The boom in broadband services has moved Internet-based phone systems out of the closets of a few technology enthusiasts and into Hong Kong's offices and homes. 'Voice-over-IP [internet protocol] has finally gone mainstream,' said Stephen Tsui Shing-tat, Nortel Networks (Asia) vice-president and managing director for Hong Kong. This development has come after years of struggle by rivals Nortel and Cisco Systems to build demand for voice-over-IP (VoIP) systems in Hong Kong as the technology swiftly found a lucrative market in the mainland. VoIP sends voice transmissions in digital form in 'discrete packets' rather than in the traditional circuit-switched protocols of the public switched telephone network. An advantage of VoIP is that it avoids the tolls charged by ordinary telephone services. Soaring local demand for high-speed internet connections - with data transfer rates of 1.5 megabits per second or higher - to homes and offices from slow, narrow-band links is credited with driving the IP trend. More than one million households had broadband access as of May, almost double the number at the start of last year, according to the Office of the Telecommunications Authority (Ofta). Although Silicon Valley-based Cisco remains Hong Kong's leading supplier of networking equipment, Canadian telecoms-gear maker Nortel has secured two deals that have strengthened its lead in the VoIP market segment. Mr Tsui said Nortel had built 'one of the largest voice-over-IP networks in the world' for Hong Kong Broadband Network, a subsidiary of Nasdaq-listed City Telecom (HK). He declined to divulge financial details. The Hong Kong Broadband Network infrastructure is made up of key Nortel hardware and software products, including the Succession Communications Server 2000 'softswitch' and the Passport Packet Voice Gateway, which allow the operator to transfer both voice and data traffic at a much lower cost to subscribers than fixed-network telephone services. 'We have made Hong Kong telecommunications history by attracting more than 120,000 new subscribers since we launched high-quality, packet-based telephony services last year, said Ricky Wong Wai-kay, Hong Kong Broadband Network chairman. Nortel has also helped CPCNet, the telecoms arm of Hong Kong-listed conglomerate Citic Pacific, develop and deploy a VoIP service targeted at local enterprises. This offering has been made part of CPCNet's existing managed IP network services portfolio. CPCNet chief executive Stephen Ho Wai-chung said: 'Organisations want to leverage their existing investments and at the same time drive cost reductions.' Research firm International Data Corp has forecast VoIP revenues in Hong Kong will grow to more than US$62 million in 2006 from US$13 million in 2001 as more corporate users take up low-cost and secure packaged offerings. The increased activity by local network operators in VoIP represents a breakthrough for Nortel and other overseas-based makers of VoIP gear in light of tougher competition in the mainland from Chinese companies, including Huawei and ZTE. That has translated to a steady flow of telecoms investments in Hong Kong. Ofta estimated that the cumulative investment per capita from 1991-2001 is about HK$14,000. This figure is similar to Britain's and second to Japan's. United States-based telecoms market research firm Dell'Oro Group reported that demand for VoIP systems worldwide - indicated by IP line shipments - had grown despite a flat overall market for enterprise voice communications equipment in the first quarter of the year. 'IP lines are an important measure as they are the PBX [private branch exchange] system connection to operate an IP phone over the Ethernet local-area network,' Dell'Oro senior analyst Steve Raab said. 'IP PBXs are an increasingly popular system option for deploying IP lines, as nearly two thirds [61 per cent] were on IP PBXs during the first quarter.' He noted that Nortel had captured 63 per cent of the market, while Cisco managed just 2 per cent. Avaya seized a 26 per cent share, while Alcatel had 17 per cent of the market.