax server market is in flux as the market transitions from analog and TDM (Time-Division Multiplexed) fax to FoIP (Fax over Internet Protocol). That is to say that the market is moving from using fax systems that work over conventional phone lines to fax that works over Internet lines. This means the market is moving to devices that support the T.38 protocol rather than simply using the traditional T.30 protocol.

Conventional faxing, like voice communications, is a real-time, synchronous process, which makes timing the arrival of fax signals a straightforward proposition. In the original T.30 fax standard, the timing of transmissions during the handshake is critical to setting up fax calls. The T.30 protocol is designed to handle 3 seconds of delay. IP is an asynchronous process, however, with data in the communication stream broken into packets and the packets perhaps even sent over different network routes. Faxing over an asynchronous network can cause fax transmission failures due to issues of delay, jitter and packet loss. Delays can exceed 5 seconds, which impacts the handshake process. Although FoIP fails to achieve the 99% successful transmission rates of conventional faxing, vendors indicate that FoIP success rates of 97-98% are commonplace.

One of the issues with FoIP is a condition known as jitter, in which packets arrive at irregular intervals or out of order. The application of a jitter buffer briefly delays packets and re-introduces a regular pace into the packet stream, thereby ensuring that packets are received in the proper order. Jitter buffering is made possible when a time stamp is added to each packet, so the proper packet order can always be determined. Although jitter buffers are advantageous, they also introduce an element of delay. Packet loss, which can occur in any packet network, also must be considered. Typically, the loss of three consecutive packets will cause a fax transmission to fail. Redundant packet streams compensate for packet loss, replacing a packet lost from the original packet stream with the corresponding packet from the redundant stream.

The T.38 protocol lets one transmit a fax across an IP network in real time, just as the original G3 fax standards did for the traditional PSTN (Public Switched Telephone Network). T.38 allows IP fax devices to perform independent T.30 sessions that are loosely coupled and offer data buffering. This allows fax transmissions to be successful despite delays of more than 5 seconds, which would cause traditional T.30 PSTM calls to fail. T.38, by the way, provides users the same confirmation notices of successful transmissions or error reports for failed transmissions as does conventional analog real-time T.30 faxing.

The market for conventional fax servers is declining while the market for FoIP servers clearly is on the upswing. This is partly due to cost savings, which can be considerable. FoIP servers cost a lot less than conventional fax servers because no expensive fax boards required. FoIP fax servers can be centralized, IP router ports cost less than PBX station ports, and once the system is set up, telecommunications costs are lower. Virtualized fax servers save up to 40% over conventional fax servers. The virtualization trend is very hot: 75% of FoIP servers were virtualized in 2011. Finally, many businesses are moving to VoIP, so FoIP makes a lot of sense in terms of common skill sets and at least partially common infrastructure.

Despite the increasingly clear advantages of IP, in general, and FoIP in specific, Davidson Consulting’s latest report, Fax over IP Server Markets: 2011-2016, estimates the FoIP market grew by 35% in 2010, but only by 11% in 2011. Davidson primarily attributes the slowdown to slow growth in the market for SIP (Session Initiation Protocol) trunking, although competition with Internet fax services and a bit of a slowdown in the healthcare vertical were also factors. An interesting element of the SIP issue is the linkage (or lack thereof) between VoIP (Voice over IP) and FoIP. VoIP, the voice corollary to FoIP, has to date mostly grown within LANs (Local Area Networks) within enterprises. At the moment, there is very little interconnecting of VoIP/FoIP LANs over WANs (Wide Area Networks). As a result, islands of VoIP and FoIP communicate across the IP/TDM gateways across the PSTN to the worldwide installed base of fax devices.  Recently, expectations have arisen that ITSPs (Internet Telephony Service Providers) would interconnect enterprise VoIP/FoIP LANs across enterprise and inter-enterprise networks by sharing the same broadband access circuits and WANs. Although the SIP standard is written with interoperability in mind, integrating SIP-compliant VoIP equipment from different vendors has proven problematic. The issue is that minor inconsistencies exist with regard to how the different vendors interpret the SIP specifications. If a company is looking to use SIP trunks from more than one vendor, they still have to deal with the complexities of interoperating with several SIP trunks that each behave in different ways. Many corporations, especially large ones – and with no regard to fax – are hanging back from SIP trunking because of problems with voice traffic.

So, slow market motion toward SIP trunking translates into retarded growth in FoIP. That said, Davidson Consulting believes that the SIP trunking market will begin to grow rapidly in the year 2014, but growth in the health vertical will slow due to the Direct project. Davidson pegged the overall FoIP market at $215 million in 2011 and expected it to grow at a 10.9% compound annual growth rate (CAGR) to $360 million in 2015.

In terms of market leadership, Davidson figures that OpenText, which markets the RightFax line of fax servers, consolidated its lead in the FoIP server market, in large part due to its acquisition of the MESSAGEmanager fax server business.  Open Text’s share grew by about three points to 33.0% whereas, Sagemcom, the second-leading player, saw its revenues grow only $3.2 million from $51 million one year ago, to register only a 25.2% share, down from 29.1%.  So, not only did OpenText widen its lead over the number two player, it also bolstered its Pacific Rim business because MESSAGEmanager, an Australian outfit, had the majority of its sales in Australia and Japan.

Davidson Consulting is headed by Peter Davidson, a leading fax industry analyst for more than 25 years. Davidson Consulting produces annual market research reports on the FoIP, fax services and computer fax markets. The latest report, Fax over IP Server Markets: 2011-2016, is available at www.davidsonconsulting.biz.