hip to be ip

Despite its Bell roots, BCE's Nexxia spinoff hopes to take on the agility of a start-up as it markets its new IP network to North America

When you think of hip companies, one with "Bell" in its name probably doesn't come to mind.

Save for Nexxia, the data and Internet arm of Bell Canada.

Instead of dressing up a cumbersome legacy network to handle video and data traffic, Bell Canada opted to roll out a swank national IP network to deliver broadband services to businesses in Canada and the U.S.

For construction and operation of that next generation network, the Canadian telecommunications conglomerate chose to spin off the data arm into a separate entity. Thus, Bell Nexxia as it is called in Canada - or BCE Nexxia for anywhere it is marketed outside of Canada - was born with the silver spoon of incumbency in its mouth and the hopeful agility of a start-up.

With the help of about $500 million for its six-month network construction, Nexxia set off on its data course and turned up its network in January of last year. The Canadian carrier has since grown into a broadband service provider similar to next generation providers in the U.S., building or operating networks capable of transmitting data packets at the highest available speeds.

Incumbency has its advantages

Nexxia's primary goals are to help enterprises tackle increasing data needs and support other providers looking to expand the depth of their own service offerings in Canada. For Nexxia, these concepts were far easier to grasp and implement with the backing of Bell Canada, which is a wholly owned subsidiary of BCE Canada.

"That small-organization-inside-of-a-big-company model enabled us to work fast and respond instantly," says Carl Condon, vice president of technology for Nexxia.

Taking on a model similar to what the FCC is mandating the U.S. incumbents do with their long-distance and out-of-region data offerings, Nexxia is run as a completely separate company, insulated from, yet supported by, its parent company.

As service providers know, time to market is critical. But because Nexxia is treated as a separate business and essentially has been set free from its larger parent company for the build, it can react far more quickly and efficiently, Condon says. Getting to the customer before the competition did was as critical for this pseudo-start-up as it would be for any other new company.

Nexxia's unique advantage is that it is a multimillion-dollar business established outside its parent telco and was given the mandate for pure growth, says Lisa Donnan, then vice president of marketing for Nexxia. She recently left Nexxia to pursue other interests.

"The opportunities for Nexxia will be enormous as the regulatory barriers come down," says Anil Khatod, president of optical Internet at Nortel Networks.

Brand awareness is another benefit of Nexxia's incumbent lineage. Because of the established brand and enterprise customer relationships, Nexxia adds stamina and foresight to its data offerings. Nexxia understands the individual needs of its enterprise customers because of the company's long-standing relationships with them. Because of the comfort level customers may have with the BCE companies, they may be less likely to turn to other providers for various services when they can get them all under one roof.

Nexxia reaps the benefits of knowing clients and having a good sense of their needs, says Jordan Worth, a telecommunications analyst for IDC Canada. "It is beneficial to Nexxia to have [Bell Canada's and BCE's] brand awareness and corporate strength."

Despite reaping incumbency and name recognition benefits, Nexxia faces stiff competition. Service providers such as Telis, AT&T, BT, PSINet and MCI WorldCom's UUNet continually nip at Nexxia's heels.

Nexxia anticipates strong competitive pressure, not only because so much money is at stake but also because it's probable that only a few national broadband carriers will survive in the market. "The market will not be able to support perhaps as many carriers as [there are] in North America," Donnan says.

Carriers don't have the same death grip they used to have on customers, says Jennifer Pigg, senior vice president of data communications for The Yankee Group. "Competition is pushing providers to expand beyond the vanilla services."

If Nexxia continues to build on the momentum it has already gained by quickly deploying its next generation network and services to ride on top of it, the company will be better suited to maintain a leadership position, Donnan says.

Data speed ahead

For Nexxia, getting to the customer is just one piece of the puzzle (see sidebar on page 28). The provider's network was built around meeting the growing and evolving needs of customers rather than just the current needs, which would leave them outdated quickly.

Companies have to be agile enough to understand a customer's needs that quarter, Donnan says. And with the Nexxia network, IP promises far more staying power than time division multiplexing (TDM) networks. This is because the high-bandwidth applications that IP networks are capable of handling are encouraging the migration from TDM networks. Companies are moving from private networking to public networking, Donnan says. "IP is very well-suited for companies that need to get to their partners and suppliers in an extranet model."

To meet the customer demand Nexxia knew existed and get revenue-generating traffic on the network, the company tried to move quickly to deploy the network. Nexxia uses a combination of fiber and DSL-based technologies to provide access to its IP, ATM and frame relay networks, Condon says. "We had Sonet coast-to-coast in a remarkably short period of time," he says. "We bought fiber in April [of 1998] and lit it in March [of 1999]."

While many U.S. providers are just beginning their migration to OC-192 speeds, Nexxia was able to install OC-192 Sonet rings as the foundation for the transport network from the start because Nexxia started the network from scratch (Figure 1). The network employs wave division multiplexing (WDM) technology from Nortel to transport up to eight wavelengths per fiber strand on the backbone, which tops out at 160 Gb/s.

Nexxia has two overlay networks, the first consisting of frame relay and ATM and the second using IP (Figure 2). So while the company can offer frame relay, ATM and Internet-related services to its customers, its dual-network backup system offers reliability.

The Sonet/WDM transport network gains its reliability from diverse fiber routes, backup points of presence (POPs), redundant switching and transport equipment and optical and electrical protection switching. Those capabilities are attractive to enterprise customers and service providers, Condon says. The transport network's backbone Sonet rings use Nortel's OC-192 4-fiber bidirectional line switching ring and OC-48 2-fiber BLSR architecture, which provide protection against fiber cuts and laser failures.

