2004 International Consumer Electronics Show

Ivan Seidenberg
Consumer Electronics Show
January 8, 2004

[Introduction by Gary Shapiro, Chairman and CEO, Consumer Electronics Association.]

It may seem incongruous for a company that’s been in this business for more than 100 years to say we’re at the beginning of the communications revolution. But a walk around the convention floor here in Las Vegas says that we are. In fact, you might even conclude from what’s going on at CES that devices that can’t communicate are all but obsolete.

Remember when a camera was just a camera?

A cell phone was just a cell phone?

A computer just a computer?

Today -- thanks to a new generation of computer chips and the amazing creativity of a new generation of consumers -- the ability to communicate is embedded in every electronic device and soon will be part of every home appliance. What used to be separate domains – phone calls, photos, music, movies, games, work -- are now united in a continuous stream of bits and bytes.

And “convergence” -- a word that’s been invoked in our industry for more than a decade -- now refers not just to technology, but more importantly to the personal, daily experiences that are driving customer behavior, shaping markets, and spurring innovation.

There’s a big change afoot in how people communicate. You see it everywhere you look. In the past year:

• Instant Messages outnumbered e-mails.

• Wireless connections drew neck-and-neck with conventional access lines.

• Digital cameras outsold conventional ones. In Japan, camera phones already outsell them both.

Maybe the most significant shift of all is that the connected PC -- equipped with “always-on” broadband and wireless home networks -- is making the move from the office to the kitchen and the family room, reflecting its increasingly central role at the heart of daily life.

Driving this change in the architecture of physical networks is a change in the architecture of human relationships. All the breakthrough phenomena of the past year or so -- from blogging to Friendster... some would even say the Howard Dean campaign for president! -- are based on customers’ immense appetite to create instant communities and the ability to share experiences with others the minute they happen.

Broadband plus mobility equals a transformation. And if we look at what customers are doing in Europe and East Asia -- where I’m told teenagers can barely conduct a conversation without text messaging -- it’s clear we’ve only scratched the surface of this enormous shift in the way we communicate.

The endless inventiveness of the consumer electronics industry is putting the tools for creating instant communities in customers’ hands. What gives these devices their potential to transform daily life are communications networks that deliver high-speed, mobile connectivity to customers wherever they are -- homes, offices, cars, hotels, sidewalks.

Verizon’s role is to deploy those networks and provide the means to use them.

You can see the infrastructure to support this “all-broadband, all-the-time” lifestyle beginning to emerge. More than 150 M Americans have a mobile phone. Around 24 M have what I’d call a “first-generation” broadband connection, whether it be cable or DSL. And increasingly prevalent high-speed wireless networks let customers take broadband on the go.

That’s good news for Verizon, because networks are what we do. As we make those networks faster and more powerful, we will have an even bigger opportunity to deliver the benefits of convergence to the marketplace.

Our challenge could not be clearer. That’s why Verizon agrees with the Consumer Electronics Association, the High Tech Broadband Coalition, and TechNet that delivering 100 megabits of capacity to people wherever they are -- at home, at work, on the go -- should be the long-term goal for the broadband and high-tech industry.

As a communications services company, we believe deeply in the power of technology to create innovation and differentiate us in the marketplace. Over the years, we have successfully managed the huge transition from analog to digital technologies in both our landline and wireless networks. Now, we are reinventing our networks once again around broadband, packet and voice-over-IP technologies.

This phase of the technology transition is in full swing. In fact, we have invested some $55 billion in infrastructure this millennium -- more capital than any other telecom company in America from 2000 to 2003 -- to move toward our vision of an integrated, multimegabit network that will fuel the growth of the entire high-tech industry in the future.

The result is that – for millions of customers across America -- Verizon is the passageway to the power of communications.

• 46 M of our telephone lines are equipped for DSL.

• More than 36 M people use Verizon Wireless.

• We serve over 7 M small businesses and almost 80 percent of the Fortune 1000.

• More than a million businesses advertise in SuperPages, and 7 M visitors a month log on to our on-line directory, SuperPages.com.

• In fact, it’s safe to say that upwards of 100 M Americans are connected to a Verizon network at some point, each and every day -- at work, at home, or on the go.

