Investors have soured on Cisco Systems after the company said costs would rise. But buried in the company’s third-quarter financial results are some numbers that could benefit a wide swath of the telecom sector.

Cisco’s (nasdaq: CSCO) unit that targets the market for phone calls placed on Internet lines has shot up dramatically, CEO John Chambers said Tuesday afternoon. Chambers said the company’s enterprise-communications group, which specializes in the voice-over-Internet Protocol market, saw sales increase by 40% over the last year. While that’s good news for Cisco, the unit’s results may be even better news for some of its VoIP-focused competitors, which are all vying to gobble up enterprise IP-phone lines–a market the Dell’Oro Group projects will grow from $1.6 billion in 2005 to $4.2 billion in 2010.

In a research note issued on Wednesday, UBS analyst Long Jiang said Cisco’s IP-phone growth indicates "continued robust IP adoption by enterprises" and commented that the trend is good news for the rest of the industry as well. Jiang added in an interview that legacy business-phone vendor Avaya (nyse: AV), which controls about 20% of the market, could see "impressive" growth.

Jiang also said that Avaya, which competes with companies like Nortel Networks (nyse: NT), Siemens (nyse: SI) and Alcatel (nyse: ALA), needs to overcome issues specific to the company, including a supply-chain problem. But he noted in his report that new additions to Avaya’s product line, including messaging systems, could be "potential positive catalysts." Avaya’s shares have recently traded down 5% from their 52-week high, reached Monday.

In a quarter when many of your peers and competitors have struggled, Cisco’s results are particularly noteworthy. What are you seeing and experiencing that is unique?

John Chambers: Our vision, strategy and execution are clearly working. Cisco’s balanced approach to the market in terms of our four customer segments, core and advanced technologies, business and technology architecture, combined with our five key geographic theaters continues to work very well. These strong results indicate that both our vision of how the industry is going to evolve as well as our strategy has positioned Cisco for continued leadership in the industry.

In very general terms as intelligence moves throughout the network, the network is becoming the primary driver of not only IT, but also all forms of communications. If this is the way the market evolves, and we believe it will, Cisco is very uniquely positioned to lead in both communications and IT enabled by the network.

The momentum we are seeing makes us comfortable that not only are we winning versus most of our competitors in the marketplace, but anticipating and positioning our customers effectively for market transitions. Whether it’s convergence of data, voice, video, and mobility, architectural evolutions, or intelligence throughout the network, we believe Cisco is uniquely positioned to enable the future of IT and communications.

That said, we will continue to monitor our peers and the overall market to better understand the concerns they are experiencing.

A U.S. maker of network management systems said Wednesday it had received an order from Shanghai Telecom Co. for a system that can detect and block telephone calls placed over the Internet.

Shanghai Telecom, which has 6.2 million landlines, plans to use Narus Inc.’s system to improve its ability to block "unauthorized" Internet calls that connect to its phone system, bypassing its toll structure.

Use of Internet calling, also known as Voice over Internet Protocol, or VoIP, is growing quickly across the world, threatening the business models of some telephone companies.

In the United States, the Federal Communications Commission fined a small telephone company that prevented its Internet subscribers from accessing competing VoIP service, but some countries with state-owned telecommunications companies are taking a different tack.

In China, the government has sided with carriers and allowed them to block VoIP services that compete with the carrier’s own products. A recent report in the Financial Times quoted an executive with a Hong Kong company as saying that the government would not issue new licenses for computer-to-phone calling services until 2008.

“Voice services, which have experienced persistent pressure from wireless alternatives, are increasingly being challenged by VoIP solutions,” says David Lemelin, In-Stat analyst. “Long distance revenues are increasingly becoming irrelevant as ‘any distance’ calling plans for wireline and wireless services take hold.”

Here, we take a look at some of the best new offerings in GSM VoIP phones:

First up is the Calypso C1250i, with built in 802.11 wireless capability, allowing for not only VoIP audio phone calls, but when teamed up with its 30 frames per second video playback and recording functionality, live action video phone-to-phone video conferencing as well.

Also notable about Calypso Wireless is its “Automatic Switching of Network Access Points” technology which allows seamless voice roaming between GSM cellular networks at WiFi networks.

Next up is Voice Internet Phone Network’s (VIPN) Axia 308. This quadband GSM phone also supports GPRS, 802.11 WiFi, VoIP, and is a PDA running Windows CE. The phone will sell for around US$600.

Finally, Paragon Wireless introduced the first dual mode SIP phone in China this week – the PWTW-1100. The handset boasts a four hour talk / 72 hour standby battery capacity, even when both its WiFI and GSM capabilities are running. It also offers an SD memory card slot and an MP3 player, giving it iPod like functionality. And in terms of security WPA encryption and a VPN (Virtual Private Networking) client are included, as well.

These are some of the hottest VoIP GSM dual mode phones, but clearly they’re not the only ones. Anything better out there that we missed? Post a comment.

