A bit more than a year after Nortel announced its landmark deal with Verizon, the reality is that the RBOC only replaced between 5 to 10 of its Class 5 switches, which represents less than 1% of its total Class 5 switches in service (2,500).  This result is not surprising.  I recommended a lot of caution right from the early going.  I recall using a hockey game analogy in an interview I had at about the same time last year.  It was just the first period, and Nortel had just scored a goal, I said.  But it was still early. 

Also, while a couple of legacy Lucent switches were replaced, at such a low pace, it would seem that Lucent was able to just about maintain its share of the Verizon Class 5 installed base, with the other replacements being older Nortel DMS switches.  Since Nortel's exclusivity expires in July of this year, Lucent will still be given a few chances to get a significant portion of the replacement opportunity.  This just goes to show that, despite the initial Nortel win, it is still very hard to replace the incumbent, and in the worst case scenario, Lucent will still be the secondary supplier.  So expect that the months following July will be a good acid test for the recently acquired Telica softswitch (company acquired on May 2004 for $295 million).

Verizon's own Class 5 VoIP plan called for a an agressive 5 to 6 year deployment, but right now, a more likely scenario would be a 5 to 10 year exercise, with a rough annual spend of $100 to $200 million.  But that is assuming that Verizon will stick to its original allocated capex for class 5 switch replacement of roughly $1 billion.  And that other high priority items (e.g. FTTH project, IMS, etc.) will not draw more resources.  Those are two big ifs.  Nothing but a big dose of reality for those engaged in a bit of "irrational exuberance".