National Association of Broadcasters

Ivan Seidenberg
National Association of Broadcasters
April 18, 2005

Introduction by Phil Lombardo, Joint Board Chair, NAB.

Thank you, Phil, and good morning, everyone.

For those of you who are surprised that a telephone guy is keynoting a broadcasters convention, let me just say... join the club. Frankly, if someone had told me when I started out in this business more than 35 years ago that I’d someday be on the same agenda with a radio legend like Lowry Mays or a television icon like Jay Leno, I’d have said they were crazy.

(Call me paranoid, but you know, just in case Jay Leno is tempted to use my speech for one of those funny headline bits on the Tonight Show, I’d like to remind you about the first rule of convention keynotes: What happens in Vegas, stays in Vegas.)

In all sincerity, I do want to begin by saying a word about Eddie Fritts. As someone who has spent about as much time in the communications business as Eddie has in the broadcasting business, I want to tell you how much I admire your leadership of this organization. In your 23 years at NAB, you have prepared this industry for its future while never forgetting its heritage. I wish you all the best as you take up the next phase of your distinguished career, and I know you will continue to be a force for positive, creative change in broadcasting.

I really am very excited to be here in Las Vegas this morning to discuss the future of an industry whose very definition of itself is being transformed by competition and technology and innovation.

The industry I’m talking about is in the midst of a historic transition from analog to digital.

It’s searching for new sources of growth as its old markets contract.

It’s responding to competition by rebuilding its infrastructure, revitalizing its products, and reinventing its business model.

And it’s striving to do all of that while staying true to its core, its customers, and its unique role in the thousands of local communities it serves, all across America.

If you think that sounds like the broadcast industry, you’re right. If you think it sounds like the communications business, you’re also right.

For more than a decade, we’ve been talking about “convergence”: the idea that what used to be separate domains -- phone calls, photos, music, movies, games, video -- would be united in a continuous stream of bits and bytes. In fact, as far back as 1994, my predecessor -- Ray Smith of Bell Atlantic -- stood on this very stage and told you that, before this transformation was through, your computer would speak, your TV would listen, and your telephone would show you pictures.

A look around this convention floor -- or into the life of the average American teenager -- tells us that day has arrived.

Maybe the tipping point occurred when wireless phones outnumbered wired ones. Maybe it happened the day broadband connections outnumbered dial-up, or when “TiVo” became a verb. All we know for sure is that a new generation of technologies and a new generation of consumers have thrown all of our tidy definitions and old ideas into a giant multimedia Mixmaster to turn America into a broadband nation.

Phone calls over cable.

Radio through the Internet.

Television on the tiniest handsets and the biggest plasma screens imaginable.

Communications embedded in every electronic device and home appliance you can think of.

Amazing interactive devices with the potential to turn consumers into broadcasters and everyday life into Reality TV.

Speed, mobility, and interactivity... all controlled by a new breed of customer: media-saturated multi-taskers who expect to get what they want, wherever they are, on whatever device they happen to have in hand.

Oh yeah, and one more thing: they want to do it all at the same time.

What technology has long made possible, customers have now made a reality. And for Verizon, it means we have arrived at another turning point in our journey to deliver the innovative power of convergence to the marketplace.

Of course, another observation Ray Smith made in that speech back in 1994 was that -- when it comes to technology -- the end-game is a whole lot easier to predict than the mid-game, and -- like you -- we have faced a number of challenges in preparing ourselves to compete in the broadband future.

Verizon is first and foremost a network company. Over the years, we have successfully managed the huge transition from analog to digital technologies in both our landline and wireless networks -- much as you’re doing today in the transition to digital TV. By transforming our technology, we have also transformed our business model -- expanding beyond our traditional voice products into the growing market for high-speed data and Internet access.

Since the year 2000, we have invested more than $73 B in capital -- more than any other telecom or cable company in America. Just to put that in perspective, that’s $22 B more than the top five cable companies have invested over the same period... combined. We’ve used many billions of that investment to take broadband to the mass market, deploying DSL throughout our landline network and first-generation data capabilities in our wireless network.

Now, we are reinventing our networks -- and our business model -- once again.

We are the first wireless company in the nation to deliver a true wide-area broadband experience through a technology known as EV-DO -- which we will expand to reach some 150 M people by the end of this year.

We also are the first communications company to make a major commitment to taking fiber all the way to homes and businesses. This network, which we call FiOS, delivers super-fast data and Internet access at speeds of up to 30 megabits downstream and 5 megabits upstream. Our system will deliver 100 megabits downstream and up to 15 megabits upstream... making FiOS the fastest, most interactive network being deployed in America today.

We’ve started to deploy this exciting new technology in more than 100 communities across the country, and our plan is to reach 3 million homes by the end of this year and to expand as fast as the technology and the marketplace will allow in the years ahead.

