Verizon Expands MPLS Plans

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News Analysis
Light Reading
11/21/2003



Verizon Communications Inc. (NYSE: VZ) is quietly ramping up plans to bolster its national data network with the addition of as many as 300 MPLS routers in addition to the 87 it has already deployed.

The expansion plan, dubbed "Enterprise Advance," follows the RBOC's success in signing up enterprise customers for its national data services. The carrier claims that in the past year it has closed 900 contracts with 550 large corporate and education customers, including J.P. Morgan Chase & Co., the Securities Industry Association, and Rutgers, The State University of New Jersey (see Verizon Touts Enterprise Wins).

Now Verizon wants to invest an unspecified but significant sum to expand its range of data services and capture further business, particularly lucrative government contracts. Only this week, the U.S. General Services Administration (GSA) announced it had authorized Verizon to compete for a range of contracts in the mid-Atlantic area worth more than $330 million in total.

Verizon currently offers Frame Relay, ATM, Sonet, and Ethernet-over-Sonet services, but is keen to offer IP VPN services nationwide during 2004 to compete with the likes of AT&T Corp. (NYSE: T), MCI (Nasdaq: WCOEQ, MCWEQ), and Sprint Corp. (NYSE: FON).

To achieve that, Verizon is to add another 170 routers to the network in 2004, according to a spokeswoman at the carrier, with the remaining planned additions to follow later. She adds that the cash required for the initial expansion is part of the current 2004 capital budget of "billions" of dollars, but she could not provide a separate figure for this project. Verizon's 2003 wireline spend will total between $6.8 billion and $7.3 billion.

She says the 2004 rollout will involve Verizon's existing major IP router suppliers, Cisco Systems Inc. (Nasdaq: CSCO) and Juniper Networks Inc. (Nasdaq: JNPR). However, an additional RFP is due to be issued for some of the remaining network expansion, though no further details are available at present, she adds.

Analysts at Lehman Brothers this morning issued a note saying they believe the investments will offer a big boost to Cisco and Juniper. Lehman estimates that Verizon will direct much of its investment towards broadband aggregation and edge routers from both vendors, but that the carrier's core network buildout, using Juniper boxes, is all but complete.

However, the analysts also note that Verizon has a multivendor strategy, and while Juniper will likely be the principal supplier for the broadband aggregation portion of the buildout, the carrier is also due to add some Cisco edge routing equipment, most likely the uBR series that is already deployed in its network.

The Lehman team also believes Verizon might favor Juniper's ERX edge routers for low-end edge routing in lieu of incumbent provider Redback Networks Inc. (Nasdaq: RBAK).

For its regional IP routers, Verizon is likely to focus on Cisco's 12000 Series products, though also use Juniper's M-Series router to maintain its dual-source approach.

— Ray Le Maistre, International Editor, Boardwatch

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