National Press Club

Ivan Seidenberg
National Press Club
December 3, 2001

As delivered

[Introduction by Dick Ryan, Detroit News.]

Thanks, Dick, for that introduction, and I want to thank the Press Club for having me here today. As a matter of fact, in thinking about what I wanted to talk to you about today, I recalled the speech I gave here a year ago last September. What I remember most distinctly is that -- after my 15 minutes of brilliant commentary about the broadband revolution -- the first question I got from the audience is whether I thought people should have to turn off their cell phones in restaurants.

You know, that tells me something.

It tells me that -- no matter how many times business guys like me come to Washington to plead our case -- people in this country have simply tuned us out... and with good reason. It’s partly that we tend to talk in our own arcane language, full of technical mumbo-jumbo. But the larger problem is that the way we talk about business issues has become irrelevant to the real concerns of the country and disconnected from what’s happening in the marketplace.

People are tired of it, and frankly, we’re tired of it, too.

This is particularly true in the communications industry, where we’ve let the debate over the future of communications become preoccupied by the concerns of a small segment of the industry. In the process, we’ve lost sight of the role that this great and vital industry can and must play in the things that concern real Americans: economic growth, technical innovation, and national security.

But if we’ve had the luxury of irrelevance up till now, we don’t anymore. We’ve just been through an experience -- as a company and as a country -- that puts a spotlight on the crucial role a strong communications infrastructure can and must play in our economy. More broadly, September 11th has focused the nation’s attention on the need to get our economy moving again through policies that stimulate investment and promote capital formation.

Let me give you a brief look at Verizon’s role in the restoration of the communications network in and around Ground Zero, what we’ve learned as a result, and how communications policy can be part of the answer to the questions of the minds of real Americans.

First, I need to introduce you to some extraordinary people.

As you probably know, all three crash sites on September 11 happened in Verizon territory, one of which, of course, was the Pentagon. What many people don’t realize is that the Pentagon is bigger in terms of square footage than either of the World Trade Towers. We have about 40 people on-site to manage the communications system under contract to the Department of Defense. One of them, Donna Bowen, unfortunately lost her life in the attack. The others worked heroically to ensure that critical communications systems never went down.

I’d like you to meet three of them:

• Chris Creager, region president for the Potomac region;

• Kevin Logan, a service technician, who helped install the new fiber cables and multiplexers to help relocate Pentagon workers;

• And Bryan Clement, also a service technician, who stepped in the day after the attack and worked day and night, in extremely dangerous conditions, to assist our customers.

Please stand up and accept our thanks.

The most devastating point of attack, of course, was New York City. The damage to the network was extensive; altogether, ten cellular towers were disrupted or destroyed, along with 300,000 voice lines and 3.6 million data circuits, affecting 14,000 business and 20,000 residence customers.

Think about the network for a city the size of Cincinnati going down all at once and you have some idea of the scale of the disaster.

We also have a major switching facility at 140 West Street, just north of Tower #2 and across the street from 7 World Trade, that was badly damaged as the twin towers collapsed. 140 West is more than just a building, really; it’s more like the heart and lungs and brain of a big part of the communications system in lower Manhattan.

In the hours and days following the attack, our people worked tirelessly, under painful circumstances, to restore service -- first to emergency workers, then to the Stock Exchange, and ultimately to thousands of affected customers. In getting the stock exchange up and running the Monday after the attack, we accomplished in six days what would normally have taken six months to do.

In large part, it was made possible by a cooperative spirit among the many communications companies with facilities in the area -- local, long distance, wireless, data. For a while, we weren’t competitors or adversaries -- we were all just "phone guys" committed to doing whatever it took to get the facilities working again.

As of today, we have essentially finished the emergency restoral of the communications network in lower Manhattan and have begun the long-term restoration that will rebuild it in a more permanent way over the next several months. In the process, we’ve committed thousands of manhours, millions of dollars, and more than a hundreds years’ worth of experience and commitment at this job.

I could easily tell you a hundred different stories about the heroics of our people and the resourcefulness of our technicians in bringing the network of lower Manhattan back on line. But it comes down to this. The next time you hear someone refer to the local telephone business as simply "the last mile"... or take for granted the complexity of the task of running a local network... or wonder why anyone should care about the health of the incumbent telephone companies... think about what happened at Ground Zero and ask yourself who else could do what we did.

