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Optical/IP

C&W Plans Its Own 21CN

Cable & Wireless plc (NYSE: CWP), the U.K.'s second biggest network operator, today unveiled plans to spend £190 million (US$365 million) during the next three years building a next-generation network (NGN) along the same lines as the 21st Century network (21CN) planned by its main rival, BT Group plc (NYSE: BT; London: BTA). (See C&W Plans Next-Gen Network.)

CEO Francesco Caio told a conference call today that the "investment is driven by demand, not dreams. Conversations with our customers tell us that demand is shifting towards IP and broadband services.

"There's a strong financial rationale to this move," he adds. "There is very strong competition in the market for switched voice and traditional data services, and this move will help us to maintain profitability."

The CEO added that "there is shareholder value in creating a simpler, more efficient network" that will also allow the carrier to simplify its IT and OSS systems.

Of the £225 million ($432 million) in total core network capital expenditure planned for the current financial year to March 31, 2006, £80 million ($154 million) will be spent on the NGN.

Caio said annual savings should amount to £23 million ($44.2 million) once the new network is built; a review of current network use had identified additional savings in the current year of £50 million ($96 million) in "outpayments" (to other carriers, mainly BT) and operational costs. In the financial year just ended, C&W's total outpayment and opex were £1 billion ($1.92 billion).

The following two years will see total core capex of £145 million ($278 million) per annum, including the remaining £110 million ($211 million) of the planned NGN outlay, bringing the total 2005-2008 capex to £515 million ($988 million) .

Caio said C&W had planned to spend a total £480 million ($921 million) upgrading and maintaining its existing five networks during the next three years, so the increase was only £35 million ($67 million).

Those capex numbers, though, do not include those of C&W's access business unit, Bulldog Communications Ltd., which has its own budget (see C&W Has $150M Broadband Plan).

A C&W spokesman says today's announcement "signals an intent to invest in the network, but it's too soon to provide details of the suppliers" or details of the planned infrastructure.

Caio, though, did say that C&W's current SDH network will be replaced by an IP core, and that the current SDH, ATM, Frame Relay, IP, and circuit-switched networks will be replaced by a single IP infrastructure.

The carrier's current 70 voice switches will be replaced by 10 softswitches housed in "IP routing nodes," and the current "few hundred" metro nodes will be replaced by about 80, "in proximity to BT's 21CN nodes," says the CEO.

C&W will also simplify its back-office systems, "and cut back from the many billing platforms we have today."

With C&W aiming to spend £80 million on the new network before next April, it must already be engaging with its key suppliers, with Cisco Systems Inc. (Nasdaq: CSCO) looking well placed to win some business. The two companies have worked closely together internationally and in the U.K. in the past couple of years, though C&W also has historical ties with Juniper Networks Inc. (Nasdaq: JNPR). (See Cisco, Cable & Wireless Team on IP and Which Router Vendor Rules C&W? .)

And Nortel Networks Ltd. (NYSE/Toronto: NT) should fancy its chances of landing the softswitch deal, as it is already powering C&W's VOIP service (see Cable & Wireless Selects Nortel for VOIP).

C&W has already made its key choices for Bulldog's access network plans, where Italtel SpA and Marconi Corp. plc (Nasdaq: MRCIY; London: MONI) have won contracts (see Marconi, Italtel Score at C&W).

Caio said that the local loop unbundling process, where Bulldog's systems are installed in BT's facilities, is well ahead of schedule, with 320 of the planned 400 installations complete. He added that C&W might even expand its broadband access rollout plans to more BT exchanges. "Broadband is going to generate significant volumes, and we need to be equipped to handle that traffic."

While both C&W and BT are building next-generation IP networks, in many respects the comparison stops there. BT's plan, to switch off its PSTN by 2010, is set to cost £10 billion ($19.2 billion) and involves the replacement of the U.K.'s main voice and data networks.

But Caio sees that as an advantage. "Because we have less to migrate we can offer companies a service migration to IP earlier than BT."

— Ray Le Maistre, International News Editor, Light Reading

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