USTA TelecomNEXT '06
Ivan Seidenberg
United States Telecom Association Conference
March 20, 2006
Good afternoon, everybody. It’s a thrill to be here in Las Vegas at Telecom NEXT. It's especially exciting to kick things off alongside our good friends Bob Iger, Glenn Britt, Norio Wada, and Dick Wolf of Law and Order fame.
The scope of that list – Disney, Time Warner Cable, NTT – speaks volumes about the amazing reach and diversity of our industry. It's a far cry from 15 years ago, when dinosaurs roamed the earth, cell phones looked like shoeboxes ... and I was the head of USTA. It was a real honor to serve as chairman of this organization, but I have to say, things were a little different in 1991. Back then, we were still debating whether to let long distance providers and cable companies into our industry. In fact, as I recall, our biggest issue back then was whether to take the "I" out of "USITA."
The sad thing is, I really thought that was important. I guess it's a good thing the chairman only gets a one-year term.
Fifteen years, several technology revolutions, and billions of Internet and wireless customers later ...the digital era is now upon us. And the great news for us is, more and more of that digital life is happening on our networks.
The communications industry can be very proud of the role we play in delivering the broadband world to customers.
Our digital switches, fiber facilities and Internet backbones connect this nation's institutions to the global marketplace.
Our wireless networks are transforming cell phones into multimedia devices.
And our wired networks are the on-ramp to the Internet for tens of millions of customers.
This country's communications networks – built by billions of dollars of investment capital and strengthened by more than a century of quality service -- are an essential part of the value chain. By investing in our own growth, we've created growth across the high-tech sector and the economy as a whole. And when technology makes quantum leaps forward in terms of speed and complexity, we’ve proven that we can expand the capabilities of our networks to remain at the vital center of the information industry.
That's good -- because the next wave of the Internet revolution is being created as we speak.
The new Internet revolution will be characterized by 100 megabit speeds, two-way capabilities, and broadband-anywhere mobility. It will be delivered by an increasingly diverse range of technologies – fiber, EV-DO, cable, Wi-Fi, Wi-Max – from a wide range of providers. It will create opportunities for entrepreneurs, drive the next generation of consumer electronics and provide new creative outlets for content and applications.
And increasingly, it will do all of this on a global scale.
Today, I'd like to tell you what part Verizon is playing to create these platforms for future growth. I’d also like to share some examples of the kind of transformational mind-set we need going forward as we take our company and our industry into the future.
We'll be hearing from Mr. Wada about Japan a little later, so let's look for a moment at another of the world's leading laboratories for broadband, South Korea.
Korea, like the rest of Asia, suffered a serious financial crisis in 1997 and 1998. To pull itself out of its slump, Korea turned to the emerging technology of broadband ... investing in a fiber grid to connect schools and businesses and offering incentives for companies to provide fiber links to homes.
Today, Korea is the second-most wired society in the world, behind only Hong Kong. More than two-thirds of Korean citizens have broadband connections that deliver 50 to 100 megabits over fiber, directly to the home. They also enjoy one of the most advanced wireless broadband networks in the world.
The speed and power of these networks has made Korea a kind of test-bed for the next generation of collaborative services – especially on-line games, which are to Korea what March Madness is to Vegas. Education has gone broadband, as schools use the network to link teachers, students and parents and provide interactive learning experiences. And broadband has transformed Korea's consumer electronics industry – led by Samsung and LG – from second-tier to world-beating status, giving them first crack at developing the new commercial products and applications of the broadband era.
The real beneficiaries? Customers and the economy.
Products that are just now making their way to American consumers – like text messaging and mobile e-mail – are already well established in the Korean marketplace. Because of its advanced infrastructure, Korea is now a magnet for foreign investment, with more than 80 companies setting up research sites in-country. Technology companies – from Dell to Intel to IBM – want to be on the cusp of the innovations that will create demand for their products and drive the industry forward.
When Silicon Valley sets up shop in Asia to invent the future, it’s time to pay attention.
The Korea example shows what happens when business and government come together around a belief in the power of technology and use that shared vision to vault into the lead in the growth markets of the 21st century.
Of course, the industrial policy that worked in Korea is by no means the only way to address the issue of economic growth. We've seen in this country what a good framework can do to promote growth in wireless and cable.
The point is to have a winning mindset about taking control of your future.
For an example closer to home, take one of the oldest of the old-time "bricks and mortar" companies, the Norfolk Southern Railroad.
Even before telephones, railroads were the critical infrastructure of the industrial economy. But by the late 1990s, over-capacity and competition from new distribution systems were costing the railroads revenues and eroding their pricing power.
Most rail companies met this financial crisis by pulling back on capital investment. Norfolk Southern took another path. They saw that, even in the Internet age, physical goods still needed to get to the heartland ... they just needed to get there more efficiently. More to the point, they saw technology not as a threat, but as an opportunity to make themselves more competitive. They invested in technology and software that increased their productivity, boosted their volumes, improved their service and enabled them to move their cargo more efficiently than their competitors.
Essentially, they reinvented a 19th century industry as a 21st century competitor.
The CEO of Norfolk Southern put it this way: "We were once the Internet of our day, and now we’re just as relevant as we have ever been."
Staying relevant in times of disruptive change: that's a pretty good description of the challenge in front of us. So what do we do?
We transform ourselves ... continuously ... around the technologies of the future.
At Verizon, we’ve seen how this works.
