NXTComm08 Keynote Address

Dennis Strigl
Las Vegas, NV
June 18, 2008

Session introduced by Wayne Crawford, Executive Director, NXTComm.

Strigl introduced by John Giere, Chief Marketing Officer, Alcatel-Lucent.

VIDEO SET-UP:  “I can do more”

Thank you, Wayne and John, and good morning, everybody.  It’s great to be part of the amazing success story being written by this country’s communications industry.

That success story is on full display here at NXTComm.

What you saw in that video – and what you see on this convention floor – is a look at how communications companies are expanding the growth opportunities for our industry by expanding the world for our customers.

The key word I’d like to focus on is this morning is … “more.”

“More” is what our industry is delivering to customers and to America.

“More” is what Verizon is going to bring to the marketplace this year, next year and every year after that.

And “more” is what broadband and mobile technologies will mean to society as we enter the next phase of the digital revolution.

Now, I’ve heard our competitors say they offer better services to customers than we do.  I’ve heard our critics say that other countries offer more in the way of broadband to their citizens than we do in the U.S.

It’s time for us to set the record straight.

Thanks to the investment and innovation of the companies in this room, America’s communications market is one of the most dynamic and innovative in the world today.  The facts show that, when it comes to broadband and mobile technologies, the U.S. leads the world in the metrics that matter most:

• We have more broadband connections than anyone else, at more than 100 million and counting.  Broadband is available to virtually every zip code, every school and library, and every major business.  More than half of all households in this country have some form of broadband service, as compared to less than 30 percent in Europe.
  
  
• We also lead the world in choice and competition.  More than three-quarters of American households have access to at least two different broadband platforms, and many have six or more choices -- whether it be FiOS, U-Verse, EVDO, Wi-Fi, DSL, satellite or cable.
  
  
• The gold standard for broadband speed is fiber, which is being deployed faster here in the U.S. than anywhere else in the world.  In fact, Verizon alone has passed twice as many homes with fiber and has more actual fiber customers than exist in all of Europe.
  
  
• We also have one of the most vibrant wireless markets in the world.  U.S. wireless subscribers use more minutes, pay lower prices, and have greater choice among providers than their international counterparts. 
  
  
• Finally, when you look at which country is farthest down the path in actually putting all this technology to work in the economy, the World Economic Forum puts the U.S. in the top ranks of all the economies it studied -- calling our Internet infrastructure one of the world’s best … and getting better fast.  

So what about that study that puts the U.S. 15th out of 30 countries when it comes to broadband?  Well, for one thing, it doesn’t count wireless broadband, which is growing about three times faster here than in Europe.  And it doesn’t take into account differences in geography that make comparisons among countries so difficult.  For example, Massachusetts and New Jersey have about the same population density as Japan and Korea – and about the same percentage of broadband penetration.

The bottom line is, it’s time we put this myth to rest. 

What the U.S. communications industry has achieved in deploying broadband and mobile networks is tremendous.  Unlike most other nations, we’ve done this not through industrial policy but through private investment.  Our industry has grown by delivering innovation that makes a difference in the lives of our customers.  The benefits have rippled through the entire economy and up and down the whole supply chain – creating millions of high-tech jobs and billions of dollars of value.

Verizon is proud to be part of this dynamic and innovative industry:

• Verizon Wireless has more than 67 million customers – up from about 6 million just ten years ago. We were the first wireless company to build a national data network.  Later this year, we’ll start testing our fourth generation of network technology – remarkable for an industry barely a quarter of a century old.
  
  
• We also have the leading global IP network and are steadily adding to its speed and scale.  We’re laying a high-speed undersea cable between the U.S. and China, which we will turn up just before the start of the Beijing Olympics.  And we’re designing security and redundancy into all our long-haul cables so the world’s digital freight can move faster and more securely around the globe.
  