Our approach to our business -- in both wireline and wireless -- is pretty straightforward: deploy leading-edge technology, move up the bandwidth chain, and offer good service and a great value proposition to customers.

Wireless is a good example of our ability to evolve from one technology platform to another -- creating growth, superior performance, and innovation along the way. In converting our nationwide network from analog to digital, we enabled explosive growth in subscribers and traffic. By upgrading that digital network to accommodate data, we ushered in the era of wireless data.

Now, we are taking wireless into the broadband age. In 2003, we were the first in the nation to deliver a true wireless broadband wide-area network with our deployment of a third-generation technology known as EV-DO in two markets. And this morning, we announced that we are committing $1 B over the next two years to expand this breakthrough technology nationwide.

We have also successfully incorporated new technologies on the landline side. For the business market, we deliver next-generation networking and IP services with an IP backbone, thousands of fiber-optic access rings and IP routers, and widespread packet-switching technology. And we have extended the first generation of broadband into the mass market with DSL, which is available to 80 percent of our customer base.

Now we’re about to take the next step.

Today’s broadband offerings are good -- but not good enough. Neither DSL nor cable modems are capable of delivering to the individual customer the speed and power that Verizon already delivers to the large business customer. Nor do they have the upstream capacity to optimize the communicating power of the new generation of electronics and digital appliances.

Verizon is about to change all that. Yesterday, we announced that we will begin a widespread deployment of Nortel’s state-of-the-art soft switches. This will be the largest deployment of packet-switching technology by any major telecom company and will enable our local and long distance network to handle voice, data and video transmissions simultaneously.

We also are the first telecom company to make a major commitment to deploying fiber, which will deliver 10-20 mb/s speeds in both directions to homes and small businesses. Our plan is to reach 1 million homes by the end of the year and potentially double that rate in 2005.

With our plans for EV-DO, packet technologies and fiber, Verizon will commit about $3 B of capital over the next two years to bring broadband to the mass market. These next-generation networks will provide a common protocol and a common infrastructure for voice, data and video services. They will link to all kinds of devices -- anywhere, anytime. And they will enable a whole new generation of flexible, highly-reliable services that can ride on our infrastructure -- from voice-over-IP to video messaging to virtual private networking to multi-player games, interactive learning and lots of others.

In fact, our broadband networks will be uniquely capable of unleashing the full potential of convergence to the marketplace. Unlike cable networks designed for broadcasting, Verizon’s networks are designed for communicating. As we deploy more and more broadband, we will bring all the power of true, two-way multimegabit capability -- upstream and downstream -- to the mass market... the key, we believe, to the next phase of the convergence revolution.

Already, communications power married to computing power has reignited the consumer electronics sector and transformed customers’ experience of how they work, play and relate to one another. As we move to fiber and EV-DO, we will provide the upstream capabilities that will let people create and share their own content -- putting even more power and creativity in the hands of consumers and opening up even more opportunities for transforming whole sectors of the economy.

Besides building networks, Verizon’s other major role in the converged marketplace is creating the tools to help people use them.

Because the truth is, for most customers -- at least for now -- convergence takes a lot of work.

Think about it.

Our research tells us that an average user has about five phone numbers to manage. Techies and early adopters may have as many as ten. In addition, much of what customers do in their communications environment can only be done in a single mode, on a single device:

• Voice calls and messages on the telephone.

• E-mail and IM on a computer or a PDA.

• Entertainment on a TV or PC.

The consequence is that we have multiple layers of networks -- voice, wireless, DSL, Wi-Fi, EV-DO -- and a briefcase-ful of devices that, all too often, operate on only one platform or serve only one function.

Verizon’s communications networks have the intelligence to make peer-to-peer connections across all these platforms. In fact, we make 2 billion of those connections -- every day. And there are some programmable functions that you can use to organize your messages, e-mail and the like. But today, there is no easy way for a user to synchronize all these devices and make them work together seamlessly.

For convergence to be real to a customer, we need to be able to communicate intermodally. What you send as a voice message, I may want to receive as an e-mail on my PDA. When my phone rings in my office in New York, I’d like the network to know I’m here in Las Vegas giving a speech and leave me a message on my cell phone. I’d like to be able to use the network to integrate my work and home lives and to orchestrate the comings and goings of a busy family.

