Carriers ramp up spending

Europe's carriers are treading a fine line between spending money on infrastructure expansion and repaying substantial debts

Despite their heavy debts, Europe's incumbent telecoms carriers are spending more on upgrading infrastructures to support new data services for corporates, according to experts.

BT has already started its expansion with a £20m contract with ATL Telecom that will see a number of enhancements made to BT's Kilostream UK local access network over the next three years.

European carriers, including BT, are close to agreeing the blueprint for a "21st century network" which will enable them to provide IT managers with more flexible and cost-effective bandwidth, able to deliver IP virtual private networks (IP VPNs) that connect multiple sites and offices, and other hosted services.

"BT is investigating the 21st century network," said Romulus Pereira, president and chief executive of metropolitan Ethernet equipment maker Riverstone Networks. "It is restructuring debt and putting money to work into building wireline services. Carriers are chasing enterprise business and looking to free up cash to deploy data services that enterprises want."

BT may elect to use Ethernet-over-SDH technology to provide 10Mbit/s, 100Mbit/s and 1Gbit/s wide area network (WAN) links over its existing metropolitan-area rings and MPLS-based backbones. The ability to put Ethernet frames over STM connections is essential for BT to gradually migrate its customers to new IP-based services, according to Pereira.

"The backbones are all moving to IP over MPLS, so BT now needs to recreate the leased-line business all over again with tunnelling through IP backbones," said Pereira, adding that there are still challenges involving legacy kit and regulatory arrangements to be overcome.

ATL Telecom will provide BT with a series of line cards that will upgrade the bandwidth of leased-line private virtual circuits (PVCs) from 256kbit/s to 640kbit/s for cash dispensers, point-of-sale devices, warehouses, cash tills and other connections.

"The advantage to the customer is that the link is 10 times faster and handles more transactions. It's cheaper for BT and we hope to lower its tariffs to end-customers," said ATL spokesman David Tomlinson, who estimated that BT will upgrade 500 connections a month over the next three years.

Like other European carriers, BT is performing a balancing act that requires it to expand and improve its telecoms networks while reducing capital expenditure and paying off substantial debts. BT's debt was estimated at £13.7bn at the end of 2002, down from £27.3bn the year before.