Verizon to invest $1 billion in global network

(Telephony) Verizon Communications will spend $1 billion over the next five years to create a global telecommunications network that will link the U.S. with major cities in Europe, Asia, and Latin America.

The company will create the network, which will transport data, Internet and voice traffic, largely by entering into long-term leases--as long as 20 years in some cases--to obtain necessary capacity on existing networks. While this approach that is similar to what it is doing currently, the key difference in the new network is that Verizon will own the switches and transmission facilities.

“Right now, when we have an international call, we hand that off to another carrier on a resale basis. With the new network, even though we will be leasing capacity on other networks, it will be our electronics and we will manage and operate the network,” said a company spokesman. “That brings our costs down significantly. And, by leasing capacity long-term, we can get favorable rates.”

Verizon estimates that the new network will enable the company to reduce its costs from 13 to 15 cents per minute to 3 to 5 cents per minute.

Two companies in which Verizon currently has a stake will provide the capacity. Flag Telecom owns and operates a high-capacity undersea cable system that links Europe, the Middle East and Asia. Metromedia Fiber Network owns fiber-optic infrastructures in key metropolitan areas in the U.S. and overseas.

Verizon’s global solutions unit, which was formed a couple of months ago to manage this initiative, will operate gateway switches in New York, Los Angeles, Honolulu and London to aggregate data and voice traffic and route it over the new network. In addition, a network operations center to service Europe will be constructed in London.

The network’s first phase of deployment will link New York to London, Paris, Amsterdam, Brussels, Frankfurt and Milan by the second quarter of this year. Existing links between New York and between Hawaii, Hong Kong, Tokyo and Sydney will be part of this phase.

Verizon currently has operations in 19 counties, and this new initiative represents a natural progression of the company’s growth strategy, said its spokesman.

“We have an international presence already, and this allows us to leverage on those assets,” he said. “We also think this will strengthen our domestic market by [giving us] a greater presence in the large-business segment. Right now, our large-business customers spend about 15 cents of every telecommunications dollar with us.

“We think we have a chance to significantly increase that with this global network. In addition, it’s a terrific retention tool for us. It will not only help us keep these customers, it will add to the services they are purchasing from us.”

It will also create a new source of revenue for the company, as Verizon plans to offer excess capacity on a wholesale basis to other carriers.