Two years ago the growth engine for wireless was primarily voice. But we saw that customers wanted to be connected to all their digital content wherever they go. So we decided to enhance the wireless experience for customers by expanding our network with the broadband technology, EVDO.
Today, the Verizon Wireless EVDO network covers 150 million Americans in 180 major markets coast-to-coast. EVDO is being engineered into the next generation of laptops and PDAs. And in just two years, it has stimulated a slew of new applications, from ring-tones to data to games.
With our wireless broadband service, customers can surf the web, download complex files and send e-mail at average speeds of up to 700 kilobits per second. And with our multimedia service, V CAST, they get the latest in mobile video and music.
The really exciting thing is, the wireless broadband revolution is still in its infancy. In the next few years, we’ll see speeds of up to 3 megabits to the handset and an amazing convergence of new applications, content and hardware for the mobile customer.
So when it comes to innovation in wireless broadband, the best is yet to come.
The same dynamic is driving investment in our landline networks.
For millions of customers, our networks are the vital link to the broadband experience as it's defined today, mainly through DSL. Our challenge is to make sure our networks are equally well-equipped to deliver the broadband experience as it will be defined tomorrow.
As you know, the high-tech industry has long had a vision of networks capable of delivering 100-megabits – or more -- to the home. We can see the transformational power of super-high-speed networks in the business market today, where streaming media, rich media applications and other high-bandwidth services are the norm.
But I don't think we fully appreciate how thoroughly 100-megabit speeds – combined with the next generation of electronics and applications – will transform the broadband experience as we know it today.
The next generation of broadband experiences won't be text-based or verbal, as they are today. They'll be visual. High-definition. Three-dimensional. Like the holograms in "Star Wars" – that come to life.
Nobody quite knows how all of this comes together, but what it does mean is that all of the applications we've been predicting for years will be compelling in a very new and more powerful way. With widespread deployment of 100-megabit networks:
Doctors will "see" their patients.
Students will be "in" the classroom.
Business partners will negotiate "face to face" across the conference room.
People with disabilities will "go" to work.
E-Bay shoppers will "touch and feel" the merchandise.
On-line gamers will "become" the game.
And grandparents will practically be able to blow out the candles and taste the cake at their grandkids' birthday party.
All of this will be possible, no matter if you're across the street, across the country, or across the globe.
At Verizon, we're investing in the technology to make this 100-megabit vision a reality. We've taken the first step with the first large-scale deployment of fiber-to-the-premises technology. As of the end of 2005, our network passed 3 million homes. By the end of this year, we intend to double that, to 6 million and expect to reach 18-20 million by the end of the decade.
Our unique fiber architecture has the two-way capabilities and multimegabit speeds the digital customer requires. Our Internet-over-fiber service, called FiOS, delivers broadband speeds of up to 5, 15 and 30 megabits downstream, and up to 5 megabits upstream. And with the addition of electronics it will deliver 100 megabit speeds and beyond.
It's early in the game, but here's our biggest take-away so far: Speed wins. In markets where we've offered FiOS Data for nine months, we have an average penetration rate of 14 percent – the fastest of any product we've ever launched. And in Keller, Texas, over 30% of the customers have gone to FiOS TV since we started offering it six months ago this week. These results have exceeded even our most aggressive forecasts. That's pretty dramatic evidence that customers are ready for competition and innovation in video.
Speed and mobility are creating growth for Verizon and redefining broadband for our customers. They're fueling the market for faster home PCs, high-definition TVs, cool new handsets and all the new forms of digital content that are reshaping the entertainment industry. And with the right combination of vision, investment and forward-looking public policies, we believe that 100-megabit and truly mobile broadband networks will be the platform for amazing innovation for decades to come, to the benefit of our customers and our economy.
As I said at the beginning, I've been around this industry for a long time. And one thing I've observed is that – as an industry – we have consistently underestimated how quickly the public embraces new technologies and how eagerly the high-tech industry finds ways to use the speed and capacity that new technologies can deliver.
Who knew five years ago that, by 2006, we'd go from 200 megabyte to 160 gigabyte hard drives? From 286 to Pentium IV processors? From low-resolution to high-definition displays? From 1200-baud modems to 5 megabit speeds and more?
The marketplace is telling us that there's a great opportunity out there. We believe in the power of innovation to create growth. And we are investing to get ourselves on the right side of the big ideas that will push our industry forward.
We learned the virtues of being the "first mover" in wireless voice and broadband.
With our merger with MCI to create Verizon Business, we’ve joined forces with the "first mover" in the Internet backbone space. As a global leader in the IP transformation, we own and operate one of the most expansive IP backbones in the world.
And with fiber, we’re the "first movers" again.
Verizon is very excited about our future – as a company and as an industry. In fact, if you step back and consider the cumulative power of the capital, technical and intellectual resources of all of us here at Telecom NEXT, you have to feel energized about our collective potential to ignite economic growth, make our country competitive, and improve the quality of life for our customers.
Of course, now it's up to us to deliver the goods.
As the leaders of this great industry, it's our obligation to fill the gap between what the customer wants and what we deliver. We need to find the right business models and the right partnerships to realize our potential and show the path to growth. And we need to mobilize around a positive vision of the future and the vital role we can and must play in creating economic growth and prosperity for America.
Let's use Telecom NEXT to find the will and the way to create our future and move the high-tech industry forward. I look forward to hearing what Mr. Iger and Mr. Wada have to teach us about what the future holds. We're proud to be part of this great industry ... and we can't wait to see what happens next.
