Verizon Allies with Nortel for VoIP

Stating that it will "dramatically accelerate" the evolution of its "nationwide wireline network to packet-switching technology" Verizon also said that Nortel will not only provide a large portion of the equipment but will also be the prime integrator for the project, developing technology to integrate the new and old portions of the network.

"We were looking for one vendor to be the prime supplier and do systems integration to bring in third parties," says Stuart Elby, vice president of network architecture and enterprise technologies. "When we looked at all of those things, Nortel was the player that stepped up to meet these features."

He adds, "I don't want to give the impression that Nortel is just the integrator because they are the major equipment provider. There may be other good vendors, but they may not have all the equipment or ability to put all the pieces together."

A Major Deployment
The scope of the migration is very broad, considering that Verizon operates more than 60 million phone lines in its service area, plus a broad range of services to business that may be equally large. Elby says 38 companies responded to Verizon's request for proposals for the project.

Beginning in the first half of 2004, Verizon will begin replacing central office TDM switches with gateways controlled by a softswitch. Elby declined to be specific about the numbers of central offices to be replaced and the numbers of gateways to be deployed. Other sources at Verizon said the number of central offices could be in the tens and certainly would be less than 100.

In the first 18 months, even accounting for redundancy, it is unlikely that Verizon will need more than three or four softswitches. Possibly each central office will need at least one media gateway to connect the customer TDM lines to the IP backbone, although the scale of the gateways could vary.

And, although the replacement will be done central office by central office, Elby acknowledged that the resulting architecture will be very different from the hierarchical structure of its TDM network. "Class 4 switches certainly won't exist," Elby says. "We will have a large geography served by a single softswitch and, from a call-processing point of view, it's a very flat architecture. But IP still has hierarchy because of the scale of the network.."

Elby says four conditions will be "triggers" that determine which central offices will be upgraded first.
--an issue with capacity exhaust, "in some cases either the switch itself or the floor space and power in the building."
--Two, "we have some very old equipment that requires change-out anyway, so rather than a DMS or 5ESS, we are going to use a packet telephony platform."
--Third, "where there will be new services ... that high-end enterprise customers are going to roll out, new services that provide VoIP service on top of the IP VPN that we are providing."
--Four, "in fiber to the premises. We are planning to be very aggressive in the rollout of fiber to the premises. As we select offices for fiber to the premises, those also will be considered for upgrade to VoIP."

Business Services
Besides the upgrades of the central offices, new services for business are mentioned prominently in the Nortel announcement. Early on Verizon will offer "Centrex IP," a name some traditional providers give to IP trunking used to extend a Class 5 switch's Centrex capability. We already have been offering that in some trials," says Elby. "Few customers in a position to turn down 15,000 lines of Centrex and turn up IP Centrex. So this allows them to roll some lines onto IP access and leave others."

Verizon will also market Nortel PBXs, including its IP PBX, although the company acknowledges that Cisco Systems Inc.'s AVVID IP PBX accounts for the majority of sales of new PBXs to large business. Nortel, with its large installed base of traditional PBX and key systems, accounts for the majority of PBX upgrades that Verizon does.

Another unique service that Verizon plans to offer, using Nortel infrastructure, is a combination of traditional and IP Centrex, giving a customer the ability to migrate to IP only part of its services. There was not time frame for that offering, but Elby says Nortel infrastructure will replace the GoBeam Inc. IP Centrex that Verizon is now reselling in the Chicago area.

Keys to Success
Several factors worked in favor of Nortel from Verizon's point of view.

Most important was its ability to supply most of the pieces of the puzzle, at least for the early deployment. Clearly Verizon had little appetite for shopping the VoIP mall for vendors with the best technologies or best deals, particularly at this early stage.

There was also Nortel's ability to bring to bear significant integration resources, and to create the middleware to tie the whole project together. "This is such a monumental change for us and such new technology for us that we didn't want to be in the position of system integration and to go through the headache of testing all these things," Elby says.

Not to be discounted is Verizon's history as a regulated incumbent, a heritage that makes it and most incumbents, cautious about new technology. "We talking about a scale here that makes us very leery," says Elby. "When we're talking about transforming the PSTN, we want some assurance of stability, and we are not going to be on the bleeding edge to make that happen across 60 million to 70 million lines."

"I think there's a conservative element to this," says Jon Arnold, principal analyst, Frost & Sullivan. "But I'd also guess that Sonus wasn't able to prove itself for voice in a large network, so [Verizon] would rather revert to form and deal with a tried and true."

Vision and Reality
Although Verizon made it clear that Nortel will gain the bulk of its equipment purchases, several factors could mitigate the impact of that choice, particularly in the long run.

First, the pact is still only a "an interim letter of agreement," which Verizon and Nortel expect to replace "with a five-year agreement within the next few months." While unlikely, it is possible that the terms of the agreement could be changed in that time period.

Second, It is an open question whether the contract applies to Verizon's out-of- region long distance network, where Sonus Networks Inc. has played an important role. "This is not the greatest news, and Nortel has a lot of deployment, says J. Michael O'Hara, vice president of marketing, Sonus Networks, which had hoped to play a role in the new upgrade project. "We expect to continue working with Verizon and providing VoIP equipment. As recently as the fourth quarter we had an order from them."

Verizon's telephone units already buy a lot of equipment from Nortel, says Christine Hartman, principal analyst, Probe Group. "That's not so true for their long distance subsidiary, making Nortel and Sonus a more even match. Until 272 relief in all states (three years from when Verizon received long distance permission), both subsidiaries can't do much joint negotiating, I believe."

Possibilities for Third Parties
Long term, Verizon left the door open a crack for third-party providers. "We just want to rely on Nortel. Part of whole deal is that they are stepping up as system integrator," says Elby. "But we expect over time to see lot of different third-party applications and third-party servers out there but integrated through Nortel infrastructure."

For example, Nortel can not yet supply a key element in IP networks today, session border controllers, which become critical as Verizon begins to exchange IP traffic directly with other service providers. However, Elby contends that Verizon is "nowhere near" doing direct IP traffic exchanges because the technology available to do that is "prestandard."

As for IP Centrex software packages, such as Broadsoft Inc. or Sylantro Software Systems, "If there is something that we need for a business, and it makes sense, and it's not coming out of Nortel, part of the arrangement is that they are going to integrate it into the system," says Elby, who adds that it is possible such applications could be incorporated into the system.