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Verizon to Build Out Global Broadband Network

Verizon Communications is no longer satisfied to be the largest telecommunications carrier in the U.S. It unveiled plans Wednesday to burst out of the U.S. market and create a global broadband network carrying data, Internet and voice.

"This is a logical next step for Verizon because it will help unlock the full value of our network and our core business," said Eduardo R. Menasce, president of Verizon's Enterprise Solutions Group, which manages the design, operation and maintenance of networks for large business customers. "We believe that our global network perfectly positions Verizon to become a leading presence in the large business market, which is the fastest-growing segment in the U.S. telecommunications industry and generates $140 billion a year in revenues."

Verizon is acquiring fiber-optic cable, switching and transmission equipment and related network software to deploy the broadband network, with the first phase -- linking New York to London, Paris, Amsterdam, Brussels, Frankfurt and Milan -- scheduled to begin operating by second quarter 2001. Verizon already operates links between New York and Toronto and between Hawaii, Hong Kong, Tokyo and Sydney, and those cities too will become part of the network. Additionally, over the next two years, Verizon plans to expand the network with direct links to leading commercial and financial centers like Geneva, Zurich, Madrid, Singapore, Buenos Aires, Caracas and Mexico City.

Completion of the first phase of the network will require the outlay of significant capital, but Verizon said the investment has already been incorporated in its capital budget and in the financial guidance for 2001 and 2002 that it issued last year. Also, Verizon said it anticipates a cost savings of at least $300 million in transport costs over the next five years because routing international calls over its global network rather than paying other carriers to transport the calls will be significantly less expensive.

Verizon has created a new business unit, Global Solutions Inc. (GSI) to oversee the project and manage the network.

"We will manage and operate our global network by owning the switches and controlling our own transmission facilities, rather than just re-selling capacity and services on another carrier's network," said Thomas A. Bartlett, president of GSI. "And we will support our network with outstanding customer care, including Web-based services such as provisioning and billing. As a result, we will be able to offer a facilities-based network that connects commercial centers around the globe and that provides an array of voice, data and Internet services to large business, wholesale and residential customers. Our prices will be competitive and our service will be outstanding."

Verizon is turning to its allies to help it complete the network on schedule. FLAG Telecom and Metromedia Fiber Network Inc. (MFN) -- Verizon holds ownership stakes in both -- will lend their muscle to get the ball rolling.

FLAG Telecom owns and operates a high-capacity, undersea cable system that links Europe, the Middle East and Asia. It is currently laying a trans-Atlantic cable between New York, London and Paris and is scheduled to begin operating it next month. The company is also developing FLAG North Asian Loop, to connect major cities throughout Asia, and a trans-Pacific cable.

MFN, meanwhile, owns fiber-optic infrastructures within key metropolitan areas in the U.S. and internationally. It has already deployed more than 1.2 million miles of fiber and plans to hit 3.6 million worldwide by 2004.

While FLAG Telecom and MFN lay the fiber-optic infrastructure, GSI plans to operate gateway switches in New York, Los Angeles, Honolulu and London to aggregate data and voice traffic and route it over the network. It plans to build a European network operations center in a suburb of London.

Analysts Wednesday c