Ron,
AFAIK, you are correct regarding a virtual CTC, but you can still define a real 
FICON CTC - I think I'm correct in saying you just need one spare FICON port, 
unlike ESCON, where you needed two, and a cable between them.

Assuming nothing has changed on the mainframe, and you are running JES2, this 
definitely sounds like a network issue.

I'm sure IBM will help, but, in the meantime...

Basics first.  Can you ping z/VM from z/OS and vice versa?  Of course ICMP 
might be blocked, so you could also try TRACERTE ipaddress from both systems.  
Maybe also try TELNET, just to prove both systems can see each other.

Is your JES NETSRV address space up (something like JES2S001)?

Is the JES line started?

What happens when you issue $SN,N=your z/VM node number (or possibly 
$SN,SOCKET=your z/VM socket number) on the z/OS system?

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