In February 2012, Infonetics Research published its inaugural Diameter Signaling Control worldwide and regional market size and forecasts report, in which we reported worldwide sales totaled $8.6M in CY11. The Diameter signaling controller market is in its infancy; as we predicted, a growing number of new products have launched in the past three months, and we expect more through 2012. As with all new markets, Diameter signaling controllers will expand functionality to meet operator requirements and use cases. We forecast revenue to grow at a 106.2% CAGR through CY16, resulting in $321.3M in revenue that year.

As mobile operators migrate to all-IP networks (access to core), signaling standards are migrating from SS7 to Diameter. At its core, Diameter enables the exchange of policy information within and between network operators. Diameter has also been developed as the foundation for authentication, authorization, and accounting (AAA) functions in IP-based networks.

Diameter signaling controllers provides centralized routing, traffic management, and load balancing among Diameter and non-Diameter elements within IMS and mobile broadband networks. It also supports protocol mediation and interworking functions between carrier networks. A fully loaded Diameter signaling controller will encompass the Diameter agents, DRA, DEA, and load balancing.

The move to all-IP mobile networks is being driven by LTE, and Infonetics forecasts that the number of LTE subscribers worldwide will grow from 9.2M in CY11 to 130.2M in CY15. The escalation of subscriber growth and the amount of signaling traffic these subscribers will generate is at the heart of our Diameter signaling controller forecast model.

As LTE networks are deployed and begin to grow, a key challenge is scaling the signaling and control plane due to the increasing amount of Diameter messages passing among network elements. Several global operators have experienced significant signaling storms in their LTE networks that in some cases have resulted in network outages. The storms have been caused by growing usage of the networks, but also by architectures that allow Diameter signaling to be dealt with on a peer-to-peer basis.

The increased use of mobile broadband networks is driving the growth of Diameter signaling within and between operators. This signaling traffic in turn has hastened the need for centralized controllers that can help manage the traffic in a more efficient and scalable manner. There are a number of key drivers to consider when evaluating the future growth of Diameter signaling traffic that will require signaling controllers:

• The continued rise in smartphone adoption as prices continue to drop due to strong competition and broad availability from high-end to low-end devices
• The availability of advanced 3G and LTE services such as tiered pricing and shared data plans, which require more frequent exchanges of policy and charging information
• The increase in the number of 3G and LTE network elements, particularly related to policy and control (e.g., PCRF, HSS, OCS), that must communicate with each other
• Roaming in LTE networks and between LTE and 3G networks, as well as subscribers moving between 3GPP (LTE/HSPA) and non-3GPP networks such as WiFi

A number of vendors are clamoring to play a role in this emerging market. We expect to see Diameter signaling controllers from at least 15 vendors by the end of 2012. Not all vendors will be successful, as the market cannot support that many, but we expect the competition to spur further innovation.

Today Tekelec is the front-runner in Diameter signaling control, with a strong revenue lead in 2011, helped by key wins in North America, including Verizon Wireless for its 3G and LTE networks and MetroPCS. With its heritage in SS7 and SIGTRAN, Tekelec has been an early mover in the Diameter signaling controller space and is well positioned for the future. In our February report, we asserted that Tekelec’s ability to draw upon its installed base of legacy customers will make it a formidable competitor. Since then, Tekelec has continued to increase its customer base for its Diameter Signaling Router (DSR), announcing 15 new customers across all regions, which confirms our statement. This brings their customer base to 19 for the DSR, totaling 1.8 million messages per second across a variety of use cases including interconnection for roaming, scaling policy deployments, core routing for LTE and IMS networks, and providing subscriber locator function in an LTE architecture.

Diane Myers

Principal Analyst, VoIP and IMS

diane@infonetics.com