Chief Executives' Club of Boston
Ivan Seidenberg
Boston, MA
March 27, 2008
As Delivered
Introduction by Ranch Kimball, President and Chief Executive Officer, Joslin Diabetes Center.
It’s always exciting to come to Boston, which embodies so much of what the 21st century economy is all about. Before I begin, I’d like to recognize some members of my colleagues who are here today:
- Sandra Moose, who sits on our Board of Directors;
- Donna Cupelo, region president of Verizon;
- Ellen Corcoran, general manager of Verizon Telecom;
- And Ken Dixon, region president of Verizon Wireless.
I consider myself on “home court” here. Massachusetts is an important market for Verizon, as well as a locus for significant investment and innovation:
- We employ more than 13,000 people and provide $275 million in health-care benefits for employees, retirees and their families.
- We serve several million customers and spend over $780 million a year with more than 10,000 Massachusetts vendors and suppliers.
- We have invested $3 billion in capital over the last five years to give Massachusetts a communications infrastructure that rivals the best in the world. Our wireless network offers voice and high-speed data service across the state. Our fiber-optic network, FiOS, is rapidly gaining scale and scope.
We’re making these investments in Massachusetts because, like all technology-driven businesses, we’re big believers that investment and innovation are the keys to long-term growth. That’s just as true for our country as it is for our company. In fact, if there’s any silver lining to the economic uncertainty we’re living through these days, it’s that it focuses our attention on the fundamentals of what it takes to create long-term sustainable value for shareowners and customers.
Real value is created when you bring something new to the world that didn’t exist before – a technology, an idea, a product or a service that improves people’s lives and broadens the economic base. Today, I’d like to discuss with you what we are doing to make this happen.
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This year, America’s wireless, telecom and cable companies will invest about $70 billion in broadband, digital and mobile networks that are changing how people live and driving innovation across our entire economy.
Verizon is investing about $17 billion in capital a year to be the best network company in this dynamic environment.
We were the first wireless company to deliver a national data network, which now reaches some 250 million people across the country. Mobile customers can now do much more than make phone calls. Today, in just one month, our wireless customers send and receive more than 20 billion text messages. Increasingly, they’re using our network to download music over the air, watch TV, map their location with GPS, share photos and movies, and surf the web. They also want to be in control. So we see the cell phone becoming a kind of “universal remote” that lets you manage all your digital content -- music, video, news or voice -- and have it delivered anytime, anywhere, to whatever screen you have at hand.
We used to say that wireless had become such an important part of life that the only three things you need when you leave the house are your wallet, your keys and your cell phone.
Our goal is to make sure that all you’ll need is your phone.
In fact, in the years to come we won’t just think in terms of a wireless “phone” at all. Our next generation of wireless technology will embed wireless capabilities into all kinds of consumer electronics: cameras, cars, credit cards, security systems, even home appliances. One forecast predicts that by 2012 there will be 50 million of these “smart” devices in the marketplace, with wireless capabilities built right in. Verizon is already taking steps to lead this next phase of growth. We have announced our plans to deploy a fourth-generation wireless network, with testing beginning later this year. We just held a conference for the inventors and manufacturers who are developing these new devices and applications to run on our network. And we are acquiring new spectrum that will give us the capacity to offer these next-generation services nationwide.
The innovation curve in wireless is just beginning. The same is true in the landline business, which is rapidly evolving beyond the traditional “phone business.” With DSL, we got into the Internet business. Now, we’re building a high-speed fiber-optic network all the way to customers’ homes and businesses, which puts us in the TV and multimedia business.
We started this project – called FiOS – about three years ago. We now pass more than 9.3 million homes – about 700,000 of them here in Massachusetts -- meaning that fiber is being deployed in this country faster than anywhere else in the world. We’re using the fiber network to bring video choice and fast Internet access to our customers. By the end of this year, Verizon FiOS customers will have access to more than 150 high-definition TV channels, more than any other service provider in the nation. And later this year, we will bridge the TV and the PC experience by bringing Internet video like YouTube, CNN or anything you get on the Internet on your TV screens.
As great as all this is, the potential of FiOS goes well beyond what you see today.
Today, most broadband customers in America download content from the Internet at speeds of 10 mbps or less. With fiber, we are already delivering 20-megabit speeds that work in both directions, for downloading and uploading. Soon, we’ll be delivering speeds of 100 mbps or more. This makes possible incredibly rich high-definition videoconferencing, delivery of 3-D video, virtual reality gaming experiences, and all sorts of healthcare and education experiences. We have only started to imagine how completely this kind of two-way, high-definition broadband will transform entertainment, education, commerce, medicine, the arts … basically, any experience that can be digitized and transmitted over the fiber network.