And I’d like to have the tools to do all this without having to hire my own personal IT manager -- or rent a 13-year-old -- to set it up.

We’d like to show you what Verizon is doing to create a truly intermodal customer experience -- one that lets customers send or receive any information, to or from any device, at any time. Our goal is to let the user tap the intelligence in our network and make communications as simple and as intuitive to use as any great consumer appliance -- or even the telephone.

I’ve asked Eric Rabe to come here today to show us what the near future will look like on the Verizon network. Eric has been using the iobi service I mentioned for a couple of years now -- and if he can make it work, anyone can... Welcome, Eric.

Eric Rabe:Thanks, Ivan.

Ivan:What do we have here?

Eric: Well, all the communications devices we use today. These are familiar -- a traditional phone, laptop computer, a cell phone, a PDA and a tablet PC. The unique thing about what we’re going to see is how Verizon can help you get all these devices to work together.

To do that easily, we’ve developed a new service called iobi. Iobi lets you create a personal network to control your communications -- telephone, wireless, e-mail, data, IP -- whatever.There are many ways to manage this personal network. You can do it over the phone, with a PDA or on a personal computer.

Let me show you how I use iobi on my PC.

Since iobi is a smart network system, it knows where my phone is located. So it can tailor information for me.

This is the iobi home screen. Here at the top I can see my phone lines -- mobile, home and office -- that iobi monitors.

By clicking here, I can see all the calls that I’ve received on any line... (clicks shows list)... And iobi remembers all those calls in my personal call log.So I have XX new calls on my office line.

I can see incoming calls...

Oh, there’s a call coming in now, and I can see they are calling my Boston office. I’ll just ignore this call for now.

I can manage my calls from this screen...

I can also move any of the numbers from the call log into an address book, so that the number is saved -- not on my computer but on the network. It’s available from any computer I might be using.

If I have any voice mail messages, they are indicted here. And I can play them from this screen... (Voice mail message starts to play)... So I have easy access to a record of incoming calls, and I can easily manage my contacts using iobi.

Let’s try something we all do 20 times a day -- make a phone call. To show you I use iobi every day, I need a little assistance. Adriana, could you come up here, please? Ladies and gentlemen, this is Adriana Rizzo from our New York team.

Let’s say Adriana is traveling on business. Where are you today, Adriana?

Adriana: (dons a beret) Oh, how about Paris? The one here in Las Vegas...

Eric: OK, so we have Adriana here in Las Vegas, and she needs to call me, but she doesn’t know that I’m here in Las Vegas too. She doesn’t know where I am. And it doesn’t matter.

Adriana just dials my office in Boston from her phone here in Las Vegas -- or anywhere in the world she might happen to be.

I can see here on my laptop that a call is coming in to my Boston office. I see that it’s from Adriana. I need to take it.

So I just clicked an on-screen button and in a few seconds rerouted the call to the computer I’m working on. I could just as easily have sent the call to a cell phone or another phone, but I decided to take the call as a VoIP call here on my computer.

The network grabbed the call headed for my Boston office on the conventional Verizon network, redirected it here to Las Vegas using voice over IP, and I took it on this computer. All in a few seconds.

Adriana, what’s up?

Adriana:Hi, Eric. How did you know it was me?

Eric: I can see your number on my iobi screen.

To the audience: You can see the call is connected, and I’m talking to Adriana using my VoIP.

But let’s say I’m not at my laptop when Adriana calls... That’s no problem if I’m carrying my PDA. This is a Verizon Wireless pocket PC. I could just as easily have directed Adriana’s call to my PDA and again taken the call as a VoIP call.

Or I could do the same thing using this tablet PC. The network just doesn’t care where I send the call.

I could send it to my Verizon Wireless Blackberry or to a cell phone.

What you’ve just seen is Verizon’s iobi at work, using Verizon’s networks. This was not a simulation.

We are in the final stages of a technical trial of iobi right now.

You’ve just seen how iobi lets you manage calls in real-time.

But iobi also serves as the control panel for all my communications. The way it does that is to use everything it knows about my calls and my calling habits to create my own personal network.

For example, when a call is placed, obviously the network knows where that phone the call is coming from and where that phones are located.

Say I’m out of the office and I get a call... like a minute ago when Adriana called. Adriana’s number is captured on my iobi call log and it is saved on the Verizon network.

