Verizon Business to Offer 40G across Europe with Nortel

| Nov 19, 2007 | Business Telecom Services - Europe | Competitive Update
| Analyst: Dustin Kehoe

Current Perspective: Positive
Vendor Importance: Moderate
Market Impact: Moderate

Event Summary

On November 15th Verizon Business announced that it would soon begin the rollout of its ultra long haul (ULH) equipment, offering backbone capacity between the core routes of London, Amsterdam, Frankfurt, Paris and Brussels. The network is based on Nortel’s Optical Multiservice Edge 6500 and it features dynamically compensating optics and a common photonic layer. Verizon will deploy ULH transport across 3,230 kilometres and offer a capacity of 40 Gbps.

Analytical Summary

• Current Perspective: Positive on Verizon Business‘ announcement regarding plans to upgrade its pan-European backbone to 40 Gbps using ultra long haul (ULH) technologies, because the new investment, based on Nortel equipment, will enable the carrier to quadruple its backbone capacity to support continual growth in IP and data communications services across major European hubs.

• Vendor Importance: Moderate to Verizon Business, as the company needs to continue to invest in its network infrastructure to support the current and future demands for high-capacity bandwidth from its customers. The injection of 40 Gbps capacity will be important for supporting high-speed Internet access, advancing its carrier Ethernet products, delivering more Web-based applications (especially multimedia and video), and supporting the growing requirements for managed storage.

• Market Impact: Moderate on the European telecoms market, because there is no sharp increase in market demand that matches Verizon Business’ move to quadruple network capacity in select routes. Most customers appear to be content with their existing service offerings. When there is a noticeable shift, competitors are also likely to invest in similar network upgrades.

Recommended Competitor Actions

• Now that IPTV, carrier Ethernet and wireless data services are starting to gather steam, expectations are that traffic growth will increase substantially. With this in mind, European carriers should consider the business case for upgrading to 40 Gbps services. While there is little dispute that customer demand for bandwidth continues to increase year-over-year, carriers will need to make sure there is enough capacity that can be provisioned to stay ahead of the demand curve.

• Competitors should consider some of the merits behind ULH for offering higher-capacity services. This will be important for lowering OpEx, especially as real-estate constraints and power consumption have created some concerns with services that are more heavily reliant of electrical regeneration for DWDM WAN services. Equally, customers are always looking for more scalable and efficient services.

• All competitor service providers should consider opportunities in providing high-capacity services for vertical markets, such as the finance, government and health sectors, where there is a heavier demand for applications with high-capacity links. Academic research networks are also prime targets for wholesale services.

• As metro optical networks become increasingly more robust, the lines between equipment designated for assignment in metro core, regional and long-haul networks are blurring. As a result, equipment vendors have a mandate to increase the flexibility of their solutions by offering multi-reach capabilities from the same platform, and they are expanding the ability to share line cards across platforms.

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Competitive Positives and Concerns

Recommended Vendor Actions

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