Data Communications - Cisco Lands Backbone Network Deal in China
November 15, 2004
Cisco Systems recently announced that it has been selected to build a next-generation backbone network for China Telecom. The network contract is the latest in a string of deals this year between China Telecom and Cisco. Financial details of the most recent deal were not disclosed, but the various deals that Cisco has struck with China Telecom are believed to have a combined value of more than US$100 million.
The China Telecom Internet Protocol Next-Generation Network, once finished, is expected to cover more than 200 cities and provide services to corporate customers across the nation. In addition to the central backbone network, Cisco will also provide equipment for provincial networks where the most companies are located and Internet traffic is heaviest: Jiangsu, Hubei, Zhejiang, Anhui, Fujian, and Jiangxi.
The project will use Cisco platforms in the US and Hong Kong to connect the backbone network with ChinaNet, China's largest public network. The next-generation network will also enable users in China to link up with overseas networks through VPN (Virtual-Private-Network) services.
The Cisco deal is one piece of a larger plan that China Telecom drafted in hopes of propelling itself into the ranks of the world's largest IP (Internet Protocol) service providers within the next two decades. China Telecom operates a virtual monopoly over fixed-line services in China with 99% of market share, and it claims roughly 80% of the country's 80 million-plus Internet users.
Beijing promised in January 2004 to increase purchases of US telecom equipment as a way to reduce the enormous trade deficit that China enjoys with the US, which is expected to shatter all records this year to total US$140 billion. All in all, China has agreed to buy US$2.3 billion in equipment from foreign telecom companies, mostly American, such as Cisco, Motorola, Ericsson, Intel, Lucent, Nortel, and UTStarcom.