(There. I feel better now.)

As proud as I am of our accomplishments, this is much more than just a Verizon story. The rapid restoration of service in lower Manhattan is testimony to the resilience of the entire communications infrastructure.

This strength derives, in part, from the investment made by us and others over the years in facilities -- software controls, digital switching and fiber-optic technologies. This new technology base allowed us to reroute traffic around the damaged areas, reconnect customers to fiber rings, and reassign telephone numbers to other central offices so customers could remain in service.

From a customer perspective, Verizon’s landline network was just one piece of the puzzle. Wireless usage went up 50 percent across the country on September 11. In New York City and Washington D.C, it went up 100 percent, and stayed that way for a week after the disaster. Users of broadband services like DSL or cable modems were able to communicate even when voice switches were overwhelmed or, in the case of New York City, damaged. Broadband allowed employees who couldn’t get into downtown areas to keep working by telecommuting. And all over America -- actually, all over the world -- people kept in touch with loved ones over the Internet, using e-mail, Blackberries, text messaging, wireless and Instant Messages.

There’s been a lot written about the potential vulnerability of the communications network in the wake of the 9/11 attacks. Clearly, we have some new security concerns related to safeguarding our key network assets, and we’re working on those with our customers, vendors, other carriers and policy makers.

But here’s the real lesson about how to ensure the security of this nation’s communication system -- a lesson that needs to be front and center in the debate about how to make our country stronger in the wake of this tragedy. What 9/11 showed us is that true security lies in having a diversity of technologies that give customers redundant capabilities and provide alternative ways for Americans to communicate.

If it can be said that anything positive can come from such a horrific event, maybe it’s this: the restoration effort in New York City showed how the market can work to solve problems in a moment of true national urgency. And, like all catastrophic events, this one has a way of concentrating the mind on a few core issues of national importance:

• How to get more technology in the hands of more customers,

• How to encourage investment in alternative and competitive facilities,

• And how to put capital to work in rebuilding New York City and jump-starting the American economy.

If you ask me, that’s a pretty good starting point for a new conversation about communications policy in this country -- one that might actually be relevant to the concerns of the average American citizen.

If you look at it through the lens of these few core issues, some of the policy debates that have obsessed Washington for the last decade can look profoundly unserious, or even frivolous.

Take the issue of wireless spectrum, for example. We’ve spent the last eight years debating this issue when, really, we knew the right answer all along. In order to ensure continued growth and innovation in this vital industry, we needed to get more spectrum in the hands of companies that have the will and the wherewithal to actually put this resource to work for customers. And, while the spectrum auctions were a major step forward, the continuation of the spectrum cap put a lid on growth and acted as a barrier to the natural evolution of this industry.

But somehow, we could never seem to move forward because the greater good was held captive to the interests of a few marginal players.

I give FCC Chairman Powell a lot of credit for cutting to the chase on this issue and making a decision about spectrum allocation that can actually move the industry forward technologically and benefit customers through a new generation of services.

Now, if we could just do the same thing on broadband policy. Because -- if we’re honest with ourselves -- I think we’ll find the same dynamic is at work.

After all, the issue on broadband is really pretty simple: how to push more diverse technologies into the marketplace where they can fuel the economy, stimulate innovation, and give America the secure, redundant infrastructure it needs. In our industry -- as in all capital-intensive, technology-driven businesses -- it’s also pretty clear how to do that: promote new investment by taking down the "do not enter" signs that impede the flow of capital. At the most basic level, that’s what the broadband legislation known as the Tauzin-Dingell bill is designed to do.

We’re hopeful that the House of Representatives will bring this legislation to a vote in the next two weeks and send a signal that it’s time to move forward with the broadband revolution. I’m also pleased that, in his speech to the National Summit on Broadband on October 25th, Chairman Powell outlined an approach to encouraging broadband investment that lines up very closely with the simple, market-driven priorities that have proven to be successful in other technology industries.

I’m encouraged by these signs that the debate over communications policy is beginning to be conducted in terms that connect it to the larger issues of capital formation and high-tech growth. A policy that rests on sound economic principles will benefit the entire industry, unlike the current regulatory model based on resale and unbundling which encourages competitors to rely on our facilities rather than invest in their own rival network platforms.

