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A double-barreled announcement from Verizon Communications last week — that it will expand its EV-DO wireless data network nationwide while simultaneously transforming its basic wireline switching architecture into a packet-based network via a five-year contract with Nortel Networks — marks a major turning point for both the industry and the carrier. At the same time, it is largely a reflection of the carrier's current view on the overall economic recovery.

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Ivan Seidenberg, who used his keynote speech at last week's Consumer Electronics Show in Las Vegas to introduce a home networking and advanced messaging service, said the company would spend $3 billion over the next two years to provide broadband service to both wireline and wireless customers.

“As we see the economy move forward, we're more than happy to increase our spending,” Seidenberg said during a press conference prior to his CES address. “It's kind of early in the cycle to decide what is incremental and what is not.”

As part of that cycle, Verizon will spend $1 billion over the next two years growing its wireless data network (see story on opposite page). And while the company has yet to provide financial guidance for 2004, for the first time in several years there are positive indicators pointing toward slightly higher capital expenditure budgets throughout the industry. For example, SBC Communications CEO Ed Whitacre said during a presentation at a Smith Barney conference in Phoenix last week that the carrier will increase capital spending slightly this year, to between $5 billion and $5.5 billion.

But it is Verizon's contract with Nortel that will have the most lasting impact. Though neither side would discuss financials, the deal marks the largest carrier yet to commit to changing its basic central office infrastructure using softswitches.

The deal, under which Nortel is the exclusive provider of softswitching for 18 months, includes the deployment of Nortel's Succession Communication Server 2000 Superclass softswitches, Passport Packet Voice Gateways, the Succession Multiservice Gateway 4000 and 9000, and the Multimedia Communication Server 5200 in both tandem and end-office applications. Additionally, Verizon will distribute Nortel's enterprise IP Telephony portfolio.

Verizon, which previously deployed softswitch equipment from both Nortel and Sonus Networks in its long-distance network, is faced with a myriad of deployment scenarios in its local network and a variety of metro markets in which to start. And according to Paul Lacouture, president of the Verizon Network Services, it plans to use virtually all of them.

“You do it in the large metro areas to have a packet presence, then you go into some of the other areas where you have a need to add capacity because you're at either space exhaust or capacity exhaust,” he said. “I wanted to have the ability to do both.”

Verizon's hesitancy to detail its exact deployment could stem from the unresolved regulatory issues carriers are facing, said Blake Kirby, senior vice president of the carrier and infrastructure practice at Adventis.

“If you do a cap and grow [where existing circuit switches are maintained and new subscribers are put on the softswitch], there might be regulatory benefits with that especially as it applies to UNE-P obligations,” he said. “That's an issue that needs to be tested and worked out.”

On the access side of the network, Verizon also is envisioning using several architectures. In its announcement of the Nortel deal, the carrier linked the move to packet switching with its previously announced fiber-to-the-premises project. However, its softswitch deployment isn't predicated on it or, in fact, on the expansion of broadband at all, said Mark Wegleitner, senior vice president and chief technology officer of Verizon.

“We haven't correlated that on purpose,” he said. “We have some situations where we want to use softswitching and it's not driven by broadband. In the near term, we eliminate a lot of the things that go on in the central office like the main frame cross-connect.”

Initially, though, the company sees three primary access architectures: one in which the user buys a SIP phone, one with an integrated access device at the residence or small business and one with a line gateway in the CO providing the conversion from circuit to packet.

“You can get a softswitch from many people that will let you do VoIP and the customer is going to use DSL or cable modem,” Lacouture said. “We wanted that capability, but we also want the ability to convert to VoIP without the customer being impacted. To them, it will be just like any other dial tone.”

Ultimately the company will tie FTTP and softswitching together, Lacouture said. However, because of the efficiencies gained with softswitches it may be not be apparent immediately.

“If you look at our architecture long term, with our packet switches we don't have to replace them one to one,” he said. “The fiber to the premises helps us because now [softswitching] is insensitive to distance.”

The end result will be significantly fewer switches with the ability to manage both local and long-distance networks, which will still be maintained by separate organizations within Verizon, from a handful of locations.

Ironically, Verizon's decision to move to a local softswitch architecture comes in large part because of the huge increases in long-distance traffic. Since winning approval to provide interLATA service, the carrier has signed on more than 500 large enterprise customers to long-distance service. Additionally, wireless subscriber growth is causing big jumps in long-distance. As a result, the company was going to be forced to double its national network capacity over the next year, Lacouture said.

“We had a bunch of factors that were converging at one time,” he said. “If we're going to add capacity, we wanted to do it with technology that is going to position us to offer all the VoIP services. The second factor was that we're going into the phase of our enterprise network where we want to offer VoIP service, and we're building those capabilities in our network. The third factor was we want to be in the consumer VoIP business. When we looked at all those factors, the timing was right for us to go focus on one supplier.”

For Nortel, the deal is a major victory not only from a financial perspective but also from a strategic standpoint. Verizon had previously been a major Lucent Technologies customer, and the win gives Nortel its largest marquee customer since announcing last year that it had signed a $146 million contract to provide Bell Canada with softswitches. The company also is the primary softswitch supplier to Sprint, the largest non-RBOC local carrier in the country.

“The key thing for us is we now have 45-plus networks installed worldwide,” said Sue Spradley, president of wireline networks for Nortel. “As [Verizon] decided to step it up, one of the values we thought we brought was our experience. The contract covers our entire portfolio.”

Unlike the deal with Bell Canada, though, Nortel and Verizon don't appear to be joined at the hip for application development, which often is touted as a key reason to deploy softswitches. While the carrier will watch what develops in the joint Nortel-Bell Canada Innovation Centres, it's open to any IP-based application. The rollout plan currently calls for VoIP-based residential services in the second quarter and an entry into the enterprise market in the fourth quarter. In Las Vegas last week, Seidenberg talked up two broadband applications that require VoIP technology but would make it easier to implement. The first, dubbed iobi (eye-o-bee), allows users to more easily manage their various communications devices while the second, called VerizonOne, gets the company deeper into the home networking market with a DSL modem/router combined with a touch-screen computer and a cordless phone.

In the enterprise, the first service will likely be some iteration of IP Centrex. Qwest Communications, which announced a contract with Lucent to provide softswitches for its local network in November, sees IP Centrex as the first natural application, said Cliff Holt, executive vice president of the business markets group for Qwest.

“The first beachhead is in IP Centrex,” he said. “There are a lot of customers sitting with PBXs that want to go to IP PBXs or even further out there to IP Centrex. There is a convergence of technology happening where frame, ATM, IP VPN and broadband are all going to look like one smart PVC pipe heading into one cloud.”

Initially, however, Verizon is keeping as many of its options open as possible, Lacouture said.

“We have some in-house developments that take advantage of the convergence of voice and data,” he said. “Part of our arrangement with Nortel is we'll look at the innovation center they have with Bell Canada and see where that goes. Our intent is not to be biased on any path. There's not a killer app to point to and say, ‘Ah ha, that's what you need this for.’”

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© 2014 Penton Media Inc.

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