VERIZON PLAN DIGS DEEPER INTO ENTERPRISE MARKET

Verizon Communications this week is expected to announce an aggressive push into the enterprise market it has coveted. The carrier's plans call for the development of new data and IP services specifically targeted to enterprises — including IP virtual private network services — and the buildout of a nationwide IP backbone.

Industry sources said the build would consist primarily of leasing unlit fiber and placing electronics into the network where needed. Verizon is not expected to lease facilities or resell services from other carriers, and the program will cost the carrier about $1 billion, which would come from its existing capital expenditures budget.

While Verizon declined to comment on its plans, in September Eduardo Menasce, president of Verizon's enterprise solutions group, said that the enterprise represents an exciting growth opportunity for the carrier.

“The enterprise is the showcase for technology. They always want the best possible tools. That's why technology for the enterprise develops faster,” Menasce said.

The buildout would be executed in two phases. The first would commence almost immediately and consist of shoring up the carrier's service delivery capabilities along the “I-95” corridor in the Northeast. The second phase, which would begin as early as the second quarter of 2003, would link the small IP networks that exist in major metropolitan areas and at one time comprised GTE's footprint.

Currently, Verizon's annual enterprise revenues of $7.5 billion are third among carriers, but the RBOC ranks well behind market leader AT&T, whose enterprise revenues are estimated in the range of $26 billion to $30 billion. In between is WorldCom.

Verizon has been held back by its inability to provide long-distance service across its footprint, but that will change in a matter of weeks. After gaining long-distance approval for Virginia from the FCC last week, Verizon is now authorized to provide long-distance in 11 states and will file applications for Maryland, West Virginia and Washington, D.C., by the end of the year.

Adding long-distance will allow Verizon to create service bundles that can compete effectively with those of AT&T and WorldCom.

The timing couldn't be better for such a push. Because questions abound as to whether WorldCom will emerge from its bankruptcy proceeding and how it will perform should it do so, Verizon could gain a quick toehold with skittish enterprises looking to dump WorldCom.

In addition, with its headquarters in New York City and a footprint that stretches from the nation's capital to Boston and beyond, the RBOC is surrounded by the majority of multinational companies that are headquartered in the U.S.

“We have been doing good business with these companies on a local basis for years. Verizon is a known entity,” Menasce said.

Enterprises are attractive customers because they have money to spend and a willingness to spend it. They also tend to be loyal, if only out of necessity, said Thomas Osha, chief of staff for Broadwing, which generates about 42% of its revenues from enterprise customers.

“They want quality and they're willing to pay for it,” Osha said. “And because the high-end enterprise network tends to be very complicated, there is less tendency for churn. That gives you a better opportunity to recover your investment.”

While WorldCom's debacle might open a door for Verizon, that hesitancy to switch providers could work against them, said Nancy Kaplan, vice president of Adventis. She also cautioned that the enterprise market is still very competitive.

“There are some formidable, established carriers playing in the enterprise market such as Equant and Cable & Wireless,” Kaplan said. “Verizon is going to need solid relationships with foreign carriers to pull it off.”