The company is the latest carrier to move toward packet-switched networks, also known as voice-over Internet protocol technology, versus traditional telephony.
Other carriers are also slowly moving toward packet-switched networks, also known as voice-over Internet protocol (VoIP) technology, versus traditional telephony, which is "circuit-switched." Sprint made a $1.1 billion deal with Nortel in November, and began adding packet switching to its network in 2002. Qwest Communications International announced in October that it would adopt packet-switching technology from Nortel.
Analysts have cautioned that traditional phone companies like Verizon could get squeezed out of VoIP technology. Packet switching allows for faster call routing, greater network capacity and the ability to deliver new services, such as multimedia. It also has another important advantage over circuit switching: It allows for a more distributed network that can more easily survive damage to part of the network.
Verizon said it will use the Nortel equipment to move voice traffic over lines using asynchronous transfer mode (ATM) technology, which can later be updated and integrated with IP technology. Verizon said it was part of a larger strategy to integrate voice and data services.
The Nortel equipment is already in use at the company's tandem centers in New Jersey and Florida, and Verizon said it plans to add it to several new locations over the next 18 months.
Though it is still evaluating the reliability of packet-switching technology, Verizon said the New Jersey center has already completed over 1.8 million voice phone calls.
The convergence of voice and data networks, and the simpler networks afforded by packet switching, will also save the company money, according to Nortel's director for VoIP marketing, Jenna Stanley. Stanley said that according to industry averages, companies using packet-switching technology save about 10 to 15 percent on operating costs and 50 percent in capital spending on an ongoing basis, since they have simpler systems to upgrade and maintain.
But in order to fully realize those benefits, Verizon still needs to add packet-switched technology to the "edge" of the network, which connects the switching centers directly to end users, according to Stanley. Those switching centers are known as "class 5," and require separate regulatory standards--something that may delay their transition to packet switching.