I can add Adriana to my address book, and if she moves or gets a new number, and she updates her iobi profile, the network will automatically update it.

Now I can use iobi to call her any time from any of my phones.

You can see how the Verizon networks can keep track of your calling.

And because iobi doesn’t store information on a particular user’s computer, PDA or cell phone, it can be a real life saver.

Say something happens to my Cell Phone. Oops! (Eric drops Cell Phone in water pitcher.)

Not a problem. Since my address book is stored on the network, it’s there for me wherever I am -- and it’s always up to date.

And, of course, if I get a new computer or a new PDA or even if I’m using someone else’s computer, the address book is still there, available on the network anywhere any time.

If I want to arrange a conference call, all I have to do is select the people I want to join. Iobi will call all the participants, and begin the conference call.

Now let me tell you about something else we’re dong today. This laptop is equipped with a PC card that gives you Verizon Wireless’ EVDO service -- BroadbandAccess.

EVDO works a little like WiFi, but better. To use it, you don’t have to be within a few hundred feet of a hotspot. EVDO works over a much wider area. You can use it in a car or on a train. It’s a wireless broadband without the cappuccino... unless you want cappuccino.

Right now, we have EVDO up and running in Washington, DC, and San Diego. For today, we’ve set it up here in Las Vegas to show you how it works.

As you can see, we’re not using a LAN drop for this demonstration -- just Verizon Wireless BroadbandAccess.

Here’s a video clip. It could be a live picture from a cell phone at your son’s soccer game, or the 100 meter run at the Olympics this summer.

It works when I’m at a Starbucks…or even in a cab on my way to the airport!

So that’s how iobi will work in the office -- or wherever you might happen to be in the world. Let’s ask Adriana to come back up and give us an idea of what this means for busy families.

Adriana?

Adriana:Well, the change may be even more dramatic for busy families. To audience: Let me show you something.

Meet Verizon One. We’ve designed Verizon One to try out new ways to put the power of Verizon’s networks at your fingertips. Verizon One lets you personalize the networks of Verizon to your own particular needs.

Of course, it has a cordless phone built in. But Verizon One is much, much more.

It is an incredible multi-tasker. For one thing, it may not look like it, but this is a DSL modem, so it replaces the box at the side of your computer that connects you to the Verizon DSL broadband network.

But it’s also WiFi, providing 802.11 wireless networking for several computers in a home. It replaces the networking box beside the computer. So the Verizon One phone helps clear away the clutter and you can put it almost anywhere in the house.It makes setting up a broadband network quick and easy. So easy…even a parent can do it.

Maybe best of all, iobi, which Eric has been demonstrating is built right in to Verizon One. That turns it into a kind of command center for a family.

This is the Verizon One home screen. Here I can see whether or not I have voice mail waiting on any of my lines – and, if so, listen to the messages with a couple of clicks. (Plays first part of a voice mail message.) Using iobi, Verizon One has a call log showing who called and when and letting me call back with a tap on the touch screen.

The family calendar is here too. This is interesting. I can use the calendar to make notes of all the kid’s sports or social engagements we have of course. But I can also use it to schedule forwarding my calls. I know I’ll be out this afternoon from 4:00 until around 5:00, so I’ve instructed Verizon One to forward calls during that time.

Of course, the home screen shows me what phones I have forwarded at any time -- my cell phone, or my office phone, for example.

There’s a memo section where my husband and kids can leave messages.

Let’s say you’ve been out, and comeback to find the rest of the family away. You check the Verizon One phone. You scroll through a couple of messages, nothing urgent . . . (scrolling down)

But look, here’s a memo I saved. The kids sent it to my husband the other day -- on his birthday.(touches screen)

Verizon One phone audio: Kids (on Verizon One phone) screen sing: “Happy birthday to you..."

Audio under as Adriana continues:The kids would have recorded that right here on the Verizon One -- there’s a camera built in to the top so that you can leave video messages -- and make video calls to another Verizon One user over the broadband networks that we’re building right to people at home.

How would this work in real life? Say it’s Saturday morning... (Verizon One phone rings) That’s my husband. He’s taken our son to his soccer game. But it’s at a new field in a neighboring town and, you know men, they never ask for directions, so they’re lost. Now my son Jason is calling for help.

