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Verizon Calls Nortel for VoIP

Verizon is close to finalizing a five-year deal with Nortel for Voice over IP equipment, a move that signals the Baby Bell is modernizing its network and preparing for its first major VoIP rollout.

Financial terms weren't disclosed, but Verizon spokesman Mark Marchand told internetnews.com the contract was "significant given the size and scope of the transformation." Nortel, which has been a Verizon supplier for several years, beat out unnamed vendors in a bidding process, Marchand said.

Verizon will deploy new Nortel VoIP equipment in its local and long-distance voice wireline networks later this year as it builds a system to simultaneously handle voice, data and video transmissions.

Specifically, the deal includes Nortel's Succession Communication Server 2000, Multimedia Communication Server 5200, Superclass softswitches and VoIP gateways.

The contract designates Nortel as Verizon's exclusive VoIP gear provider for the next 18 months. In addition, Verizon will continue selling Nortel's IP telephony portfolio to enterprise customers looking to jump from legacy to VoIP systems -- an area other telecoms are eyeing as well.

Verizon expects its next-generation network will be the nation's largest converged network. Other service providers are also readying VoIP technology, which promises lower network management costs and long-distance bills and advanced features including instant video calling, unified messaging, Web-based call screening and routing and address book integration.

Entrants in the field range from startups (Vonage) to Baby Bells (Qwest) to cable giants (Time Warner Cable) and national carriers (AT&T).

Verizon's initial service deployment is scheduled for mid-2004 and is expected to include hosted VoIP and multimedia services for business and consumers. The first markets to offer the services have not yet been chosen, Marchand said.

The New York company's overall move from legacy switches to packet switches will take longer than five years. But the Nortel contract won't increase Verizon's capital expense budget for 2004, which at $6.8 billion to $7.3 billion is about level with last year.

"We are reallocating," Marchand said. "Taking money we would have spent on old technology and using it for (VoIP),"

For Nortel, of Ontario, Canada, the deal follows VoIP equipment wins with MCI, Sprint and Cox Communications, a spokeswoman for the company said. News of the Verizon contract sent Nortel stock up 52 cents, or nearly 11 percent, to 5.28 at midday.