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Verizon RFPs: More Fizzle Than Sizzle

Light Reading
News Analysis
Light Reading
6/26/2002

News of RFPs (requests for proposal) in progress at Verizon Communications Inc. (NYSE: VZ) are sending sobering messages to industry hopefuls.

The RBOC has reportedly split a much-coveted contract for next-generation Sonet equipment among three of its existing suppliers, putting a damper on what some observers were hoping would be a dramatic win for one or two of them.

Verizon's not confirming it, but sources say the RBOC has awarded a three-year contract worth about $750 million jointly to Fujitsu Ltd. (KLS: FUJI.KL), Lucent Technologies Inc. (NYSE: LU), and Nortel Networks Corp. (NYSE/Toronto: NT).

Deployment probably won't start until 2003, sources say, and it's likely the agreement has an option to extend from three to five years.

"Verizon's pretty much made it clear it's not buying anything new this year unless it has to," says Sam Greenholtz, senior analyst at Communications Industry Researchers Inc. "And they're not going to deploy next-gen Sonet until they can do it throughout the network."

It's not known how Verizon will split the equipment it eventually buys among the chosen trio, or whether it represents win, lose, or status quo for the selectees. "All three have existing run-rate procurement arrangements with Verizon," notes George Notter of Deutsche Banc Alex Brown LLC. "It could even be negative to one or more of them, representing less business than they had before. It's hard to tell."

Some say Nortel, as a longtime supplier to the areas that were formerly served by GTE prior to its merger with Verizon, will likely continue to provide gear for the southwestern and midwestern areas of the network. Lucent and Fujitsu have been supplying the old Bell Atlantic and Nynex areas in the East and will probably continue to do so.

The vendors won't clarify any of this. At press time, none of them would comment on the rumored award, although all three were previously identified as finalists in the next-gen Sonet contest.

Originally, RFP-watchers hoped the deal would be a bit more dramatic in its impact (see SBC, Verizon Mull Metro Buys and Capex Cuts: How Low Can They Go?). But the lackluster outcome clearly signals that with the market in turmoil, carriers are playing it safe, sticking with suppliers they know, rather than moving to ones they haven't dealt with before.

Analysts say the Verizon developments -- and the likely delay in actual deployment -- indicate that RFPs should not be counted on as signs of solid market activity. It's a warning that's been sounded about other RBOC bids, such as those emerging at BellSouth Corp. (NYSE: BLS) (see BellSouth to the Rescue?).

"I don't think any of the RFPs out there are odds-on bets to be executed even if there's an award," says Tom Nolle, president of the CIMI Group consultancy. He says regulatory issues as well as the market downturn could be playing into Verizon's caution.

"You're chasing ghosts," says Frank Dzubeck, president of Communications Network Architects. "Winning an award in 2002 does not mean revenue." Lots of RFPs and RFIs (requests for information) are out for all carriers, he says, and they won't mean anything until the contract's not only signed but implemented.

— Mary Jander, Senior Editor, Light Reading
http://www.lightreading.com

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ivehadit
ivehadit
12/4/2012 | 10:12:34 PM
re: Verizon RFPs: More Fizzle Than Sizzle
1) that verizon will not deploy new gear to satisfy new growth?

2) that verizon will not modernize legacy networks with new gear?

3) that verizon will not offer new services so it does not need the new gear?

4) that verizon does not want to save on op-ex so it does not need the new gear? (they are compensated for op-ex, so whats the incentive to drive it down - gmpls, bye bye?)

5) that verizon does not want to save on cap-ex so it will continue to buy old gear at higher costs?

6) that verizon does not want to send a positive message to the market because it will send its stock price down?

7) that verizon wants to stay an albatross, its people don't want to do new things, there's no competition without worldcom, so lets keep buying sonet since TIRKS knows it well?
willywilson
willywilson
12/4/2012 | 10:12:34 PM
re: Verizon RFPs: More Fizzle Than Sizzle
1) that verizon will not deploy new gear to satisfy new growth?

2) that verizon will not modernize legacy networks with new gear?

3) that verizon will not offer new services so it does not need the new gear?

4) that verizon does not want to save on op-ex so it does not need the new gear? (they are compensated for op-ex, so whats the incentive to drive it down - gmpls, bye bye?)

5) that verizon does not want to save on cap-ex so it will continue to buy old gear at higher costs?

6) that verizon does not want to send a positive message to the market because it will send its stock price down?

7) that verizon wants to stay an albatross, its people don't want to do new things, there's no competition without worldcom, so lets keep buying sonet since TIRKS knows it well?

----------

1. Not as much as you seem to think they need.

2. Circuit switched voice telephone works great, and will work great for the next 100 years. VoIP, on the other hand, is a Silicon Valley fraud.

3. Bingo.

4. The stuff in place now works fine.

5. Costs of "old gear" are plummeting. And VZ is not exactly in a bad bargaining position.

6. VZ has no responsibility to rescue your options.

7. SONET works fine. Most of the rest is a Silicon Valley fraud.
light_rock
light_rock
12/4/2012 | 10:12:33 PM
re: Verizon RFPs: More Fizzle Than Sizzle
ivehadit,

"they are compensated for op-ex..."

Care to elaborate on this? Thanks.
ivehadit
ivehadit
12/4/2012 | 10:12:32 PM
re: Verizon RFPs: More Fizzle Than Sizzle
i understand the 12% rate of return includes the costs of op-ex, so...driving down op-ex reduces verizons rate of return payment on its regulated network.

anyone care to provide a counter argument?
netskeptic
netskeptic
12/4/2012 | 10:12:29 PM
re: Verizon RFPs: More Fizzle Than Sizzle
> VoIP, on the other hand, is a Silicon Valley fraud.

This one was good.

Thanks,

Netskeptic
broadbandboy
broadbandboy
12/4/2012 | 10:12:29 PM
re: Verizon RFPs: More Fizzle Than Sizzle
"i understand the 12% rate of return includes the costs of op-ex, so...driving down op-ex reduces verizons rate of return payment on its regulated network. anyone care to provide a counter argument?"

-------------------------------------------

Yeah, figure out a way to drive down opex, but don't tell anyone - shhhhh!

And I'm not kidding.

BBboy
BobbyMax
BobbyMax
12/4/2012 | 10:12:22 PM
re: Verizon RFPs: More Fizzle Than Sizzle
The message is that:

1.SONET/SDH deployment is too valuable to be thrown away.

2. Crapy products from start-ups started by greedy VCs funding Metro Ethernet and unnecessary optical gears will not be deployed by the RBOCs.

3. This is an answer to 10,000 VCs that crapy technologies would not be adopted by the RBOCs.
cfaller
cfaller
12/4/2012 | 10:12:22 PM
re: Verizon RFPs: More Fizzle Than Sizzle
broadbandboy wrote:
"Yeah, figure out a way to drive down opex, but don't tell anyone - shhhhh!

And I'm not kidding."
-----------------
That's not crazy at all. Wasn't there a story a couple of years ago about Bell Atlantic not being able to find & show to the FCC millions of dollars in equipment that they were carrying on their books? I think the FCC gave them a slap on the wrist, I don't remember. Where there's smoke...
zweisel
zweisel
12/4/2012 | 10:12:17 PM
re: Verizon RFPs: More Fizzle Than Sizzle
In other words, the incumbent vendors' actual physical products will triumph over the PowerPoint vapourware of the start ups... same goes for the long haul market as well.
mbledug
mbledug
12/4/2012 | 10:12:14 PM
re: Verizon RFPs: More Fizzle Than Sizzle
Are Fujitsu's Flashwave 7410 and 7420 part of the
RFP?

Mbledug
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