(Phone rings -- answers phone: “Hi, Jason...”)

To audience: I have to figure out where they need to go. Good thing the coach called a couple of days ago from school.

I can go to the phone log, click on the coach’s call, and get a map showing where the coach was when he called.

There’s the school at 3rd and Pine.

Now I need to know where my husband and son are.

With his ok, I can use iobi to check on where his mobile phone is actually located. (Clicks through the process to find husband’s location.)

To Jason on phone: OK, you two, you’re not far from the school…make the next right, and look for the school on the left.

There is a lot more you can do with Verizon One phone. You can get entertainment schedules, specifically for you because the networks know where you are.

We can tailor the information to show the schedule for the nearest movie theaters. It could even check the family’s calendar and compare show times to times the family is free for a movie.

Verizon One is also able to receive pictures sent from a camera phone.

My husband could take a shot, and send it to the Verizon One. Here’s one of that soccer game. Looks like a good game.

Maybe I’ll go. First, though, I can just click here to forward calls to my cell phone while I’m away. I’m out of here, in time to catch the second half.

Ivan, you can see how a device like Verizon One phone can become the command center for a busy family.

Ivan Seidenberg: It's very cool. Eric, Adriana, thanks for the demo!

Just to summarize what you’ll be seeing from Verizon in the coming months:

We’ll be introducing “iobi” in the first half of this year. Iobi can be loaded on phones, PDAs, laptops, and -- in the future -- digital TVs. It will seamlessly bridge from the public switched network to wireless to voice-over-IP to the Web. And it will open the door for new web-based services that take advantage of the Verizon networks.

Later this year, we will bring to market a Verizon One Phone like the demonstration model you just saw, which will be -- at once -- a DSL modem, a wireless router, an iobi-enabled phone, and an IT manager for the home.

And we will invest some $3 B over the next two years to:

• Put IP-enabled switches in our local network.

• Deploy fiber.

• And take EV-DO nationwide.

As these high-speed networks become pervasive, it will become clear that broadband isn’t just about cheaper phone calls or faster downloads.

It’s about putting the power of two-way multimedia communications in people’s hands.

This two-way broadband power will lead to the truly transformational applications that will revolutionize commerce, improve our quality of life, and usher in a new era of innovation.

Peer-to-peer multimedia capabilities that will do for video what desk-top publishing did for print.

Customer relationship tools and Web services that extend the power of sophisticated information management to small businesses.

Virtual private networks that provide truly secure ways to share your most sensitive information and conduct your most private transactions -- medical records, finances, work-at-home, your kids’ school records.

Video instant messaging that will transform communications for the hearing-impaired.

Telemedicine, “anywhere” education, virtual town meetings... all kinds of innovations that will enrich and empower individuals.

Want more? Then you tell us.

Verizon’s broadband networks will be the platform for thousands of new applications and devices. We’ll provide some ourselves. Many will come from you -- the people who write the software, develop the applications, create the content, make the equipment, and fabricate the chips. But most will come from customers themselves, who will put these technologies to use in ways that you and I can’t even imagine today.

Of course, for broadband to reach its full potential, lots of things have to go right. We’ve gotten it pretty much right in the wireless world, where -- for the most part -- government has stayed out of the way of capital formation and innovation. We’ve gotten it more or less right for the large business market, where Enterprise customers have lots of competitors vying to deliver the latest technology.

And we can get it right in the consumer market, too, if we put the customer in the center of the picture. As the Consumer Electronics Association has noted, Verizon’s recent legal victory against the Recording Industry Association of America is one example of “getting it right” by standing up for consumer rights and technological innovation. And the federal government can take another big step by clearing the path, once and for all, for broadband investment -- as urged by the High-Tech Broadband Coalition and the C.E.A. -- so we can get this vital technology in customers’ hands.

For all the challenges ahead of us, we hope we’ve conveyed to you that Verizon is tremendously excited about our future. We believe we have a central role to play in energizing the consumer marketplace, stimulating innovation and improving the quality of life for our customers. And we are confident that broadband will put the U.S. technology sector back in the drivers’ seat in the most innovative, generative technology in the global economy.

We’re proud to be part of this great industry and look forward to working with all of you to invent the broadband future.