  
• In our landline business, we began about four years ago to build a fiber-optic network called FiOS all the way to customers’ homes.  By the end of this year, we will pass some 12 million homes, and we’re expanding at a rate of 3 million homes a year.

FiOS is a great example of the choice, competition and quality our industry is bringing to the marketplace. 

Think about what’s happening in the video market, for example, where customers have waited a long time for some real competition.

FiOS doesn’t just get us into the video business … it puts us at the front of the pack.  FiOS TV is all digital.  We’re adding more than 60 new channels to our line-up this summer.  By the end of this year, we’ll offer 150 high-definition channels and more than 1,000 HD on-demand titles a month.   

We’ve gone from zero to more than 1.2 million customers in the span of just over two years.  And we’re about to take another big step by bringing FiOS to New York City.  Our plan is to cover all 3.1 million households in all five boroughs over the next 5 or 6 years.  We will start rolling this out as soon as the New York PSC gives us the go-ahead, which we expect will be next month.

We think that bringing video choice to big cities is a huge growth opportunity for Verizon.  And what do New Yorkers think about all this?  Take a look.

VIDEO ROLL-IN:  “Person-on-the-street” interviews

If customers are excited about what we’re doing for them now, I’ve got news for them … we’re just getting warmed up. 

Sure, customers are happy to have another choice in video.  But in the digital world, “video” goes way beyond “television.”   The high-definition revolution is changing the Internet itself from a text-based to a visual medium, where everything will be high-def, two-way and mobile.  Where the average family today might have four or five digital devices in the home, tomorrow they could easily have dozens.  This will usher in countless new services – from 3-D gaming to high-def social networks to whole new applications for things like telework, medical imaging, electronic commerce and more.

The opportunities for innovation in this space are tremendous.  So are the demands these new applications place on our networks.  Fortunately, the communications industry is more than equal to the task – and I am pleased to say that Verizon is leading the way.

Take peer-to-peer networking, for example.  With all the video streaming and downloading going on today, about 60 percent of Internet traffic is conducted on a peer-to-peer basis.  Verizon has taken the lead in rallying the industry around making peer-to-peer applications work better while reducing their impact on the network.  We founded the P4P Working Group, which brings together more than 60 ISPs, computer and content companies to work on this issue.  Earlier this year, we field-tested some new peer-to-peer technology and found that it improved performance for customers by an average of 200 percent.

This is a very exciting result that we believe will yield major benefits across the entire Internet industry.

Verizon is also leading the way with FiOS, which we are making even better with GPON technology.  The combination of FiOS plus GPON is the fastest network being deployed by any broadband company today.

• With FiOS and GPON, we send 2.4 gigabits per second of downstream speed to a node that connects 32 homes.  Even if every one of those homes used FiOS at the exact same time, each of them would have 75 megabits per second of downloading capacity at its disposal. 
  
  
• As for upload speed, FiOS provides 1.2 gigabits per second of capacity to the node, meaning every customer has an average of 37.5 megs of capacity available at all times.  

Regardless of what our competitors may tell you, here’s the bottom line:  Verizon is the only broadband company in the country currently offering 50 megabit download speeds and 20 megabit upload speeds to its customers. 

And as good as FiOS is, it’s about to get even better.

Up to now, these super-fast speeds have been available to FiOS customers in selected markets in a handful of states.  I’m pleased to announce this morning that we are making these speeds available to all 10 million homes in the FiOS footprint.  That means, starting next week, FiOS customers can get …

50 megs downstream … everywhere.

20 megs upstream … everywhere.

And our basic FiOS tier will be 10 megs down and 2 megs up – which means new customers can get double the speed for the same price.

We’ve heard the skeptics who say the market doesn’t need 50 megabit speeds. 

Our customers say different. 

Let me introduce you to two FiOS customers who have our 50/20 service today … and they can tell you themselves.

VIDEO ROLL-IN:  50 megabit subscribers

As you heard from those customers, the appetite for bandwidth shows no signs of slowing down. 

