With most carriers avoiding spending money on much of anything these days, Nortel Networks Corp. (NYSE/Toronto: NT) was celebrating what it calls a “good strategic win” yesterday, after Verizon Communications Inc. (NYSE: VZ) announced that it is using Nortel's packet switching equipment in large switching centers in New Jersey and Florida (see Verizon Deploys Packet Switches).

In yesterday’s release, Verizon stated that the deployments, which are designed to evaluate the reliability of packet technology, represent the largest application of packet switching technology for voice transmission by a local exchange carrier in North America. The deployment in New Jersey alone has, according to the statement, already successfully completed more than 1.8 million voice phone calls.

The announcement is important because it shows that Verizon, a relatively slow-moving RBOC, is finally coming around to using packet switching technology in its voice networks. Verizon, which did not return phone calls, didn’t mention in the release which other vendors’ equipment was evaluated for the deployment.

The financial impact for Nortel is less clear -- there was no dollar amount specified for the contract, and some analysts believe that Verizon may later buy similar equipment from other providers.

"This is not a complete deployment,” says Frank Dzubeck of Communications Network Architects, indicating that coming deployments may quite possibly be with equipment from other vendors. “No one that I know of is committing to just one vendor... [And] Verizon has a history of never giving all the jewels to a single vendor.”

Nortel officials declined to say what other vendors were involved in the bidding, but they did say it was a contested bid. Observers say they expect that Cisco Systems Inc. (Nasdaq: CSCO), Lucent Technologies Inc. (NYSE: LU), and Siemens AG (NYSE: SI; Frankfurt: SIE) were among the runners-up.

Still, most observers agree that yesterday’s announcement is good news for Nortel, which, as the incumbent vendor at Verizon, was expected to win. “It certainly gives them credibility,” says Current Analysis analyst Brent Wilson, pointing out that Nortel will likely keep its incumbent business at Verizon. “Without a doubt, Nortel is having success protecting its installed base. That doesn’t mean they have the best technological solution.”

“This is important for them,” Dzubeck says. “It verifies the fact that they have an excellent product.” More importantly than validating one vendor, however, he says, is that the move validates the technology being deployed. “Here’s an RBOC making a commitment. That blessing... shows that the technology is now deployable.”

Jenna Stanley, the director of Voice-over-IP Solutions Marketing at Nortel, says the announcement demonstrates that packet switching is replacing voice circuit switching: “This not only marks an increase in the volume of packet switching equipment being deployed... but also an increase of carrier comfort with the technology.”

Stanley claims that packet switching technology will enable Verizon to do faster call routing, as well as free up excess capacity that in a circuit switching environment is used just to get different tandem switches talking to each other. This use of packet switching technology to carry voice is known as voice trunking over ATM switches, or VTOA.

This is the third packet switching deployment deal for voice that Nortel has signed with carriers over the past year. Last fall, the company signed similar deals with both Sprint Corp. (NYSE: FON)and Qwest Communications International Inc. (NYSE: Q) (see Sprint, Nortel Ink Billion-Dollar Deal and Qwest Pushes Packets). Nortel refuses to put a price tag on what the Verizon deployment deal will mean to them, but if it comes close to what they claim they’ll pull in from the Sprint deal -- $ 1.1 billion -- it’s a big deal.

Current Analysis's Wilson, however, says that while this might be the largest completed deployment, other announced -- but yet incomplete -- deployments, like one at Sprint, will be far larger when they’re done.

Farooq Hussain, a general partner at Network Conceptions LLC, downplayed the size of the announced deployment. “1.8 million calls -- that’s less than a couple hours work,” he says, insisting that many carriers have already been doing packet switching for voice for years. “This is a good announcement for Nortel, but as a carrier announcement, it doesn’t carry any weight at all. They’re way, way behind everyone else."

— Eugénie Larson, Reporter, Light Reading
http://www.lightreading.com