United States Telecom Association: TELECOM '04

Ivan Seidenberg
United States Telecom Association: TELECOM ’04
October 11, 2004

Thank you for inviting me to join you today. As some of you may recall, I chaired this organization back in 1991, and I’ve addressed you several times since then. So speaking to my USTA colleagues is a bit like coming home for me.

Of course as anyone who has ever left home and returned can tell you, the place you return to isn’t always the same as the place you left. Frankly, when I left last time, I never assumed that when I came back, the cable guy would be delivering the keynote after mine!

But I’m really glad that Brian Roberts of Comcast is here with us because I think we can all learn from him and his industry.

I know that’s heresy to many of you -- the thought that the head of the nation’s largest communications company would publicly praise one of his biggest potential competitors. But I can do that for a number of reasons:

• First, I’ve known Brian for a long time. He’s a smart guy and a good businessman.

• Second, I think healthy competition from responsible competitors is good for the customer and ultimately good for the industry overall.

• And finally, I’m happy to say good things about Brian because I am a firm believer in one indisputable truth: What happens in Vegas stays in Vegas...

Now, I’ll be the first to admit that when I come to Las Vegas I am not a successful gambler. I’ll also be the first to admit that I hate to lose -- at anything! So while I was here, I spoke with some winners to see what I could learn. And it turns out that the secret to their success can be boiled down to a few simple rules:

First, Play The Games You Know. If you don’t know the rules of the game or the strategies for winning, you probably aren’t going to ever hit the big payout.

Second, Play The Games Where The Odds Give You A Good Chance Of Success. Serious gamblers don’t spin the wheel of fortune and hope that their number comes up. They focus their energies on games where strategy and intellect give them a fighting chance to win.

Third, Big Rewards Result From Big Investments: Only amateurs get excited about winning $2 on a $2 bet. If you want to win the big prize, you have to be prepared to invest the big bucks.

Fourth, Know When To Hold And When To Fold: Professional gamblers recognize that sometimes luck is with the house no matter what they do. And when that happens, the smart player knows that it’s time to move on.

Finally, and most important, Play With Passion: If you don’t enjoy the playing as much as the winning, then why bother? Flush your money down the toilet and be done with it.

Well, you didn’t come this morning to hear gambling advice; you came to hear about the state of our industry and Verizon’s long term strategy. And in a nutshell, here’s my prognosis.

I think our collective future can be as bright as the Las Vegas Strip at midnight. But it will only happen if we, as an industry, play by the same set of rules that the successful gamblers down the hall are using right now.

First, we need to "Play The Games We Know:" We’ve all seen corporations expand their portfolios by entering new lines of business that had absolutely nothing to do with their core mission. But these side ventures rarely result in fundamental growth over the long term.

At Verizon, we’ve learned that our strength is not running office supply stores, leasing airplanes, creating entertainment content, or selling light bulbs.

Our expertise is designing, building, managing, maintaining and utilizing networks. We are a communications company, and what we do best is getting information -- be it voice, data or video signals -- from here to there.

So when the Telecom Act gave us the ability to pursue entry into the long distance business, we jumped at the chance, because we knew we could leverage our strengths and build on our proficiencies. It was a game we knew how to play.

We entered the market with easy-to-understand plans with low rates. We quickly developed bundled service packages to build customer loyalty and reduce churn. And we now have more than 16 million long distance customers nationwide.

The second rule of success is to "Play The Games Where Your Odds Of Success Are Greatest." At Verizon, our customers are telling us that their communications needs now revolve around broadband -- both wireless and wireline. So we’ve responded by escalating our transformation into a national broadband company.

On the wireline side, we are aggressively deploying, marketing and improving our DSL product. We’ve increased the bandwidth of our standard DSL offering and added new and faster speed options for consumers and business customers.

In Wireless, we introduced Broadband Access, our EVDO cellular service that provides typical download speeds of 300 to 500 kilobits per second. This gives customers a “wired LAN” type experience even when they’re on the move... and unlike Wi-Fi, they don’t have to buy a cup of coffee or sit in a hotel lobby in order to get it.

We started a year ago in just two markets, Washington DC and San Diego. As of today, we serve 14 major metropolitan areas and 24 major airports nationwide. And we plan to be in an additional 16 markets by the end of the year, making Broadband Access service available to almost 75 million customers coast to coast.

This broadband deployment hasn’t been cheap. But customers want the features faster, and in order to meet their needs, we need to break out the checkbook -- which leads me to the third rule:

"Big Rewards Result From Big Investments:" One of the keys to Verizon’s success over the past decade has been our willingness to make bold moves, even when they cost big money. Things like Bell Atlantic merging with NYNEX, followed by our merger with GTE.

These two historic corporate mergers were totally out of character with the telecom world as we knew it back then. But they were good for consumers, good for business, and we’re still reaping the benefits years down the road.

The same can be said about our cellular partnership with Vodafone and the massive investment in wireless technology and spectrum it took to create Verizon Wireless -- which is viewed by many as the jewel in our crown. It was a big investment that is paying big dividends.

Now we’re taking a similar bold step with our investment in fiber to the premises, or “FTTP.” In January we announced that our new fiber network would pass 1 million homes and businesses by the end of this year, and at least three times that many next year. And we are right on target to meet those goals.