Riding on someone else’s network and investment is not a growth business. It will not help us -- or the interexchange companies and CLECs, for that matter -- compete against the cable, satellite, wireless, software and content companies for the information-age customer. And it will not help build the platform for the rebirth of technology-driven growth that will kick-start the American economy.

The true power of the communications industry to catalyze economic growth and high-tech innovation can only be realized if we re-focus our energies on getting new capital into the marketplace and new technology into the hands of customers.

The challenge for America is to stimulate the most new capital investment in the shortest amount of time. There are variety of measures currently being considered by the Congress that would help do exactly that.

• The first, as I mentioned before, is the broadband legislation being considered by the House of Representatives. Broadband is not just about cable modems and DSL lines, as we think of it today. It’s about creating the new Internet infrastructure that will drive the next generation of IT innovation. If, as Alan Greenspan has said, the last wave of high-tech growth was stimulated by connectivity, the next will be driven by bandwidth. Telecom spending on broadband will have huge multiplier effects: on the computer industry, software, media, and equipment. We need to get this capability in consumers’ hands. Period.

• Second, to avoid a prolonged recession, the Congress should enact an economic stimulus package that contains meaningful incentives for capital investment. Unlike previous recessions that have been triggered by a decline in consumer spending, this one has been led by a huge slowdown in capital spending. Therefore, we believe any recovery package needs to include changes in the tax law to encourage new investment. In particular, we support the proposal -- included in the economic stimulus package passed by the House of Representatives as well as the one proposed by Senate Republicans -- that would give a 30 percent "bonus depreciation" for companies making new equipment purchases over the next three years. This provision has garnered widespread support from the high-tech industry because it focuses on new investment -- you actually have to spend to get the benefit -- and on the kind of productive assets that create jobs and economic growth.

• Finally -- not just as the head of a New York-based company but as a kid from the Bronx -- let me put in a plug for New York City. Americans have been unbelievably generous in sending emergency aid to the victims of the September 11th tragedy, and Congress has been responsive in considering ways to help New York City recover. But emergency aid alone won’t do the trick. To rebuild lower Manhattan and retain its economic base, New York City needs investment. Congressman Amo Houghton and Ways and Means Chairman Bill Thomas have proposed legislation that would create a new "Liberty Zone" that would provide tax breaks for businesses that reinvest in lower Manhattan. We believe the Congress should act quickly to make this part of its plan to help rebuild New York City and restore the strength and vitality of the world’s greatest financial center.

(By the way, it’s been inspiring to watch how New Yorkers from both parties and all over the state have pulled together to tackle the challenge of helping New York City recover. It’s been a team effort -- from Governor Pataki, Mayor Guiliani and Mayor-Elect Bloomberg; to Senators Clinton and Schumer; to Congress Members Nita Lowey, Charlie Rangel, and Jim Walsh. They’ve put aside their differences and come together for a common good. New Yorkers -- and people all over America -- owe them a big debt of thanks.)

This is a moment of truth, in our industry and our country. From where I sit, I believe the next two or three years will be some of the most challenging I’ve faced in my 36 years in the telecom business.

On the one hand, we’re tremendously excited by our opportunities. Verizon has the largest capital budget of any company in America. We have a quarter-million employees with unparalleled technical skills and resourcefulness. We have a huge investment in the new wireless and wireline technologies that can bring a whole new generation of services to customers and create jobs, productivity and growth for America. And -- as we demonstrated on September 11th -- we have a huge role to play in providing the kind of advanced communications network on which this country’s security depends.

But we also have a business to run. And unless we can operate under rules that make economic sense and give us rational incentives to invest, we will not be able to put these enormously valuable assets to work for our customers. And that would be too bad for us -- but, more important, for the country.

The answers are right in front of us. The test will be the choices we make about policies that affect technology and capital investment. If we make the right decisions, there’s a good chance that -- by this time next year -- the old-style telecom wars will look like an old black-and-white newsreel, full of furious debates over issues that history has long since decided. And the American economy will be back to doing what it does best: creating jobs, inventing cool new stuff, and leading the world in productivity and growth.

Thanks for listening, and I look forward to your questions.