Verizon CEO: Blame the Government

WASHINGTON D.C. -- When RBOCs talk, the telecom industry listens.

Attendees here at the Comnet show packed the auditorium to listen to Ivan Seidenberg, CEO of Verizon Communications Inc. (NYSE: VZ) as he stumped for more technological advances from equipment providers at the same time as he blamed the government for many of the problems associated with telecom's nuclear winter.

Seidenberg urged regulators to loosen their hold on incumbents in order to spur real competition in the market place. He also encouraged equipment vendors to step up efforts to develop new technology in an effort to kick-start broadband deployment and services. And finally, he provided a kernel of hope to next-generation equipment providers by telling them that although overall spending will be down in 2002, spending on high-growth areas will continue.

Verizon has never been shy about its lobbying. In the last couple of years, it has focused on removing parts of the 1996 Telecom Act that force it to share access to the last mile, supporting controversial legislation like the U.S. House of Representatives' Tauzin-Dingell bill, which is still awaiting a vote on the House floor (see Last Mile Political Battle Heats Up). During his speech today, Seidenberg reiterated the company’s stance that for progress to be made in broadband deployment, regulators need to take a different approach to spur true competition.

“I believe the communications industry could do itself a big favor -- not just here in Washington but in all our public debates -- if we could cut through the clutter and all focus our energies on this simple goal of getting the most technology in the hands of the most customers, faster,” he said.

He also pointed out that roughly 40 percent of American households are still without the option of broadband and only 6 percent of small business have access. He concluded that it is time for the federal government to get behind a broadband initiative to help push for universal access.

Just how does he propose the government do this? Not surprisingly, he asserts that what needs to happen is less government involvement --particularly in areas of operational and pricing regulation. He proposes that regulation for new Internet and telephony applications, like broadband, should be handled more like wireless or cable.

“We’ve worked very hard to reinvent ourselves around new technology, new customer sets, and new business models. Now it’s time to reinvent the regulatory model, as well, so we can move our industry forward and deliver the kind of progress our customers depend on us for."

While he urged less action by regulators, he also urged equipment companies to step up their efforts to push the industry forward. After his formal speech, Seidenberg commented on what he perceives as cuts in research and development from some of the major equipment suppliers.

“Look at companies like Redback Networks Inc. [Nasdaq: RBAK], Lucent Technologies Inc. [NYSE: LU], and Cisco Systems Inc. [Nasdaq: CSCO],” he said at the post-keynote press conference. “How much are they spending on R&D right now? I’m not trying to single any of them out. But they need to push forward with new developments to accelerate deployment of new services.”

He went on to say that Verizon has already spent a tremendous amount of capital on building its infrastructure, but he said that what is needed now, if progress is to continue, are solutions from equipment providers for some fundamental problems.

“We’ve spent a lot of money to reach this point, but if we don’t fix the back-end issues we’ll have a big problem."

He also offered words of encouragement for next-generation equipment providers. While he acknowledged that the $17 billion in capital spending by Verizon in 2001 was down from the previous year and spending in 2002 is likely to be even lower, he also said that spending on high-growth areas like DSL, wireless, and long-distance buildouts will continue. He explained that spending was consistent with customer demand, as services with less demand take the brunt of the cuts.

These comments could be particularly good news for equipment providers focused on the metro area network where DSL traffic is aggregated and also for makers of optical transmission gear. Fixed wireless and optical wireless equipment providers could also take heart, as Verizon looks to multiple technologies to connect customers to their network.

“I believe we have to continue to invest in these areas,” says Seidenberg. “We’re seeing a secular change in the industry. Voice is migrating to different platforms, and we need to be able to handle these new revenue streams.”

— Marguerite Reardon, Senior Editor, Light Reading
optodoofus 12/4/2012 | 11:00:41 PM
re: Verizon CEO: Blame the Government So, we should trust Verizon and the other RBOCs? Once the government allows them to put their competition out of business by leveraging the copper infrastructure that their customers paid for over the past hundred years, then they'll quickly roll out broadband service at a reasonable price to everyone?

Come on, Ivan. Get real. The incumbents are doing everything they can to inhibit the availability of broadband for their own advantage. They don't give a rat's ass about what their customers need.
fgoldstein 12/4/2012 | 11:00:39 PM
re: Verizon CEO: Blame the Government VeriZontal's version of competition is simple. Everybody else competes for those business that VZ doesn't want, and VZ competes for business that others already have, but nobody competes with VZ's business!

The Internet is itself unregulated today -- ISPs are totally beyond FCC-type regulation. They purchase regulated bandwidth from common carriers, and there's a pretty clear distinction about where the two meet. Yes, some ISPs own their own non-common-carrier facilities too. But the common carriers have to sell service to ISPs.

Seidenberg is asking to remove the common carrier obligation, so that VZ can cut off other ISPs and CLECs from their networks. (Dingell-Tauzin's wording gives lip service to ISP rights, but also allows VZ to raise the rates they charge to ISPs with no regulatory recourse whatsoever, so a $30,000 month local T1 -- today $300 -- would be within their rights.) In other words, don't regulate the Internet and don't regulate things bought by ISPs. That's hardly fair play, and it's certainly not good for the network sector of the economy. Imagine if the ILECs got this and treated the Internet the way they treated their other pre-competitive technologies. Lessee, 20 year lifespan on routers....

He's also asking (this is in D-T) to cut off CLEC access to loops needed to provide DSL, and CLEC access to dark fiber. So the end user won't have a choice any more -- the wire plant to most homes is, in economic terms, a natural monopoly, and VZ's trying to leverage that to maintain a monopoly in waht are clearly competitive services that run over the wire. Think "how to turn a recession into a deep depression"!
HeavyDuty 12/4/2012 | 10:59:51 PM
re: Verizon CEO: Blame the Government I've a rather simple solution to the "regulatory obstructions" impairing broadband's increasing availabilty; RBOCs ainGÇÖt gonna like it!

Have the FCC, and PUCs, put their heads together and figure out what would be just compensation to the RBOCs for their COs, then acquire them via a process that will probably need to be eminent domain.

Turn around and sell them (the COs) to multiple companies that agree to limit themselves to the CO services and facilities business only. It might be useful to limit the number of CO operating companies allowed to do business within any given LATA, but it should almost certainly be greater than one.

Then allow local loop vendors (again, it might be wise to place an upper limit on the number of vendors within a LATA) equal access to all the CO facilities.

All IXC vendors will also be allowed equal access to establish POPs within the COs.

Cable TV, ISPs, interactive video, and other types of content providers will also have access to the COs as needed.

All vendors must be able to interconnect to one another via an open standard (such as SS7).

This is a very basic recommendation that the ILECs will greet with disdain, because they've seen what competition has done for long distance POTS vendors and would rather not follow suit.

fgoldstein 12/4/2012 | 10:59:43 PM
re: Verizon CEO: Blame the Government A similar plan has been suggested, sometimes called "divestiture II". Separate the RBOCs into two companies, one of which gets all of the outside plant (loops, etc.) and one of which keeps the customers and switches. Then the OSP company sells its loops to all comers, including the RBOC service company, on equal terms. CO space would be handled the same way, as an OSP function.

No, the RBOCs don't like it. But a financial analyst type recently proposed this as an answer to the European incumbents' fiscal woes (debt). Let the loopco have the debt (easy to pay back from steady sales) and the serviceco would have better numbers. And somebody has bid $8B (or 8B GBP?) for BT's outside plant, not that BT wants to sell it.
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