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VIDEO: "IT'S THE NETWORK"
Good morning, everybody, and welcome to NXTComm. You know, I've been in this business a long time and I've been to a lot of conferences over the years, but there's an energy here at NXTComm that tells me something different is happening in our industry.
You see the breadth of the communications business – from networks to hardware to content -- in this morning's keynote session.
You see our technology leadership in the thousands of experts and inventors who pack the convention halls.
You see the innovation gene that's baked into our DNA in the endless variety of exhibits on the convention floor.
And you see in that opening video just a few of the many ways our industry touches people's lives and forms the fabric of our society.
Communications technologies are the disruptive force in the 21st century economy. All of the defining experiences of the digital lifestyle – social networking, media sharing, e-commerce, mobile media – depend on our advanced networks and the practical applications that deliver their power to customers.
Together, our broadband, mobile and global IP networks comprise a powerful delivery system for the media-rich, interactive content that is transforming television, the Internet, commerce, medicine and education.
Network investment pushes the whole industry forward by fueling innovation in consumer electronics, equipment, content, and software. It also generates economic benefits far beyond our industry by transforming the way business gets done – squeezing out costs, speeding up time, and connecting millions of people around the globe to the opportunities of the information economy. Every job created through broadband investment creates four jobs in the broader economy. And wireless has become one of the world's great growth engines. One major study done for the CTIA finds that 2.5 percent of all the jobs in the United States today depend on the wireless industry.
Every segment of our industry has shown a great capacity to evolve and grow, as the market has moved from voice to data to IP to video. Along the way, we've learned what the great technology leaders have always understood.
Leaders in technology-driven industries grow their businesses through investment and innovation.
They have the financial discipline that earns them the right to invest in the future.
They accept the responsibility to create the future and know that every great new idea grows the market and expands our sense of the possible.
And the true market leaders are the ones who focus on customers by anticipating their needs and bringing something new and valuable to their lives.
This year, more than 50 percent of Americans will have a broadband connection. More than 75 percent have wireless phones. These are big numbers. But what's more important is how customers are expanding what the terms "broadband" and "mobility" mean.
The Pew Foundation says that 8 percent of Americans are what they call "omnivores" – "deep users" of Web 2.0 and mobile media.
Forty-four percent of cell phone owners use them for data, video and the Internet.
A typical family with a couple of kids uses some or all of a growing array of digital devices -- HD TVs, laptops, game-players, mobile phones, BlackBerrys. The heaviest users consume – and increasingly, produce – more media in one weeknight than we ever dreamt of a few short years ago.
And we have barely begun to imagine all the ways that rich graphics, two-way broadband and virtual reality will transform medicine, education and creative industries.
This surge in visual, interactive content – delivered to any screen, anytime, anywhere -- has changed our industry forever.
A single video requires 1,000 times the bandwidth of an audio file. A high-definition video requires up to 10 times the bandwidth of a regular video – that's equivalent to downloading 2,300 songs or 35,000 web pages.
It has taken many years of investment and innovation to prepare our wireless, wireline and global IP networks to handle this exponential growth in demand for broadband and mobility, but now, it is our industry that is pushing the envelope on speed and providing a pathway to the future.
We see all this energy and momentum at work in my company.
In wireless:
· Our 3G broadband network now reaches 200 M people across the country.
· This year, we're upgrading with Rev. A, which will give a big boost to
upload speeds and enhance the mobile broadband experience.
· And by the end of the decade, we'll be ready for 4G, which will embed
wireless broadband into all kinds of consumer electronics. One forecast
predicts that, by 2012, there will be 50 M consumer devices in use that
have embedded wireless capabilities. So the innovation curve in
wireless is just beginning.
In the wired network, you'll recall that it wasn't so long ago that the high-tech industry was challenging the telecom industry to solve the bandwidth "bottleneck" and deliver 100 megabits to the home. Tech and media leaders like Michael Dell, John Chambers and Mark Cuban have all spoken out on the need for 100 megabits to the home.
Today, 100 megabits is just the beginning.
· Verizon's fiber-to-the-home network will reach 9 M homes by the end of
2007 and 18 M by the end of the decade.
· FiOS Internet service delivers up to 50 megabit speeds today and is
capable of 100 megabits and beyond. In fact, we're already trialing 100
megabit service today over our existing BPON architecture.
· Starting this fall, we'll start to move from megabits to gigabits. We will
begin to use GPON technology in all FiOS deployments, which will
increase speeds downstream by four times and upstream by eight times.
· And by the end of the decade – when our cable competitors say they'll
be transitioning to DOCSIS 3.0 – we'll be preparing for the next
generation of electronics that will take the home consumer to the next
level of broadband, at speeds that rival what we deliver over our most
advanced business networks today.
We're also increasing the power of our global IP networks, over which more and more of the world's commerce takes place:
· Here in the U.S. we're building an all-optical ultra-long haul network to
deliver the reliability, resiliency and 40 gigabit speeds that will make the
Internet run better and faster. This year, we'll add about 6,000 miles to
that network, putting us more than halfway to our goal of a 50,000-mile
network across the country.
· We connect customers in major cities across the U.S. with a converged
packet architecture that carries all kinds of service – voice, video, data
and Internet – to a common IP network.
· And yesterday, we announced that we'll be extending this technology to
major cities in Asia/Pacific and Europe, which will help our multinational
customers make the transition to IP and – ultimately – to bandwidth-on-
demand.
Obviously, we believe in the transformational power of superior networks. People talk about the virtual world of cyberspace, but networks are made up of real stuff -- fiber, cables, routers, switches, servers, optical components, computer chips – that makes the information economy run. The network advances I just described are possible only because of the tremendous partnerships among all the companies represented here at NXTComm.
