For the longest time, the switchzilla in San Jose has been preaching the IP mantra, and telling everyone who was willing to listen, that it was the pivotal and the most important part of this migration from circuit switch to packet switch networking in the phone realm.

Today, all PR could not hide the naked truth: when it comes to phone companies, the incumbents still want to buy from the old timers. Nortel Networks’ exclusive deal with Verizon to provide all sorts of VoIP networking gear and software, has stripped the IP veneer off Cisco’s smiley face. In fact, Cisco and others like Lucent Technologies, are losing traction to Nortel which has won contracts with MCI, Bell Canada and now Verizon.

Aman Kapoor, a dear friend of ours and principal at Packetology, a consulting firm, has been telling us for months that Nortel might be the Trojan horse in the VoIP battle. And that it could be on a come back story of the year. it is ironic, even as I prepared my full report on Nortel this announcement came today. Tip of the hat to Aman for a good call. The Nortel-Verizon deal is also not good news for Lucent Technologies which has been left in the cold, reports Light Reading.

bq. ”Lucent’s made a lot of effort rebranding and repositioning against Nortel,” says Jon Arnold, VOIP analyst at Frost & Sullivan. “Taking a prime customer away is not a good sign for them.” Naturally, Lucent is downplaying the news. “Nortel is first with Verizon, but this will be a two-vendor game,” says Bill Price, a company spokesman. He points out that the deal is exclusive for 18 months only, meaning that Lucent has time to catch up and offer a decent migration strategy for its own Class 5 switches.

Sonus Networks, which also has some softswitches in the Verizon long distance network is also one of the big losers after today’s announcement.