Lucent's VOIP Group Gets a Boost
Lucent ducked out of the VOIP business altogether last year, refocusing the company around products that would immediately make it money. In early 2002, its softswitch business was doing badly, and, consequently, much of it got the axe (see Lucent Performs Softswitch U-Turn, Lucent Clarifies Product Strategy).
Now the softswitch business is back on again, according to Lucent execs, who are proud to announce the first deployment of the company’s Accelerate media gateway which connects standard phones to either the traditional voice network or a VOIP network.
Qwest is using this product along with Lucent’s IP-enabled 5E-XC Class 5 switch to replace outdated Class 5 switches from LM Ericsson (Nasdaq: ERICY) in a handful of its rural offices in the 14 western states where it offers local telephone services. Idaho, Montana, and Wyoming are said to be likely areas for field trials next year [ed. note: and they've got a lot of fields out there].
“The goal is to consolidate our offices and gradually migrate the network to voice-over-IP,” says Claire Maledon, spokeswoman for Qwest who was deliberately vague about the company’s plans. “This is just the beginning, but it is important for us to get our VOIP strategy out there."
Lucent’s media gateway is an important product in the company’s softswitch arsenal. It supports up to 10,000 lines and can be controlled by the 5E-XC switch, or Lucent softswitch (LSF). “We didn’t address this need before this product; and the sub-10,000 lines is an important market… It’s where carriers start to migrate first, in more rural areas,” says Roger Heinz, VP of convergence solutions at Lucent. He claims Lucent’s softswitch is in eight live networks worldwide but was only able to name AT&T Wireless Services Inc. (NYSE: AWE) as a customer.
Analysts say this is an important contract win for Lucent as until now much of the upgrade business from old Class 5 switches to softswitches as been going Nortel's way.
Nortel Networks Corp. has announced big contract wins over the past year with Sprint Corp. (NYSE: FON) and MCI (Nasdaq: WCOEQ, MCWEQ) for migration to VOIP (see MCI Vouches for Nortel's VOIP, Sprint Starts on Softswitches).
It’s also no coincidence that Qwest is jumping on the VOIP bandwagon, as are the other RBOCs, while there is still time to avoid the regulations that govern traditional telephone services. Right now, VOIP services are not subject to line charges and avoid taxes and mandatory contributions to universal service funds, all of which contribute heavily to monthly phone bills (see Qwest Jumps Into VOIP Hotbed).
This is set to change once the Federal Communications Commission (FCC) regulates the service, but the Commission isn’t even talking about what these new regulations could be until December and is unlikely to pass any rules for at least a year (see FCC Sets Date for VOIP Inquiry).
Separately, Qwest posted a third-quarter profit Wednesday and said it expects revenue to increase in 2004. The carrier’s third-quarter revenue fell to $3.57 billion from $3.77 billion a year ago, but earned $1.83 billion, or $1.05 per share, in the latest quarter, compared with a loss of $123 million, or 7 cents per share, last quarter (see Qwest Reports Q3 Profits).
Qwest, which is still being probed by U.S. regulators for accounting problems, was up 23 cents at $3.63 in afternoon trading. Lucent shares were up 3 cents to $3.06 (see Prosecutors' Party at Qwest and FCC Investigates Qwest).
— Jo Maitland, Senior Editor, Boardwatch
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