Nortel Networks Delivers Efficient Optical Solutions for More Effective Local Governments.

OTTAWA -- Customers Choose Solutions for Inter-Departmental Communication, Emergency Response Systems, Community Networking

Nortel Networks (NYSE:NT) (TSX:NT) today announced the next step in delivering high-performance networks for local governments and municipalities in North America - a complete solution set for enabling high-bandwidth, reliable and secure networking through Nortel Networks optical portfolio.

Additionally, two new government customers - the cities of Philadelphia and Calgary, Alberta - have deployed Nortel Networks optical solutions.

The speed, flexibility and simplicity of Nortel Networks optical solutions can benefit local governments looking to improve connectivity between governmental departments, support innovative eGovernment applications, enable faster emergency response systems, and enhance community networking. In addition, Nortel Networks optical solutions can allow local governments to significantly increase bandwidth availability, and drive reduced cost of ownership by converging video, voice and data networks over a single, simplified network infrastructure.

"With increased demands being placed on local governments to reduce costs and maximize the value of technology investments, government officials are beginning to look at optical solutions as a way to increase employee productivity, boost local economies and better serve the community," said David Parks, senior analyst, Yankee Group. "With the complete, end-to-end optical portfolio offered by Nortel Networks, local governments can implement a solution that best fits their requirements."

"The government sector is a focus for Nortel Networks and our end-to-end optical portfolio provides the reliability and security that is absolutely necessary when dealing with mission-critical data and applications," said Philippe Morin, general manager, Optical Networks, Nortel Networks. "The two customer wins we are announcing are further testament that our optical solutions are the right choice for local governments looking to enhance their current networking infrastructure."

The City of Philadelphia has deployed a resilient packet ring (RPR) Optical Ethernet solution based on Nortel Networks Optical Metro 3500 to enable high-speed connectivity between 13 government offices and departments throughout the city. With the increased speed and bandwidth available through the optical network, the City is offering new eGovernment services such as online permits and bill payments, while also implementing new applications like video conferencing to improve employee productivity. In addition, the network will enable the city to improve collaboration with other city, state and federal organizations as well as support local non-profit organizations.

"We deployed an optical solution because we believe it is robust enough to provide an almost unlimited amount of bandwidth, ensuring that the City has the ability to offer new services to the citizens of Philadelphia," said Joseph James, deputy commissioner of public property, the City of Philadelphia. "Our analysis shows that the Nortel Networks optical solution is expected to provide a return on investment of less than two years and give the City a reduction in operating expenditures of 20 percent over the next five years."

The City of Calgary is implementing an Optical Ethernet solution based on the Optical Metro 3500 platform to increase bandwidth for a new computer aided dispatch system (CAD) to integrate communication among Police, Fire and Emergency Medical Services. To deliver this mission-critical service, it is necessary that the network infrastructure deployed to support the new system provide the highest degree of resiliency, availability and security. With the solutions in place, EMS dispatch paramedics can quickly access the CAD servers located at the Fire Department, and city maps and vehicle registration systems can all be accessed immediately by dispatch workers and shared with emergency personnel.

"When it comes to the safety of our citizens, ensuring that we have the fastest first response teams in place is essential, and the network that supports that must be based on the most reliable and resilient technology," said Sandy Virgo, City of Calgary. "Over 3,000 Police, Fire and Emergency Medical Services staff are supported by the optical network without issue or interruption, reinforcing our confidence in the scalability and resiliency now enabled through our optical network."

Nortel Networks is a leading provider of Government Solutions worldwide, leveraging expertise in new technologies like IP (Internet Protocol) telephony, virtual private networks, Optical Ethernet, advanced multiservice switching, and wireless local area networks. Nortel Networks works with agencies to design and build total solutions that can integrate switching, IP technologies, routing, optical, wireline and wireless transmission into a converged, reliable network. The network can lower operating costs as it enhances collaboration and information sharing, significantly raising the level of service to government constituents.

