New Virtualized Network capabilities will create an agile, subscriber-aware networking environment, putting users in control of their network experience. New Network Intelligence solutions for the Optical Internet will enable service providers to dynamically monitor network conditions, and to automatically shift network resources to fulfill consumer needs and support the most profitable services.

“Nortel Networks is creating a new, high-performance Internet that will let users control both content and performance, tailoring the network to fit unique needs,” said Clarence Chandran, president, Service Provider and Carrier Group, Nortel Networks. “Our Virtualized Network and Optical Internet solutions will actually give the Internet a ‘brain,’ allowing it to adapt to different customer needs, tailor services to users, and optimize content and information flow.”

Virtualized Network capabilities will enable a variety of advanced features, including instant user recognition from any location or port, preferred customer status, hosted applications, and new levels of control and personalization. This will help to enable a second wave of eBusiness, based on personalized customer relationships, in which the Internet acts as a two-way tool for businesses to provide personalized content and services to customers, create business-to-business marketplaces and empower employees.

“The Internet will see some dramatic changes in the next two years, moving further beyond connectivity into a service delivery platform,” said Michael Howard, principal analyst and founder of Infonetics Research. “Making customers ‘sticky’ is a key for success in this new environment. We believe Nortel Networks’ Virtualized Network is the correct end-to-end approach to making the network the major contributing factor in building a positive user experience.”

“By re-examining the role of the network, and turning it, in effect, inside-out, Nortel Networks has set the foundation for a real new dynamic global network that will, hopefully, help to bring to fruition a personalized service that will be controllable by the customer and not limited by network rules,” said Michael Thompson, director of research, the Butler Group, London. “With the new dynamic and personalized networking approach provided by Nortel Networks and the application and service elements provided both by it and its strategic suppliers, the technology changes have become more than incremental. Growth and evolution has become revolution.”

Nortel Networks Virtualized Network capabilities will include the industry’s only complete service delivery environment, spanning Nortel Networks Preside* capabilities and integrated with Nortel Networks’ industry-leading CPE and network-based VPN portfolio including Passport,* Shasta* 5000 BSN, Contivity,* CVX* and Versalar* technologies.

Innovatia, an Aliant company, will be the beta trial customer for the Virtualized Network. In addition, Nortel Networks IP VPN customers Telstra and Genuity believe Virtualized Network capabilities have potential to enhance value for their customers, and intend to evaluate the solution. Nortel Networks is currently a leading vendor in both network-based and premise-based IP VPNs.

Nortel Networks is developing three new Network Intelligence solutions: OPTera* Networking Controller (ONC); Preside network and service management; and Intelligent Optical Connectivity (IOC). Together, these new capabilities will work in tandem with Nortel Networks’ OPTera Packet Solution to make the network more responsive. OPTera Packet Solution is a breakthrough technology that unifies optical and packet networks into one powerful infrastructure capable of carrying all types of services. This technology includes OPTera Packet Core and the OPTera Connect portfolio.

Today, service providers must spend significant time and expense manually reconfiguring their networks to accommodate new and ever-changing traffic requirements. Through this optimization, network resources are dynamically applied in real time to ensure that a service provider’s most profitable services receive the network resources they require above and beyond those applied to standard, best-effort services.

In addition, Network Intelligence solutions will dramatically reduce the time it takes to optimize the network, establish optical or packet-layer connections, and respond to service requests. Instead of waiting weeks for manual reconfiguration, service providers can simply dial up their connections and make changes and set policies in a matter of seconds. Intelligence technology reduces the chance for human error and presents a significant cost savings for service providers.

End-to-end intelligent packet/optical layer internetworking across metro and long haul is a key differentiator for Nortel Networks’ solution. As a result of this interworking, packet switches, such as IP routers or ATM switches, and optical switches can automatically traffic the network based on messaging requests from the packet layer. Nortel Networks combines the OPTera Connect family (metro and long haul) with the network management capabilities of Preside to offer a software solution that enables unprecedented agility and scalability for the next-generation Optical Internet.

Nortel Networks is a global leader in telephony, data, eBusiness, and wireless solutions for the Internet. The Company had 1999 U.S. GAAP revenues of US$21.3 billion and serves carrier, service provider and enterprise customers globally. Today, Nortel Networks is creating a high-performance Internet that is more reliable and faster than ever before. It is redefining the economics and quality of networking and the Internet through Unified Networks* that promise a new era of collaboration, communications and commerce. Visit us at www.nortelnetworks.com.

Certain information included in this press release is forward-looking and is subject to important risks and uncertainties. The results or events predicted in these statements may differ materially from actual results or events. Factors which could cause results or events to differ from current expectations include, among other things: the impact of price and product competition; the dependence on new product development; the impact of rapid technological and market change; the ability of Nortel Networks to make acquisitions and/or integrate the operations and technologies of acquired businesses in an effective manner; general industry and market conditions and growth rates; international growth and global economic conditions, particularly in emerging markets and including interest rate and currency exchange rate fluctuations; the impact of consolidations in the telecommunications industry, the uncertainties of the Internet; stock market volatility; the ability of Nortel Networks to recruit and retain qualified employees; and the impact of increased provision of customer financing by Nortel Networks. For additional information with respect to certain of these and other factors, see the reports filed by Nortel Networks with the United States Securities and Exchange Commission. Nortel Networks disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.