We are tremendously excited about the growth prospects in our industry. And the impact of Verizon’s investment in network technologies goes well beyond our company alone. Application developers are scrambling to harness the incredible bandwidth we have delivered to the marketplace. Media providers and programmers are developing high-definition video content for FiOS TV and the mobile screen. Software developers are creating navigational systems to help customers manage their digital information. Hardware manufacturers are hard at work on the fiber-optic cables, computer chips, and consumer electronics gear that will put all this new capacity to work for customers.
That’s how innovation works: when we innovate, our partners, suppliers, even our competitors innovate, and vice versa. We are at the core of an industry making an enormous economic impact.
The economic impact of all this investment and innovation can hardly be overstated. One recent study by a group called Connected Nation found that a 7 percent increase in broadband adoption in the United States would create 2.4 million jobs and $134 billion in economic growth.
These are big numbers, but frankly, if we compare them to what’s going on in the rest of the world, they’re nowhere near big enough. The countries with the fastest-growing online populations in the world today are Brazil, Russia, India and China. China has already passed the U.S. in the number of Internet users. And at current growth rates, in just three short years more than 40 percent of the Internet users in the world will reside in Asia.
If we want our citizens to be able to compete for jobs and wealth in this global information economy, America needs to think big when it comes to broadband – doubling down on growth and encouraging the investment that will rev up this vital growth engine.
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Technology companies like Verizon clearly play a part in keeping this value-creation cycle going. So – for better or worse – does the government.
When it comes to wireless and cable, for example, the government generally gets pretty good grades for avoiding economic regulation and letting the capital markets work. The FCC auction process has put vital spectrum in private hands and raised tens of billions of dollars for the U.S. Treasury. On the telecom side, network investment really took off only when the government lifted regulations on broadband so capital could flow to these new opportunities. And more recently, we’ve seen constructive policies like the Internet Tax Moratorium, which have kept this growth engine running.
Capital doesn’t need a passport. It can go anywhere in the world. We need policies to keep it here.
The result of pro-investment policies like these has been hundreds of billions’ worth of investment, thriving competition and lots of innovation and value being created for customers. Now, as we stand on the brink of a new phase of technology-driven growth, the last thing we need is to discourage the very investment that will make that growth possible.
In a time of economic uncertainty, it’s critical that we have a stable environment for long-term, value-creating investment. Our view is that government needs to be very careful not to slow America’s growth engine and damage our international competitiveness – which happens every time it raises taxes to meet short-term needs at the expense of long-term growth, or imposes new regulations that anticipate future problems rather than fixing actual market failures. Government ought to be focused on breaking down barriers to capital formation, not erecting new ones. For example, here in Massachusetts, we’d love to see the video franchising process be streamlined so it wouldn’t take us over a year to get permission to bring some competition to the cable business. We already have statewide franchises in New Jersey, Virginia and California.
More broadly, I believe that all of us – public and private sectors -- could be doing much more to use the power of technology to create whole new industries and address the big social challenges of our time. Massachusetts is doing that with a billion-dollar biotech initiative designed to give this region an edge in an industry with the potential to find new sources of fuel, engineer new drugs, revolutionize agriculture and more.
Or take another example, and that’s health care. I have been working with the Business Roundtable on this issue, currently as the chair of its Health and Retirement Task Force. I can tell you that every business person we speak with knows the burden that health care places on our economy, not to mention the psychic toll it takes on American families.
But what most business people don’t know about health care is that it’s one of the few sectors of the economy that has not been revolutionized by information technology. Ninety percent of patient records are stored in paper form. Where computer records do exist, they are often incompatible, even within a given hospital, let alone across the whole system. It just doesn’t add up.
Our company couldn’t run like that, and most businesses couldn’t either.
We may not be able to fix America’s health care problems all at once, but we can make a start. Here in Massachusetts, you’ve led the nation in expanding access to health care. The next step is to reduce costs and improve quality. Senate President Murray has introduced legislation to implement electronic medical records in the state. On the federal level, Senator Kennedy has sponsored a bill to identify and adopt technology standards for electronic medical records. It has the backing of the business community, a growing number of medical associations like Web MD, and numerous members of Congress on both sides of the aisle. What we need now is a political agenda to move this ball forward immediately.
As part of the Business Roundtable, I will be in Washington next week with Senator Kennedy to urge Congress to enact this vital legislation this year.
Health care IT is just one example among many of how technology can be put to work to address the big issues of our time.
Saving energy.
Improving education.
Empowering people with disabilities.
Creating economic opportunities around the world.
These are all things our technology helps support.
It’s easy to be an optimist when you’re in the communications business. Our products make people’s lives better and businesses more productive. We’re one of the few sectors of the economy that’s continuing to grow, even in these uncertain times. Our investment creates ripples of economic opportunity throughout the whole economy. Innovation and entrepreneurial activity have never been more vibrant. And as we use technology to address the big social challenges of our time, we will only become a more vibrant force in the world and in the economy in the years to come.
Massachusetts has always been progressive, smart and savvy in this space, and we look forward to working with you in the future to create a better society for our customers and citizens.
Now, I’ll take your questions.
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