But combined with positive fourth-quarter news from Nokia, the announcements served to pump up stock prices for telco equipment makers. Nortel, meanwhile, followed up its Verizon announcement with word that it will sell core routers from Avici Systems Inc. (North Billerica, Mass.) in a deal that also gives Nortel options on 800,000 shares of Avici stock. Under a joint marketing and technology development pact, Nortel will resell Avici's TSR, SSR and QSR routers, and integrate them under the Nortel Preside management system. Nortel has an existing reseller agreement with Juniper Networks Inc.
Verizon Wireless plans to spend $1 billion on a national upgrade of backbone services compliant with the cdma2000 1X Evolutionary Data-Only (EV-DO) third-generation cellular standard. The Verizon Communications wireline upgrade will be based largely on soft switches and media servers from Nortel Networks.
While most technology analysts view the drive toward IP networks with optimism, Tom Nolle, principal analyst and chief executive officer of CIMI Corp. (Voorhees, N.J.), cautioned that "VoIP can drive technology, but it will never be a significant revenue stream." Voice, he said, "remains a giveaway whether it's TDM [time-division multiplexed] or packetized," as broadband services become the principal revenue generators. Instead, Nolle said, carriers are shifting to IP backbones in order to provide converged services over a unified protocol stack.
Verizon Wireless' plan is to have EV-DO services at rates of between 300 and 400 kbits/second in most major cities by the summer, and then to expand nationwide in the following 18 months. Though no contracts have yet been signed or suppliers anointed, the spokesman said the company is very happy to date with work performed by both Nortel and Lucent Technologies in the limited commercial launch of EV-DO networks in the San Diego and Washington, D.C., areas. Those networks, which went live in September, formed the basis upon which "we've been assessing the business case [for EV-DO] that led to today's announcement," the spokesman said.
Nortel's letter of agreement with Verizon Communications, meanwhile, is expected to be followed by a formal five-year agreement. Verizon said its network will center on the provision of VoIP services in both local-area and long-distance markets. However, moving all communications to IP will allow Verizon to offer many additional merged broadband and voice services, such as instant video calling and unified messaging. Analyst Nolle called such services the "real moneymakers for carriers."
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