Both of these next-generation networks are setting a new standard for broadband services in America. They provide a common protocol and a common infrastructure for voice, data and video services. They link to all kinds of interactive devices -- anywhere, anytime. They are built for multi-tasking, and they enable a whole new generation of innovative services -- from voice-over-IP to video messaging to multi-player games, shopping, interactive learning and lots of others.

And after many years of predictions and a couple of false starts along the way, these new broadband networks are launching us -- once and for all -- into the world of television and entertainment. We’ve prepared a short video to give you a flavor for the new vistas of growth and innovation these networks are opening... not only for my business, but also for yours.

Let me put an exclamation point on what you just saw about these two new pathways to the video customer.

V-CAST -- our great new wireless service -- is a reality today. We have the network, we have the handsets, and thanks to partnerships with providers from all segments of the entertainment business, we have the content to make us the leader in the new world of wireless multimedia services. As a matter of fact, all of the content you saw in that video is available to V-CAST subscribers right now.

3-D games, music videos, sports highlights, movie previews, mobile episodes of network TV shows -- we’re convinced that, once customers get a taste of this whole new wireless experience, they will see it as every bit as indispensable as their mobile phone service is today.

As for the landline side, we are laying the groundwork to launch FiOS-TV later this year. We’re already rolling out our network in hundreds of communities and signing up customers to our blazing-fast new FiOS data service. We’re signing deals with broadcasters, programmers, software and hardware companies to assemble a video package that will deliver the best possible customer experience. And we’re working to get the franchises we need to enter the market, which I’ll say more about in a few minutes.

FiOS will change the competitive landscape in the video marketplace, both now and in the future. From Day One, we’ll offer a new technology, a new business model, and a new customer experience. The tremendous capacity on a fiber system gives us all kinds of room for local programming and high-definition content. We can offer HDTV and DVR functionality through the whole house, not just one TV set. The upstream speeds on FiOS will let customers create and share their own multimedia experiences. And the software capabilities built into our network mean they’ll be able to control and manage all of that without getting an engineering degree.

For the television industry, this opens all kinds of exciting new possibilities to extend and enhance your relationship with your audience. As technology barriers fall and we begin to marry the power of broadcasting with the mobility of wireless and the interactivity of the Internet, we’ll offer a compelling new customer experience that will give you many new ways to reinforce just how important you are in the lives of your audience:

• Traffic alerts and weather reports delivered to the dashboards of commuters.

• Program guides that are virtual gateways to your whole media library.

• Video clips promoting your TV line-up for the night, delivered to cell phones.

• Interactivity built into programs and commercials that lets viewers call up Randy Johnson’s E.R.A., order a C.D. from American Idol, or vote someone off the island... all in real time, with a click of the remote.

• And the ability to spend Sunday afternoon with your grandkids 1000 miles away, just by turning on your TV.

We are driven to be successful in this marketplace. To do that, we need the content our customers want and need the most... and that means you. That’s why we are anxious to work with all of you to explore the creative and commercial possibilities of the digital future. We are also committed to partnering with you on the policy issues around our entry into video:

First, we recognize the importance of protecting the value of intellectual content in a digital universe. The creators and carriers of content share a common interest in this issue... after all, if we don’t adequately protect the value of content, we won’t have any content to provide. We believe our architecture and platform will provide opportunities to develop new ways to protect content. We are focused on working cooperatively with the entertainment industry to find the best answer to this important question.
• Second, we understand the issues you face as you make the transition to digital television, particularly those around “must carry” and the retransmission of digital content. This is where our fiber-based system really changes the dialogue from a conversation about scarcity to one about abundance. With the tremendous bandwidth on our systems -- and with our business interest in providing as much content as possible -- we believe we can effectively address all these issues in a way that expands the market for us both.

• Finally, and most urgently, we need to find a way to break down the biggest barrier to our entry into video, and that’s the franchising process. As a local telephone company, we have always had a franchise to deploy and operate our networks. Now, we’re being asked to obtain a second franchise to use those networks to compete in video. We are currently applying for franchises in towns, cities and counties across the country, and we are also pursuing statewide solutions in some jurisdictions. This is, at best, a slow process that presents an unnecessary impediment to consumer choice in video. Therefore, we are also seeking a federal solution to this issue. We ask you to lend your persuasive voice in support of clearing away this barrier to video competition and speeding the day when America’s communications companies can use our fantastic resources to offer your content and provide a true and compelling competitive alternative to cable.

I began this speech by talking about how much our two industries have in common. And because of that, I believe we are natural partners as we explore the digital future.

We both know how quickly speed, mobility and interactivity have become part of the DNA of our customers.

We both know how urgent it is to get on the upside of the changes in technology and competition.

And we also know that -- even in a global industry -- the strongest customer bond is local. From the earliest days of the broadcasting business, radio and television have provided the glue... the connectivity... that indispensable link to the community that forms our communal experience and ties our society together.

That bond is your heritage and your future. It’s also ours. I look forward to strengthening and deepening that local connection as we face our mutual challenges and work together to invent the future, for ourselves and for the customers we serve.