The construction project, based in Spain, is believed to be one of the largest rollouts of Internet protocol (IP)-based technology for voice.
BT plans to roll out nearly 100,000 IP-based voice connections, according to the company, providing national coverage in Spain.
Nortel is thought to lag rivals Lucent Technologies and Cisco Systems in delivering IP-based voice technology, according to analysts. Yet this deal may help the telecom equipment provider gain some ground in the market, they said.
"They've been late to market," said Hillary Mine, a telecommunications analyst with Probe Research. "It's a real validation to hit the market and gain such a large share."
Using IP to deliver voice is believed to be a rapidly emerging market for communications carriers and equipment providers, given the cost savings associated with rolling voice into a single network that can also handle video and data traffic.
British Telecom executives said they have already invested about $650 million in its Spanish fixed, mobile, and Net-based infrastructure, and plan to spend an additional $1 billion for equipment over the next decade.
Details of BT's investment in Nortel technology were not disclosed.
Through use of its IP-based network, British Telecom plans to deliver direct and in-direct dial services, free phone services, and so-called virtual private network (VPN) services to residential and business customers.
As part of the deal, British Telecom will roll out 75 Nortel CVX 1800 access switching devices, as well as its IPConnect Call Engine technology and traditional phone network-to-IP gateway software and hardware, according to the company.
Nortel executives said the network represents the first time the equivalent of a public switched telephone network, or PSTN, has been implemented using IP. Nortel claims the reliability will be comparable, according to Dan Mangelsdorf, director of Internet telephony marketing for the company.
British Telecom plans to roll out the network for long distance initially, then consolidate voice and data services and add multimedia capabilities. Coverage will consist of 12 access points, or "nodes," by the end of this year, expanding to 27 access points by 2001, according to Nortel.