Our fiber optic internet service, which we call “Fios”, is currently rolling out in several states. Fios delivers internet surfing speeds that blow the doors off today’s DSL and cable offerings.

Our basic Fios service is 5 Megs downstream, 2 Megs up. It’s priced competitively with today’s 1.5 Meg DSL service. Our faster consumer speed offers 15 Megs down and two up -- for about the same price most cable companies charge for their 3 Meg down, 256K up service. And FTTP has a two-way capacity that cable’s existing facilities just can’t touch.

Our FTTP plans include more than just voice and data, however. We plan to start offering robust video services next year as well. And while we haven’t announced any of the specifics yet, don’t be surprised if Brian and I share a stage again next year -- but at the cable association conference.

It’s fun to branch out, try something new and push the envelope a bit. But that’s when the fourth Las Vegas rule comes into play:

"Know When To Hold And When To Fold." Taken in its most literal sense, of course, this means prudently managing your business: recognizing potential benefits that others don’t see or divesting assets that no longer meet your strategic goals. But I also take it to mean a willingness to reassess the environment and adapt your thinking accordingly.

So, for example, as we begin our evolution to a broadband world, we must focus on developing a public policy framework for the 21st century that encourages innovation and investment in these new applications and network technologies.

Digital communication does not recognize artificial state boundaries drawn on a map, so regulation shouldn’t either. It is critical that we have a consistent national broadband policy to expedite development of next-generation services and networks.

In a world of rapidly changing technology, the most effective and efficient regulator is often the individual customer. Case in point: Wireless. Governments stayed out; Customers are in charge. When cellular plans aren’t competitive enough, when the service isn’t good enough, or when the phones aren’t cool enough…customers change providers.

Wireless is competitive because policy makers resisted the urge to replace market decisions with their own judgments.

And because of this faith in the marketplace, we’ve seen innovations like camera phones and cellular PDAs; service plans with free long distance and no roaming charges; and innovative, customer-responsive marketing strategies like on-line ordering and mall kiosk service activation.

We believe that what’s true for wireless will also be true for broadband. If policy makers allow the market to work, deployment and innovative services will follow.

If they try to regulate and control the market, investment and innovation will be stifled. put another way, there’s no room for economic regulation in the broadband world.

One thing I noticed as I drove down the Strip is that in addition to advertising their shows, casinos also advertise the odds on their games.

They know that when they make it too difficult to win, players spend their money down the street or somewhere else. Likewise, if federal and state policies are too restrictive, industry’s incentives to invest in new technologies are decreased.

Existing economic regulation should be reevaluated. We’re no longer utilities. We no longer have protected markets. So in most cases, we should be taxed and governed by the same policies and rules that apply to other industries.

And barriers to entry into new lines of business should be eliminated. In an era when new players are willing and able to compete head to head with cable TV companies, for example, franchising rules should be eliminated.

They delay the entry of competitors into the market, they increase costs, and they actually hurt consumers. So we say “free all competitors of unnecessary hurdles to business entry” and let the competition begin!

A study released just last week by the U.S. Chamber of Commerce noted that reform of the telecommunications sector would add 212,000 jobs to the U.S. economy and $127 billion a year to the gross domestic product over the next five years. So we need to work with each other and regulatory bodies to get that reform underway.

And that leads to the last -- and most important -- Vegas rule: "Play With Passion!"

At Verizon, we love our technology and we love our business. When our employees talk about our wireless service, our service bundles, or our fiber project, they think it’s pretty cool stuff. They’re proud to be a part of innovation… proud to be having a positive influence on the life of our customers. They have a passion for progress.

I believe that corporate passion is a key element of any successful business. Look at Microsoft, Dell, Fed Ex or Nordstrom. They’re all operating in very competitive businesses and yet their absolute belief in their product and their unwavering dedication to their customers is the element that gives them a leg up on their competition.

We need to instill in ourselves and our employees a similar level of personal investment and accountability for success.

Our industry has some thorny issues that are unique to us -- universal services and interconnection, for example. But if we honestly commit ourselves to finding equitable solutions that make sense for customers and our companies, I believe we can get these issues behind us.

Likewise, I believe that we can put the economic doldrums of the past few years behind us too.

If you look at our sector over the past few years, you’ll see that there have always been pockets of growth -- even in the worst of times. And those pockets of growth have usually been related to investments in new technology or new services -- things like voice mail and other vertical services, DSL, Long Distance and wireless services. That’s what has worked for Verizon, and I would suggest that it is the prescription for improving the health of the industry overall.

We must envision the future we wish to achieve, and then invest ourselves emotionally, philosophically and financially in making that vision come true.

That process shouldn’t be alien to you… Many of you are here because a family member or someone in your community had a dream of establishing a new communications business to serve their neighbors. They worked hard, put money into their endeavors, and built a future that they now entrust to you.

Look at Las Vegas... This multi-billion dollar entertainment capital was once just a pile of blowing sand and tumbleweeds. But people of vision recognized the potential of the dream called Las Vegas. They invested wisely and with passion, and they, too, saw their dream become a fabulous reality.

We can do the same today for our industry. We, too, can realize our dream of a vibrant, exciting telecommunications future. And I look forward to working with you to do just that. Thank you very much. Enjoy your convention!