Deployed in more than 1,000 customer networks in 65 countries, Nortel Networks end-to-end optical network portfolio includes next generation SONET/SDH, optical switching products, photonics (WDM), and Optical Ethernet products. Nortel Networks has deployed more than 280,000 network elements globally.

About The City of Philadelphia

Founded in 1682 by William Penn, the city of Philadelphia is the fourth largest city in the United States based on population and one of the oldest cities in North America. As the former capital of the United States early in American history, Philadelphia is the center for many American firsts including the adoption of the Declaration of Independence in 1776 and the writing of a Constitution 11 years later.

About The City of Calgary

A Western Canadian business centre at the Eastern base of the Rocky Mountains, the Calgary area is Canada's fastest growing economic region. Calgary's diverse economic base of oil and gas, manufacturing, financial, natural resource and technology companies supports the highest rate of real GDP growth among Canadian cities. In the past five years, Calgary has led Canada in population growth, attracting more than 85,000 new residents as it nears one million in size. An international reputation for innovation has made the city home to Canada's largest concentration of corporate head offices per capita. In 2002, the Intelligent Community Forum of the World Teleport Association named Calgary co-recipient of the World's Top Intelligent Community award. A self-described "Heart of the new West," Calgary offers the benefits of a large metropolitan centre, in a relaxed and friendly atmosphere typical of western hospitality. A dynamic and youthful spirit, superior workforce and clean, safe environment make Calgary a world-class city and a global business choice.

About Nortel Networks

As a global innovation leader, Nortel Networks enriches consumer and business communications worldwide by offering converged multimedia networks that eliminate the boundaries among voice, data and video. These networks use innovative packet, wireless, voice and optical technologies and are underpinned by high standards of security and reliability. For both carriers and enterprises, these networks help to drive increased profitability and productivity by reducing costs and enabling new business and consumer services opportunities. Nortel Networks does business in more than 150 countries. For more information, visit Nortel Networks on the Web at www.nortelnetworks.com or www.nortelnetworks.com/media_center.

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 outcome of Nortel Networks independent review and planned restatement or revisions of its previously announced or filed financial results; the impact of the management changes announced on April 28, 2004 and August 19, 2004; the impact of the inability to meet Nortel Networks filing obligations on support facilities and public debt obligations; the sufficiency of Nortel Networks restructuring activities, including the work plan announced on August 19, 2004 as updated on September 30, 2004, including the potential for higher actual costs to be incurred in connection with restructuring actions compared to the estimated costs of such actions; cautious or reduced spending by Nortel Networks customers; fluctuations in Nortel Networks operating results and general industry, economic and market conditions and growth rates; the communication by Nortel Networks auditors of the existence of material weaknesses in internal controls; Nortel Networks ability to recruit and retain qualified employees; fluctuations in Nortel Networks cash flow, level of outstanding debt and current debt ratings; the use of cash collateral to support Nortel Networks normal course business activities; the dependence on Nortel Networks subsidiaries for funding; the impact of Nortel Networks defined benefit plans and deferred tax assets on results of operations and Nortel Networks cash flows; Nortel Networks dependence on new product development and its ability to predict market demand for particular products; Nortel Networks ability to integrate the operations and technologies of acquired businesses in an effective manner; the impact of rapid technological and market change; the impact of price and product competition; barriers to international growth and global economic conditions, particularly in emerging markets and including interest rate and currency exchange rate fluctuations; the impact of rationalization in the telecommunications industry; changes in regulation of the Internet; the impact of the credit risks of Nortel Networks customers and the impact of customer financing and commitments; stock market volatility generally and as a result of acceleration of the settlement date or early settlement of Nortel Networks purchase contracts; the impact of Nortel Networks supply and outsourcing contracts that contain delivery and installation provisions, which, if not met, could result in the payment of substantial penalties or liquidated damages; the future success of Nortel Networks strategic alliances; and the adverse resolution of litigation, investigations, intellectual property disputes and similar matters.

For additional information with respect to certain of these and other factors, see the most recent Form 10-Q/A and Form 10-K/A filed by Nortel Networks with the United States Securities and Exchange Commission. Unless otherwise required by applicable securities laws, 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.

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