Verizon CEO: Blame the Government
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