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TORONTO, Canada - 01/24/04 - Bell Canada's strategy to launch a national network using Internet-based technology moved another step forward yesterday with a three-year, $200-million deal to purchase equipment from California-based Cisco Systems Inc.

According to the Financial Post, This is the third large equipment agreement signed by Bell in the past four months.

The carrier signed a deal in September to buy $200-million of Internet protocol gear from Nortel Networks Corp. over three years, which was followed by a three-year, $170-million deal in December for optical switches and other sophisticated telecommunications equipment.

Isabelle Courville, president of Bell's enterprise group, said the carrier now has the major pieces needed to roll out its IP strategy. "We have the key parts to really make our move into IP from those three deals," she said. "They form the basis of what we need to move into IP."

Bell's willingness to spend nearly $600-million on IP equipment reflects the aggressive strategy articulated in December by BCE Inc. chief executive Michael Sabia, who told analysts Bell is aiming to migrate 100% of its traffic on to a national IP network by 2006, and offer 90% of its customers full access to all IP services by then.

"There's absolutely no doubt this industry is headed to a world of IP," he said. "This is not going to be telecom as usual."

Carriers around the world are moving to next-generation, IP-based networks because they let voice, video and data travel on the same network. This reduces operating and maintenance costs by 20% to 50%.

IP networks will also let carriers offer a variety of new services to corporate and residential customers to generate more revenue. While some of these services, such as voice over Internet protocol, will cannibalize existing services, the idea is that IP-based revenue will offset deterioration of services provided by older technology.

IP services are appealing to carriers because they are fairly straightforward to create, market and provision. With a bigger bundle of service to offer, there are, in theory, more sales opportunities.

Some of the IP services attracting attention are voice, hosting, video conferencing, video surveillance, wireless local area networks, firewalls, anti-virus protection and call centers.
The biggest unknown, however, is how enthusiastically corporate and residential customers will gravitate to IP services. Ronald Gruia, an analyst with Frost & Sullivan in Toronto, said it would "likely take time before IP services are widely adopted."

"It is the difference between nice-to-have and must-have," he said, adding that Internet telephony is the most compelling service because it offers a quick return on investment by cutting operating expenses.

There are two facets to the Cisco-Bell Canada deal.
 
First, Bell will use Cisco's equipment to expand its IP network and its ability to provide corporate customers with service. Second, the two companies will also work together to create new services and help businesses migrate to an IP environment.

"Cisco and Bell have had a strong relationship for 10 years," said Terry Walsh, president of Cisco Systems Canada. "This announcement is the next evolution of that relationship. It reflects on Bell's side increasing demand from enterprise customers."

Courville declined to provide details about how much Bell Canada plans to spend to create its national IP network, or what percentage of its capital spending would be allocated to IP-based technology.
 
She said the company, however, "has capped spending on legacy systems."

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