Nortel, Broadstream Team Up to Provide IPTV Content to Rural Providers

IPTV-Ready Content Helps Rural Providers More Rapidly Compete with Cable, Satellite Operators

AUGUST 07, 2006, TORONTO - Nortel* [NYSE/TSX: NT] is teaming up with Broadstream Communications, the industry leader in IPTV content transport and management services, to provide a complete end-to-end IPTV solution that now includes both video infrastructure and television programming.

The addition of Broadstream to Nortel’s IPTV ecosystem brings over 200 channels of IPTV-ready video content that can be transmitted directly to any service provider location in the United States. Nortel’s IPTV solution enables service providers to deliver a unique video service over an IP infrastructure that includes features such as on-screen instant messaging, mobile-to-TV picture sharing, and on-screen caller ID.

“As rural telcos look to offer their customers new IPTV services, a significant hurdle they face is access to a complete media and entertainment content bundle that can effectively compete with today’s existing cable and satellite services,” said Walt Megura, general manager, Broadband Networks Solutions, Nortel. “By teaming up with Broadstream to leverage their expertise in managed content services, Nortel can offer rural telcos a turnkey IPTV solution that helps enable more rapid and cost-effective introduction of these new revenue-generating services.”

Broadstream plays an important part in Nortel’s IPTV end-to-end solution by greatly reducing the complexity of acquiring content and by providing significant cost savings to telco providers. Broadstream provides TV channels that are pre-packaged in an IPTV-ready format by pre-encoding them into high quality MPEG-4 and delivering them via a single satellite to the telco video head-end. This process eliminates the telco’s need for costly encoders and expensive satellite receivers. Nortel then interconnects the content into their IPTV solution to create a complete, highly competitive IPTV service for the telco’s regional market.

“By eliminating the telco’s need to build out its own video head-end to consolidate and convert media content into an IPTV-ready state, Broadstream can help telcos of any size significantly reduce the high cost of providing a new IPTV service,” said Pete Bryant, vice president business development, Broadstream. “Our work with Nortel provides telcos with a complete end-to-end path for IPTV content from the media source down to the set-top box.”

Nortel brings to the market a comprehensive IPTV solution that is pre-integrated and pre-tested to help ensure early deployments of IPTV are reliable, scaleable, and secure. Nortel supports its IPTV solutions beyond the initial deployment phase by providing lifecycle management to protect customer investments and help ensure the system remains operational as video upgrades occur over time.

Nortel’s IPTV solution with Broadstream will be on display as part of the Nortel Rural Market Tour traveling across North America this fall. The Nortel Next Generation Networking (NGN) Rural Market Tour 2006 is a one-day educational seminar with live solutions demonstrations on NetworksXpress, Nortel’s uniquely configured mobile demonstration center displaying the latest in Nortel products and solutions designed to deliver cost reduction, increased productivity, and innovation. Nortel’s end-to-end IPTV solution, including bundled video services from Broadstream, will be a part of the educational seminars.

About Broadstream Communications, Inc.

Broadstream Communications, Inc., is the leading provider of managed IPTV network services (IPTV Connect™), content management platforms (Bstream™) and affiliate rights and marketing support services (Media Services™). Broadstream operates an all digital (IP) virtual head-end network and service offering that enables network operators to provide an efficient, cost-effective video service product offering over the economics of self-built head-end systems. With ubiquitous coverage of the entire continental United States and existing programming transport rights, Broadstream offers the most extensive IP Video distribution network in the world. Broadstream is headquartered in Bellevue, WA. Additional information can be found at www.broadstream.com.**

About Nortel

Nortel is a recognized leader in delivering communications capabilities that enhance the human experience, ignite and power global commerce, and secure and protect the world’s most critical information. Our next-generation technologies, for both service providers and enterprises, span access and core networks, support multimedia and business-critical applications, and help eliminate today’s barriers to efficiency, speed and performance by simplifying networks and connecting people with information. Nortel does business in more than 150 countries. For more information, visit Nortel on the Web at www.nortel.com. For the latest Nortel news, visit www.nortel.com/news.

