National Association of Manufacturers' Fall Board Meeting
Ivan Seidenberg
Washington, DC
October 2, 2008
As delivered
Introduction by John Engler.
Thank you, John. It’s a privilege to have this opportunity to talk to an organization that does so much to keep our country’s industrial base strong, and it’s inspiring to be among business leaders who wake up every day focused on investing and innovating and making products that customers want.
In many ways, I feel right at home here.
Most people think of “communications” as a service business, but actually, telecom and manufacturers have much in common:
- We invest billions of dollars of capital in plant and equipment, which creates jobs and growth up and down the supply chain.
- We’re growing productivity faster than the national average.
- We drive innovation around new technologies and new products.
- We provide good jobs with great benefits to millions of Americans.
- Together, we invent, produce and deliver the tangible products and services that customers need to live their lives and run their businesses.
The fact is, the old distinctions between the “service” and the “manufacturing” sectors are increasingly beside the point. In a digital economy, more and more of the value of manufactured goods comes from information technology, ideas and innovation. Likewise, digital cargo moves around the world over a complex physical infrastructure of cables, routers, servers, cell towers, computers and electronics, which your industries invent and manufacture.
This marriage of physical and intellectual content is the key to value creation and competitiveness in the knowledge economy.
The communications industry’s investment in cable, wireless and landline networks runs to about $70 B a year – more than the federal government spends on the interstate highway system, railroads and airports. In the first quarter of 2008, American businesses invested more in information technology and software than in transportation, industrial machinery and all other equipment combined. Since 2003, investment in communications equipment has risen more than 40 percent – about one and a half times faster than equipment investment in the country. And according to the most recent statistics, prices in the economy as a whole rose by 18 percent between 2000 and 2006, while telecom prices dropped by almost 6 percent.
Investment matters.
Indeed, in the words of the economist Robert Atkinson, “all of the acceleration in productivity growth since 1995 has been due to the IT revolution.”
The communications infrastructure is as critical to the 21st century as railroads were to the 19th century and interstate highways were to the 20th. Taken together, our wireless, fiber-optic and Internet backbone networks are a powerful delivery system for global commerce and a platform for future growth and innovation. Some examples:
- Wireless has proven to be the most disruptive technology in our society, evolving from a Model T to a Maserati over the span of two decades. Today’s digital networks allow customers to make calls, use GPS, download music, share photos and surf the web over their wireless devices – and that’s just the beginning. Pretty soon we won’t think in terms of a wireless “phone” at all. Over the next few years, we’ll be deploying the next generation of wireless broadband, which will be embedded into everything – from buildings to vehicles to consumer appliances to medical equipment – enabling them to be connected and communicating with one another constantly. This “machine-to-machine” communication will transform fields as diverse as health care monitoring, energy management, logistics and security and create opportunities for inventors and entrepreneurs to develop and produce these next-generation products and services.
- With interactive capabilities being built into every digital experience, we’re also modernizing our landline network to handle all this high-speed, high-definition data. For us, that means a fiber-optic connection all the way to customers’ homes and businesses. With fiber, we’ll soon have applications that will blow today’s HDTV and Internet experiences away with three-dimensional graphics, holographic quality and radical interactivity. Instead of looking at a picture of a new car online, you’ll be able to sit on your couch and take it for a test drive. Instead of scrolling down a list of books on Amazon.com, you’ll be able to walk through the shelves of a virtual reality bookstore and maybe even interview the author. Instead of flying to the Mayo clinic for a consultation, you’ll be able to show the doctor where it hurts without leaving home. That’s another huge wave of innovation and productivity, waiting to be unleashed.
- And then there’s the Internet backbone itself. As more of the world’s commerce, entertainment and information flow over the Internet, demand for faster, more reliable digital networks is increasing exponentially. Verizon is rapidly improving the speed and performance of this vital commercial engine. Today, our backbone networks transmit data at speeds of 40 gigabits per second, and we just concluded a successful field trial that more than doubled that, to 100 gigabits per second. What does that mean? For consumers, it means we’ll have more capacity for the on-demand, high-definition content that increasingly dominates the Internet. And for businesses, it means we’ll be able to support a new wave of productivity-enhancing applications like secure global transactions, electronic supply chains and manufacturing processes, on-demand software, and virtual-reality videoconferencing.
These smarter, faster networks connect buyers and sellers, producers and suppliers, in a vast global marketplace. They expand the export market, which is critical to the manufacturing sector. They stimulate demand for richer content, more advanced software and more sophisticated electronics, creating opportunities for growth up and down the supply chain. And with the massive productivity increases they bring about, these advanced networks are a key part of our country’s competitive agenda and a vital weapon for American manufacturers as you take on low-cost producers in Asia and elsewhere in the global economy.
For example, think about how broadband can be used to address two of the most pressing issues facing American business today: health care and energy.
As you know, health care and energy are two of the five problems identified by NAM that add 32 percent to production costs for U.S. manufacturers, as compared to their international competitors. Broadband and IT applications have the potential to lower these costs dramatically.
