New service revenue and capital and operational cost savings are the drivers behind Verizon's ambitious packet telephony buildout.

In what is perhaps the nation's largest circuit-to-packet telephony transition, Verizon is looking to replace 2,500 Class 5 switches in about as many local central offices with IP softswitches, and line media and trunking gateways. The changeout, which Verizon says will take about five or six years, promises new converged services for local enterprise customers, as well as new revenue and up to 50% savings on capital and operational costs for Verizon.

Verizon spends about one-third of its capital budget - which this year is $12 billion to $13 billion - annually on sustaining its embedded PSTN facilities.

Verizon is investing $1 billion in Nortel softswitch and gateway equipment for the local VoIP project. Verizon is deploying Nortel's Communications Server 2000 softswitch, Packet Voice Gateway and Media Gateway 9000 products.

Verizon is also investing an unspecified amount in application servers acquired from other vendors and developed internally. The RBOC will also be purchasing session boarder controllers and other niche pieces of the softswitch deployment from various vendors.

The VoIP buildout hinges on Verizon's ambitious Fiber-to-the-Premises (FTTP) project, a multibillion-dollar effort to run fiber to businesses and homes. So far, FTTP is being built out in nine states and will enable customers to access a host of new, high-speed broadband services - such a multimedia VoIP.

Indeed, FTTP is key to Verizon's capital and operational cost savings with VoIP: If Verizon can bring VoIP customers into the central office directly over fiber, it can avoid the cost of deploying thousands of Nortel media gateways, which enable subscriber copper lines to connect to a packet backbone for delivery of switched and non-switched services.

To date, Verizon has cutover an entire central office in Mount Vernon, Wash., to packet telephony and is offering live POTS services - call forwarding, call waiting, voice mail, fax, dial-up Internet access, etc. - to businesses and residences in that community. Customers are still on the copper loop there, so media gateways are deployed until fiber is run.