NORTEL GETS BIG ENDORSEMENT WITH BELL CANADA VOIP DEAL

The decision by Bell Canada to spend an initial $146 million on voice-over-IP equipment from Nortel Networks further cements the vendor's position as one of the premier suppliers in the softswitch market, but the contract is likely to have more impact than previous contracts with MCI, Sprint and Verizon Communications.

The three-year deal includes not only the Nortel's Succession Communication Server 2000 softswitches, which have been deployed by the three other U.S. carriers, but also marks the first large carrier deployment of Nortel's newly re-christened Multimedia Communication Server 5200, formerly known as the Interactive Multimedia Server. Bell Canada, which will launch VoIP service to business users in Western Canada by mid-2004, will deploy the softswitches in place of its Class 5 switches.

Only Sprint has done that so far, and on a somewhat limited basis. Additionally, the contract calls for the two companies to create an Innovation Centre in Ottawa focused on developing new voice-over-IP services with an early emphasis on multimedia. While virtually every softswitch vendor has some kind of developer program geared to encouraging new applications, the partnership between Bell Canada and Nortel is one of the most aggressive moves to date by a large carrier.

“It's much more than just buying product and installing a new network,” said Eugene Roman, group president of systems and technology for Bell Canada, noting that the carrier had qualified 35 vendors before picking Nortel. “It's about developing that ecosystem for the future. It will allow smaller companies to participate and create the Silicon North effect in Canada.”

For Nortel, the contract has as much symbolic significance as financial. Bell Canada gives it a marquee customer — albeit a familiar one — to prove out many of the revenue-generating applications that it has been touting as key to counteracting the tide of access line losses among U.S. telcos.

In deployments with Verizon and MCI, Succession softswitches have been used as tandem switch replacements. Sprint has deployed several Succession switches as Class 5 replacements but has not yet disclosed any plans to develop additional advanced applications based on the move to packet switching.

“[The Bell Canada deployment] really is truly groundbreaking and unique and the first of its kind,” said Al Safarikas, vice president of wireline marketing Nortel.

Bell Canada's decision to start in markets served by Bell West, a joint venture between Bell Canada and Manitoba Telecom Services, lets the carrier test services with businesses in what is essentially a greenfield environment before moving into the residential market — or into more competitive cities in the Eastern half of the country.

Telus, the incumbent in many of Bell Canada's early target markets, has deployed some softswitches in the core of its network but has not announced plans to convert any Class 5 central offices yet. Telus also has run some VoIP trials, including one in partnership with Dialpad, but has not done a large-scale rollout like the one planned by Bell Canada.

“In Eastern Canada, there will be a low level overlay for customers who want the service,” Roman said.

The timing of Bell Canada's move also is important. Though most Canadian cable TV operators have not made significant moves into the residential voice market, some are nibbling around the edges.

The nation's largest wireless carrier, Rogers Wireless, is 56% owned by Rogers Cable and co-brands services with AT&T Wireless Services, claiming more than 3.8 million subscribers. And Vonage, which has started private-labels service with U.S. MSOs, plans to get into the Canadian market by the end of the year, according to a spokeswoman.

Bell Canada plans to move into residential markets but hasn't set a timetable yet, Roman said. “This is going to be a classic technology rollout, starting with the businesses and eventually moving to the consumer,” he said.