Neither will we. 

We’ve already had trials of the 100-megabit home, which will be a reality faster than anybody thinks.  We’re also pushing the envelope on the speed of the Internet backbone – with 40 gigabit per second speeds a reality today and 100 gigabits in sight.  These speeds are transforming global businesses the same way fiber is transforming broadband to the home.  New services like virtual-reality videoconferencing and on-demand software are helping multinational companies save energy, improve efficiency and manage their global workforce – and there is much more on the way. 

If the innovation curve in broadband is just beginning, the same is true in wireless.  At Verizon, we saw early on that mobile customers wanted to do more than make phone calls, which is why we were an early investor in 3-G.  Now, wireless customers can download music, use GPS, share photos and movies and surf the Web, all with their mobile phones.

This evolution from analog to 3-G in the span of 20 years is like the auto industry going from a Model T to a Maserati in two decades – and we’re not done yet.  In fact, pretty soon, we won’t think just in terms of a wireless “phone” at all.  The next generation of wireless broadband will be embedded into all kinds of consumer electronics:  cameras, cars, credit cards, security systems, medical monitoring devices, even home appliances. 

Verizon is preparing to lead this next phase of growth.  We recently announced our choice of LTE for our fourth generation wireless network, which we’ll begin testing later this year.  The spectrum we acquired in the recent FCC auction, along with our purchase of Alltel, will give us a very complete nationwide footprint for our 4G network.  We also announced our Open Development Initiative, which will open our wireless network to the entrepreneurs and manufacturers who’ll be developing the next generation of consumer electronics and applications.

I’ve talked about the shift to “big broadband” and the wireless web and all the innovation that comes along with it.  Of course, the “holy grail” is convergence … that is, the integration of all these networks and digital experiences, in ways that make customers’ lives more convenient and productive.

For customers, convergence can be as simple as offering them a bundle that reflects how they use their services – like the Flex Bundle Verizon announced this week that combines wireless service with a broadband connection.

Or it can be as sophisticated as what we’re announcing today for multinational customers:  an expanded package of unified communications and collaboration services like VOIP and web-based videoconferencing that will help global businesses run better by making the most of their IP networks. 

And very soon, we will be able to provide a true technical solution to the challenge of convergence as we make the move to IMS.  With IMS, we will provide a common protocol for applications to work across all our networks – broadband, global IP, and wireless.  What this means is that the customer will no longer be stranded on separate islands of technology for things like messaging, voice, or video.  Instead, we’ll be able to build an application once and have the network deliver it to customers wherever they are, on whatever device they have at hand.

We think that giving customers the tools to manage their digital lives – anytime, anywhere, on any device -- may be the most powerful growth opportunity of all.

I started this speech by talking about the word “more.”  I’ve given you a look at how the communications industry in general – and Verizon in particular – are delivering “more” to our customers … more technology, more services, more innovation, and more choice.

But …

When it comes to technology, we all know that we can build in all the bells and whistles we want, but if it’s not fundamentally reliable … if it doesn’t deliver a high-quality customer experience … if it doesn’t offer a safe and secure on-line environment … the customer simply won’t buy it.

Our industry has a great record of quality and trust, but the digital world is presenting us and our customers with a whole new set of challenges.  Therefore, I believe that we can and must provide our customers with more:

• More safety – by giving families the tools to protect their children on the Internet, as Verizon is doing with our online safety initiatives;
  
  
• More security – by safeguarding digital information on every device, application and service we offer;
  
  
• And more service – by putting customers at the center of everything we do.

The history of our industry is filled with great inventions, from the telephone to the transistor to cell phones and fiber optics.  But invention is one thing … putting invention to work for people is another.

That’s the true strength of the communications industry.  That’s what we at Verizon come to work to do every day.  And that’s how we will build a better future for our industry, our country and our world … by delivering more for our customers. 

Thank you, and have a great conference.

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