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Nearly $2B per year goes from the four telcos to competitors, largely as Verizons backing out clearly cost NorthPoint the better part of $1B, which
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Verizon Wireless is a top wireless phone service provider, but it can't serve its roughly 57 million customers without some serious technological help.
Verizon agreed to pay Nortel $2 billion over the next five years for communications networking infrastructure and services that will help it build out its V CAST video and music services and BroadbandAccess high-speed Internet services for gaming and e-mail.
Such services are in high demand thanks to the proliferation of smartphones, handheld computers and other wireless devices that can handle higher bit rates and data streams.
Phone service providers are rushing to market with newfangled data services to keep customers from switching plans; Verizon Wireless said such data services accounted for 14 percent of its sales from customers in the third quarter of 2006.
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Networking equipment providers such as Nortel, Cisco Systems and Alcatel are hoping to be the supporting network equipment vendors of record for Verizon, Cingular and other carriers.
Fortunately for Nortel, it enjoys a longstanding relationship with Verizon that stretches back a decade.
For this latest contract, Verizon Wireless plans to trot out more Nortel CDMA2000 radio base stations, data switches, IP platforms and optical networking gear with professional services from Nortel.
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"The popularity of Internet services like user-generated videos, online gaming, music and video is driving an explosion in bandwidth demand," said Richard Lowe, president of mobility and converged core networks at Nortel, in a statement.
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"Nortel is making it simple for Verizon Wireless to expand its network to meet this demand and to competitively drive new services to market that their customers will enjoy."
The deal also reaffirms Verizon's support in the CDMA (define) protocol, which faces competition from GSM (define), and builds on the CDMA 1xEV-DO Revision A technology contract the two companies unveiled this past July.
The next rev of CDMA, Revision A allows CDMA network operators to provide richer wireless services, such as 3-D gaming, mobile music and IP services, such as VoIP (define) and high-speed file transfers.
Moreover, today's deal means Verizon Wireless and Nortel will work together on developing applications and services based on Internet Multimedia Subsystems, or IMS.
Considered by many in the industry to be the best splicing of traditional phone and IP communications gear, IMS (define) helps companies cut costs by integrating gear from different vendors under one common platform.
In related news, Verizon Wireless parent company Verizon Communications named Verizon Wireless President Denny Strigl President and COO, a new position reporting to Verizon Chairman and CEO Ivan Seidenberg.
Beginning January 1, Strigl will be responsible for the operations of all of Verizon's network-based businesses, which include Verizon Wireless, Verizon Telecom and Verizon Business and Verizon Services Operations.
Verizon will replace Strigl with Lowell McAdam, currently executive vice president and COO at Verizon Wireless, as president and CEO of Verizon Wireless.
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