Using information technology to save energy may be as simple as using GPS to map shorter delivery routes, or using teleconferencing as a substitute for travel. It may be as complex as using broadband to manage supply chains and reduce inventory costs. In the future, communications technology will help automate traffic flows, make just-in-time inventory the norm, manage energy use in factories and office buildings, and more.
The manufacturing sector has led the U.S. economy in improving its energy efficiency, and at Verizon we’re learning to do the same through recycling, conservation, paperless billing and alternative energy. We reduced our carbon dioxide emissions by 76,000 tons in 2007, which helped us win the “Green Excellence of the Year Award” from Frost and Sullivan. We’re also working with our large business customers to automate the 40 billion B-2-B transactions that take place worldwide, every year, which can reduce gasoline consumption by hundreds and hundreds of millions of gallons a year.
The more broadband, the bigger the savings. The American Consumer Institute estimates that expanded use of broadband technology over the next ten years could reduce greenhouse emissions by more than a billion tons, which, if converted into energy saved, would represent 11 percent of annual U.S. oil imports.
That’s a big number.
We have an equally huge opportunity to use information technology to drive quality and efficiency in health care.
Doctors are beginning to use wireless technologies to monitor their patients’ blood pressure or glucose levels, for example, without them making a trip to the hospital. Patients can consult specialists across the country or across the world over a broadband video connection, without having to leave their homes. Expensive facilities like intensive care units can be networked with hospitals across an entire state, as we’re doing with a Verizon system in Virginia.
Imagine the benefits – not just in costs, but in the quality of service that can be provided to the elderly, to people with disabilities, to residents of rural or underserved communities … frankly, anywhere you want to put a manufacturing facility.
The irony is that, for all the fantastic advancements in medical technology, the opportunity to use IT to improve health care delivery is largely untapped. The fact is, the health care system has been slow to adopt information technology, which has kept it from capitalizing on the productivity revolution that has transformed the rest of the economy. Right now, if you live in D.C. but have an accident in San Francisco, your health records are literally a continent away from where they’re needed. Ninety percent of the time, they are kept in paper records. Fixing this problem through a modern health IT system will save, by some estimates, $165 B a year – savings that will have a direct impact on the bottom line of major employers like all of you.
I’ve focused today on the uses of broadband in the areas of health care and energy, but the list of creative applications of information technology is virtually endless.
Improving education and promoting literacy.
Making government work better in an era when resources are stretched to the breaking point.
Helping American manufacturers turn invention into innovation into competitive advantage faster than any other economy in the world.
I said at the outset that our industries have much in common in terms of what we mean for the American economy. We also share a common interest in public policies that foster competitiveness and growth.
- First – With broadband being such a powerful multiplier of American productivity, we need to make sure we have an environment that promotes investment in technology. Capital does not require a passport, and without the right tax structure and regulatory policies, investment will increasingly flow outside the U.S. to countries that don’t impose as many burdens on growth. The NAM was a key supporter of the Internet tax moratorium, which has kept capital flowing to this vital growth engine. Now we’re looking to do the same thing with the Cellphone Fairness Tax Act, which we urge you to support as well. As always, we’re grateful for your support of our agenda.
- Second – We need to reform the health care system in this country to reduce the cost of employer-provided health care. The Business Roundtable’s initiative on consumer health care and retirement, of which I am the chair, recently put forward a plan to do that, based on the principles of greater competition, more choice and innovation, and access for every American. Health IT is a big part of the solution. Bipartisan legislation has been pending for some time in the U.S. Senate and House of Representatives, which would establish the uniform, interoperable standards we need to create such a system. The NAM has been an important partner through the Health IT Now coalition and, together, we must urge the next Congress to enact this vital legislation early in 2009 and usher the health care delivery system into the 21st century.
- Third, with broadband being such a key element of this country’s economic agenda, we need to encourage policies that make these empowering technologies as widely available as possible. For example, we value your support of our continued efforts to stave off unnecessary rules like net neutrality. And to drive broadband to areas yet unreached through private investment, we’re working through public-private partnerships like Connected Nation to expand broadband networks into rural areas and other underserved communities. You may know that just this week, Congress passed a broadband mapping bill, which is now on its way to the President for signature. We thank NAM for its support of this effort, which will help target the deployment of broadband to the areas that need it most.
A strong industrial base and a vibrant communications infrastructure are mutually reinforcing. Together, these great industries are the foundation for job creation, innovation and growth and, ultimately, sustained U.S. leadership in global markets. And if there’s a lesson in the implosion we’ve experienced in financial services and Wall Street, it’s the importance of allocating capital to those things that really add value, build businesses and create wealth for American workers and investors.
Technology. Intellectual property. Innovative products and services that change people’s lives and improve society.
Now more than ever, real stuff matters. We look forward to working with you to use our leadership and resources to create new solutions for America and a new era of prosperity for our economy.
Thank you.