The Ministry of Information Industry of China is likely to issue the first Voice over Internet Protocol (VoIP) license in the country this June at the latest, said a source in the ministry.

The move not only signals that China is loosening its control upon VoIP business, but also could indicate that it will have a significant impact upon the nation’s telecom sector. The opening of VoIP business has become a global trend these years.

The ministry has made an initial scheme for the VoIP development in China, the source said. It plans to issue the first license to a company under the aegis of the state-owned Assets Supervision and Administration Commission of the State Council, and makes the company as a pilot VoIP carrier.

Next, the nation will open its VoIP market entirely in 2007 when telecom carriers can also apply for VoIP licenses, predicted the source.

The chosen company is said to be one in Southern China, which needs to be finalized. The source declined to tell the name of the company to have the license, but he confirmed that the company is not a carrier.

The company will operate the VoIP business nationwide and build platforms for VoIP technologies and operation, according to the source.

Its first VoIP technology platform is expected to be completed on March 20, said the source. Officials from the ministry visited the company several days ago, he added.

Few American households use voice-over-Internet Protocol (VoIP) services as their home phone but adoption is growing — up 20% since June 2005 — and most users are satisfied with their service.

About 3.9 million U.S. households used VoIP as home-phone service in January 2006, according to a study released Tuesday by Telephia, a market research firm. That accounts for about 3.5% of U.S. households, up from 2.9% using VoIP in June 2005. However, the survey didn’t include digital-phone offerings from cable companies like Comcast (nasdaq: CMCSA) and Time Warner (nyse: TWX), which hawk "triple-play" packages of television, high-speed data and phone service.

Of the non-cable VoIP services, Vonage leads the pack with a 47.5% market share, up from a 40% share last June. Vonage had almost four times the U.S. share of its closest competitor Skype, a unit of eBay (nasdaq: EBAY), which placed second with an 11.8% share.

Market share doesn’t necessarily lead to profitability, though. Vonage, which announced IPO plans last month, lost almost $190 million in the first nine months of 2005.

The good news is that he’s released a free beta version.  The bad news is that there’s no Windows version yet – we’ll have to wait another month for that:

I’ve just released Zfone, a new product that takes a new approach to make a secure telephone for the Internet.

I think it’s better than the other approaches to secure VoIP, because it achieves security without reliance on a PKI, key certification, trust models, certificate authorities, or key management complexity that bedevils the email encryption world. It also does not rely on SIP signaling for the key management, and in fact does not rely on any servers at all. It performs its key agreements and key management in a purely peer-to-peer manner over the RTP packet stream. It interoperates with any standard SIP phone, but naturally only encrypts the call if you are calling another Zfone client. This new protocol has been submitted to the IETF as a proposal for a public standard, to enable interoperability of SIP endpoints from different vendors.

CEO of VoIP equipment and systems supplier Avaya Inc., Peterson said that some IT managers should not deploy VoIP as a way to lower communications costs. Instead, he said, ITs should look at the technology as an operations enhancer.

"We don’t believe IP telephony is a cost-reduction case," Peterson said. "I fundamentally believe that the real value is not cost reduction but how it changes the business."

My first thought was that statement bordered on the heretical. But as I have learned,part of being a thought leader is learning to lead yourself in thought. So I started processing just what the Avaya CEO said and why he said it.

BOCA RATON, FL — (MARKET WIRE) — 02/28/2006 — Airspan Networks Inc. (NASDAQ: AIRN, a leading world-wide provider of WiMAX-based broadband wireless access networks and carrier class Voice over Internet Protocols (VoIP) and Wi-Fi Hotzone systems, announced today the iTONE 500, a suite of operator-grade VoIP packages for wireline and wireless service providers and operators.

The solution is a complete package for ISPs and ITSPs that want to offer a competitive VoIP service to their subscribers, or alternatively for providers wanting to offer a hosted VoIP service to other ISPs.

According to a new report from Infonetics, the VoIP market boomed in 2005 and huge growth is expected to continue through 2009. The number of residential and SoHo (Small Office Home Office) VoIP subscribers is expected to skyrocket to 131 million by 2009 in North America, Asia Pacific, Europe, Middle East and Africa, up from 24 million in 2005. According to Frost & Sullivan, hosted IP telephony through IP Centrex type services is likely to account for an increasing share of business lines, due to cost savings and access to productivity-enhancing tools. iTONE 500 provides a cost-effective, feature-rich system to address these growing markets.

The iTONE 500 solution includes the proven, highly scalable, iTONE Softswitching engine as the core of the system. Gateways between the IP and PSTN networks are also included, along with browser-based configuration and installation support to ensure that a service provider can quickly bring the service to market. The Airspan Web Self Care application is also included, which will enable subscribers to access their accounts via the Internet, and reduce time-consuming operator-focused tasks to manage each subscriber.