The backbone POPs are protected by a redundant, physically diverse POP connected to the primary facility through an OC-48 Sonet ring. And to eliminate any single point of failure in the Nexxia network, the IP and ATM and frame relay overlay networks are housed in a redundant configuration at both POPs (Figure 2). The high number of POPs in major cities also helps speed customer provisioning, Condon says.

In addition to the security benefits of its network, Nexxia offers a breadth of services such as wireless access from its parent company Bell Canada. "It lets [Nexxia] gain leverage from [unbundled network element] differentiators," Donnan says. The company therefore can package its own broadband and IP-based offerings with legacy services and toll services through its affiliation with Bell Canada.

Nexxia also launched remote access over an IP-based virtual private network, and with that access the company is pushing IP security over a public infrastructure. In addition, Nexxia is offering value-added applications such as messaging and hosting that will run over the IP network.

For the content element of the network, Nexxia has added "seven peering arrangements with content providers," Condon says. "We are definitely seeing a rise in data center business." And similar to most U.S. providers, Nexxia feels the need to "drive more services" across its network. "The need for more services and the driving of content is snowballing," he says.

Cookie cutter for the future?

Similar to a lot of U.S.-based next generation providers, Nexxia appears set on its data course of the future. But just as many U.S providers have broader views on where their footprints should extend, Nexxia plans to keep expanding locally and southward to even more metropolitan areas in the U.S.

"Bell Nexxia identified a terrific opportunity and seized it," says Nortel's Khatod. "The U.S. market has seen it happen with all the national providers, such as Qwest, IXC [now Broadwing] and Williams."

And again, Nexxia is on a similar course as the U.S.-based providers, which leads them to develop and augment local infrastructures in hopes of serving as a one-stop shop rather than force customers to look to competitors for local connectivity.

To meet that goal quickly, the provider has established local fiber infrastructures to reach customers in Ontario and Quebec. Outside those regions, Nexxia provides local connectivity through agreements with Aliant, Manitoba Telecom Services and SaskTel.

But in Alberta and British Columbia, Nexxia's last-mile strategy involves Bell Canada. In that area, Bell Canada and MTS have launched a telecommunications operating company called Intrigna, which provides local access to Nexxia. In addition, Nexxia purchases local access from other providers, utility companies and cable companies.

As for what fruits of its labor Nexxia plans to harvest locally, nationally and in the U.S., Condon says. "It's all about driving more services, and now we have the network to do it."

Like most carriers, Nexxia is using more than one vendor's equipment to drive its network. Despite the multivendor approach, Nortel Networks appears to be taking home a healthy portion of the Nexxia contract wins.

But Nortel has an added tie to the BCE family. BCE Inc., the parent company of Bell Canada and Bell Nexxia, holds a stake in Canadian-born Nortel.

After 1999 third quarter results were issued, however, BCE hinted that it may spin off Nortel. Now those plans seem to be coming to fruition as BCE recently detailed plans to sell 37% of its Nortel stake (www.internettelephony.com, Jan. 27, NewsNow).

In addition to the Nortel tie, Nexxia also has a significant relationship with Cisco Systems. Cisco and Nexxia have teamed to co-develop Nexxia's IP network. Currently, Cisco's GSRs are being used in the IP network's packet-over-Sonet architecture.

But that soon will change as Nexxia plans to migrate to a packet-over-wave division multiplexing architecture, says Carl Condon, vice president of technology for Nexxia. By migrating to that architecture, IP packets will be able to bypass the Sonet transport layer completely, he says.

One of Nexxia's U.S.-based carrier customers, Prism Communications Services, went with the company because it filled a void in its current footprint - and because the choices in Canada were slim. Through its wholesaling relationship with Nexxia, Prism can extend its DSL access offers, marketed under the brand name Red, to envelop the Montreal, Ottawa and Toronto areas. Prism, which is based in New York, offers DSL access to consumers, telecommuters and small and medium-sized businesses.

"We didn't really look at other companies because there are not many there," says Dennis Kruse, chief marketing officer for Prism. "The Canadian market is very different in that it is not as deregulated as ours [in the U.S.]," he says. That, in turn, puts limitations on the options available.

Beyond being one of the only options in Canada, the Nexxia network was a good match with Prism's U.S.-based network, Kruse says. "We have Nortel's 1-Meg Modem deployed in our U.S. network, and Nexxia is using the same equipment in theirs," he says. "We saw the opportunity to enter Canada and resell their network, and it had the added benefit of being compatible with our existing infrastructure."

Similar to many European providers, Nexxia is pushing its service provider customers to tap into and resell the Nexxia network so they can extend their own boundaries without exorbitant expenses. "This way, we don't have an embedded, network infrastructure cost for building a network and we can offer thesame types of services we do here in the U.S." Kruse says.

Nexxia's strategy is to continue to develop North American and global customers, and to do that, its borders must continually be blurred. In many cases, that includes developing business and technology partnerships with competitors such as MCI WorldCom. Ironically, Nexxia struck a deal with MCI WorldCom, the parent company of Nexxia competitor UUNet, to provide service to each other's North American and global customers. Rather than forcing customers to look to other providers for U.S. or Canadian connectivity, the two companies hope to craft a single "North American" contract, which would enable companies to use Nexxia's services in Canada and MCI WorldCom's On-Net services in the U.S.

In addition, as Nexxia builds out more points of presence, Prism also will have access to those facilities. "In some cases, [Nexxia] may follow our lead as well [to enter new areas]," Kruse says.