Certain statements in this press release may contain words such as “could”, “expects”, “may”, “anticipates”, “believes”, “intends”, “estimates”, “targets”, “envisions”, “seeks” and other similar language and are considered forward-looking statements or information under applicable securities legislation. These statements are based on Nortel’s current expectations, estimates, forecasts and projections about the operating environment, economies and markets in which Nortel operates. These statements are subject to important assumptions, risks and uncertainties, which are difficult to predict and the actual outcome may be materially different. Further, actual results or events could differ materially from those contemplated in forward-looking statements as a result of the following (i) risks and uncertainties relating to Nortel’s restatements and related matters including: Nortel’s most recent restatement and two previous restatements of its financial statements and related events; the negative impact on Nortel and NNL of their most recent restatement and delay in filing their financial statements and related periodic reports; legal judgments, fines, penalties or settlements, or any substantial regulatory fines or other penalties or sanctions, related to the ongoing regulatory and criminal investigations of Nortel in the U.S. and Canada; any significant pending civil litigation actions not encompassed by Nortel’s proposed class action settlement; any substantial cash payment and/or significant dilution of Nortel’s existing equity positions resulting from the finalization and approval of its proposed class action settlement, or if such proposed class action settlement is not finalized, any larger settlements or awards of damages in respect of such class actions; any unsuccessful remediation of Nortel’s material weaknesses in internal control over financial reporting resulting in an inability to report Nortel’s results of operations and financial condition accurately and in a timely manner; the time required to implement Nortel’s remedial measures; Nortel’s inability to access, in its current form, its shelf registration filed with the United States Securities and Exchange Commission (SEC), and Nortel’s below investment grade credit rating and any further adverse effect on its credit rating due to Nortel’s restatements of its financial statements; any adverse affect on Nortel’s business and market price of its publicly traded securities arising from continuing negative publicity related to Nortel’s restatements; Nortel’s potential inability to attract or retain the personnel necessary to achieve its business objectives; any breach by Nortel of the continued listing requirements of the NYSE or TSX causing the NYSE and/or the TSX to commence suspension or delisting procedures; (ii) risks and uncertainties relating to Nortel’s business including: yearly and quarterly fluctuations of Nortel’s operating results; reduced demand and pricing pressures for its products due to global economic conditions, significant competition, competitive pricing practice, cautious capital spending by customers, increased industry consolidation, rapidly changing technologies, evolving industry standards, frequent new product introductions and short product life cycles, and other trends and industry characteristics affecting the telecommunications industry; the sufficiency of recently announced restructuring actions, including the potential for higher actual costs to be incurred in connection with these restructuring actions compared to the estimated costs of such actions and the ability to achieve the targeted cost savings and reductions of Nortel’s unfunded pension liability deficit; any material and adverse affects on Nortel’s performance if its expectations regarding market demand for particular products prove to be wrong or because of certain barriers in its efforts to expand internationally; any reduction in Nortel’s operating results and any related volatility in the market price of its publicly traded securities arising from any decline in its gross margin, or fluctuations in foreign currency exchange rates; any negative developments associated with Nortel’s supply contract and contract manufacturing agreements including as a result of using a sole supplier for key optical networking solutions components, and any defects or errors in Nortel’s current or planned products; any negative impact to Nortel of its failure to achieve its business transformation objectives; additional valuation allowances for all or a portion of its deferred tax assets; Nortel’s failure to protect its intellectual property rights, or any adverse judgments or settlements arising out of disputes regarding intellectual property; changes in regulation of the Internet and/or other aspects of the industry; Nortel’s failure to successfully operate or integrate its strategic acquisitions, or failure to consummate or succeed with its strategic alliances; any negative effect of Nortel’s failure to evolve adequately its financial and managerial control and reporting systems and processes, manage and grow its business, or create an effective risk management strategy; and (iii) risks and uncertainties relating to Nortel’s liquidity, financing arrangements and capital including: the impact of Nortel’s most recent restatement and two previous restatements of its financial statements; any inability of Nortel to manage cash flow fluctuations to fund working capital requirements or achieve its business objectives in a timely manner or obtain additional sources of funding; high levels of debt, limitations on Nortel capitalizing on business opportunities because of credit facility covenants, or on obtaining additional secured debt pursuant to the provisions of indentures governing certain of Nortel’s public debt issues and the provisions of its credit facilities; any increase of restricted cash requirements for Nortel if it is unable to secure alternative support for obligations arising from certain normal course business activities, or any inability of Nortel’s subsidiaries to provide it with sufficient funding; any negative effect to Nortel of the need to make larger defined benefit plans contributions in the future or exposure to customer credit risks or inability of customers to fulfill payment obligations under customer financing arrangements; any negative impact on Nortel’s ability to make future acquisitions, raise capital, issue debt and retain employees arising from stock price volatility and further declines in the market price of Nortel’s publicly traded securities, or any future share consolidation resulting in a lower total market capitalization or adverse effect on the liquidity of Nortel’s common shares. For additional information with respect to certain of these and other factors, see Nortel’s Annual Report on Form10-K/A, Quarterly Report on Form 10-Q and other securities filings with the SEC. Unless otherwise required by applicable securities laws, Nortel disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

*Nortel, the Nortel logo and the Globemark are trademarks of Nortel Networks.

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