When we innovate, you innovate, and vice versa. And when our industry innovates, we open new windows to the future for our customers.
Do customers care about great networks? You bet they do. Just listen.
VIDEO – CUSTOMER VOICES
What we're seeing is that every new generation of network technology creates whole new genres of services that turn network power into great experiences for customers.
Nowhere is that interplay clearer than in the wireless market. Three years ago, we launched a wireless service that put video on the handset. Two years ago, it was downloadable music. This year, it's broadcast quality TV.
Customer acceptance has been tremendous.
· More than 23 M of our wireless customers have broadband-capable
devices.
· Wireless broadband cards are now embedded in laptops from major
manufacturers like Dell, Panasonic, HP and Lenovo.
· In the first quarter of 2007, users downloaded 30 million songs, most of
them over-the-air to the handset – something you can do only on a 3G
network.
· Thousands of government agencies rely on our mobile data services,
many of which are in the public safety arena – from local police
departments to FEMA and, most recently, to the FBI.
· We just introduced the new Global BlackBerry, which gives you e-mail
access and a single local phone number wherever you go. It's only
been about six weeks, but so far, sales have surpassed our forecasts,
especially among business customers – literally thousands of whom are
using it today.
Every day, some 30 M American workers are on the go. And whether they're going 10 miles or 10 time zones away, we think offering this kind of convenience, anytime access, and – ultimately – convergence of the customer experience is a major area of opportunity for our industry.
· This morning, we announced three new fixed-mobile services for
business customers that create a seamless environment – single phone
number, single mailbox, and instant call set-up – for work, home and
mobile office.
· And as we transition to the technology known as IMS, we will usher in a
new generation of converged networks, products and applications.
We used to say that the three things you need when you leave your house are your cell phone, your car keys and your wallet. With the next wave of innovation in converged services, the day isn't far off when all you'll need to take is your cell phone.
And of course, the new frontier for innovation is the access network. DSL got us into the Internet business. Fiber puts us in the TV and multimedia business -- with faster Internet speeds, higher-quality high-definition content, and more interactive capabilities than any other platform, plus the ability to grow as customers find creative ways to use this new medium. It's hard to believe that we launched FiOS less than three years ago. Today, FiOS is in 1,700 communities in 16 states – we just launched FiOS TV in Rhode Island on Monday – and has been called by PC World one of the 5 most innovative products of 2007.
This quarter, we passed two significant milestones for our FiOS service: we now have more than 1 M FiOS Internet customers and are closing in on 500,000 FiOS TV customers.
As a matter of fact, this morning, we're very excited to introduce you to our one-millionth FiOS Internet customer.
How excited are they?
Let's go to Massapequa, New York and meet the Bayer family … and they can tell you themselves.
VIDEO – MEET THE BAYERS
I said at the outset that something different is happening in our industry. The hundreds of companies that make up this great industry are doing what the truly transformational industries do: expand the market through investment and innovation.
By believing in the future, the companies here at NXTComm have created one of the great growth engines of our time.
In the process, we have grown the pie for our investors, created opportunity for our employees, and delivered new choices to our customers. Just look at what's happened at my company alone, in five short years.
Five years ago, Verizon had 1.6 M broadband customers. Less than 10 percent of telecom revenues came from data. Today, we have over 7 M broadband customers, hundreds of thousands of video subscribers, and – for the first time in a long time – consumer revenues are growing.
Five years ago, we had 32.5 M wireless customers, who averaged just under 400 minutes of use every month. Wireless was almost entirely a voice service, with data accounting for a little more than one percent of revenues. Today, we've almost doubled the number of customers, to 60.7 M, and grown minutes-of-use, to more than 700 a month. But look at these statistics from our first quarter about our fastest growing services …
· 22.3 B text messages
· 450 M picture messages
· 106 M downloads of music, videos, games and ringtones …
… none of which existed a few years ago.
Five years ago in the enterprise space, data and Internet made up about 25 percent of revenues. Today, it's 50 percent. IP and managed services are growing at a 25 percent clip. Our fastest-growing service is Private IP, which was just launched five years ago. And fully 40 percent of our customers opt for us to manage their networks for them – by hosting their servers, managing their security, even managing their IT applications.
All of these new services have boosted our revenue growth from a flat rate five years ago to four percent today. And I am confident that all this investment and innovation is a down payment on even greater things to come for the future.
Innovation has changed the way we think and the way we work. We've always been a network company, but now that term has a broader meaning – not just the physical wires and towers we operate, but also the human networks we create by expanding our virtual presence in people's lives.
The best thing is, the biggest opportunities may not even be in view yet. As we think creatively about how to focus our technical know-how on the things that matter most to customers, we'll begin to tap our industry's potential to address the great social needs of our time.
Saving energy.
Reinventing education.
Transforming medicine through IT.
Empowering people with disabilities.
Connecting families.
Creating economic opportunity.
We see examples all around us of how a new idea that addresses an unmet need can invent whole new categories of service.
YouTube was founded in February 2005. Today, it receives some 100 M hits a day and its average traffic is growing by 7 percent … every week.
Video games have been around for years, but Nintendo's "Wii" reinvents the category and extends it to a whole new segment of the market.
Advances in lasers, fiber and miniaturization not only grow our business, they open new frontiers in biomedicine, medical imaging, and robotics.
Innovative leaders expand the market and enlarge our sense of the possible. That's what all of us here at NXTComm have the opportunity to do – to the great benefit of customers, as well as investors who participate in this growing industry.
We are fortunate to be part of a vibrant global industry that is creating the future, and I look forward to continuing to work with all of you to deliver all the potential that these exciting new technologies have to offer.
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