THE NATIONAL PRESS CLUB LUNCHEON
SPEECH BY: IVAN SEIDENBERG, CO-CEO OF VERIZON COMMUNICATIONS
DECEMBER 3, 2001
RICHARD RYAN: When terrorists attacked the World Trade Center on the morning of September 11th, Ivan Seidenberg, the Co-CEO of Verizon Communications and our guest today, watched the Twin Towers burn and collapse from his Manhattan office several blocks away. The attacks had a major impact on him and his company. Three Verizon employees were killed that day, two at the World Trade Center and one at the Pentagon. In a company building located across the street from the North Tower that housed telephone circuits supplying phone and data service to 4,000 brokerage houses, was severely damaged and the circuits cut. Two hundred thousand lines and nearly 4,000,000 data circuits were knocked out. Verizon knew it and had to act fast to restore communications to get the New York Stock Market back up and running. While keeping the rest of the networks around the clock operating normally, Verizon brought the lines back up in six days. John McKaw [sp], a television reporter from Texas who went to New York to cover the story, said he found Verizon employees sleeping in the streets and in tents as they labored to restore the service. “They were determined to show the terrorists that America could and would bounce back,” he said. One man, McKaw went on to say, guaranteed to him that the system would be back up and running on schedule by the next week and it was. The company was determined “to get the stock market up and running again as a symbol that America is back and you can’t keep America down,” a manager of a huge equity company said.
Mr. Seidenberg, who was born 54 years ago in New York City and is a Vietnam War Veteran, began his career at the very bottom of the telecommunications business. He was an assistant cable splicer. He worked in a variety of positions at AT&T while attending college at night. He earned a Bachelor’s Degree in Mathematics in the City College in New York in 1972 and a Masters of Business Degree from Pace University in 1980. With the breakup of AT&T in the early 1980s, Mr. Seidenberg joined the Nynex Corporation, one of the baby Bells spun off from AT&T as head of its Government Relations Office. He rose to become President and CEO of Nynex and engineered its merger with Bell Atlantic Corporation in 1997. He became Chairman and CEO of Bell Atlantic and organized last year’s merger with GTE Corporation to form Verizon. Mr. Seidenberg now shares the CEO duties with former GTE President, Gerald Lee, but will become the sole CEO when Mr. Lee retires next July.
Today, Verizon is the country’s largest provider of wireline and wireless communications. With its nearly 125 million access line equivalents, Verizon reaches one-third of the nation’s households, one-third of the Fortune 500 company headquarters and the Federal Government. It provides wireless communications to 27 million voice and data customers. The company also operates in 44 countries and is the world’s leading print and online and directory publisher and provider.
Mr. Seidenberg spoke here at the National Press Club more than a year ago, but the world then was a dramatically different place then it is today. So please join me in welcoming Ivan Seidenberg back to the National Press Club.
[Applause]
IVAN SEIDENBERG: Well, thank you, Dick for that very kind introduction and good afternoon, ladies and gentlemen. I’d also, of course, like to thank the Press Club for inviting me here today again. As a matter of fact, you know, when thinking about what I wanted to talk to you about today, I recalled the speech I gave last September. What I remember most distinctly is that after my 15 minutes of what I thought was a brilliant commentary on the telecom revolution, the best question that I got from the audience is whether I thought people ought to turn their cell phones off in restaurants. [Laughter] I guess that tells me something.
What it says is that no matter how many times people like myself come to Washington to plead our case, normal people have simply tended to tune us out and with good reason. It’s partly that we tend to talk in our own archaeing 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. Frankly, we’re tired of it and we need a new dialogue.
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. I can’t tell you the number of times when I go out and visit associations like this where the first question to me is, “What do you think is going to happen to AT&T, or what do you think is going to happen to the long distance companies?” Imagine asking the CEO of Verizon that question?
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 to now, I don’t think we have it 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 nation’s 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 on the minds of real Americans.
First, I’d like to introduce you to some very extraordinary people. As you probably know, all three crash sites on September 11th affected Verizon operations, one of which, of course, was right here at 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 our people, Donna Bowen [sp], unfortunately lost her life in the attack. Many other people here have worked heroically to ensure that critical communications’ systems never went down.
I’d like you to meet three of them today: Chris Krieger [sp], Region President for Potomac Region (raise your hand, Chris); Kevin Logan (you saw him before), a service technician who helped install the new fiber cables and equipment to help relocate Pentagon workers. Kevin?; and Brian Clement [sp], 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. I’d like to thank the Press Club for letting me thank them publicly on behalf of all of our people at Verizon. Thank you, gentlemen.
[Applause]
Thank you. The most devastating point of attack, of course, was lower Manhattan in New York City. The damage to the network was extensive. Altogether, 10 cellular towers were disrupted or destroyed, along with almost 300,000 voice lines, 4,000,000 data circuits affecting 14,000 businesses and 20,000 residential 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 this particular disaster. We also have a major switching facility at 140 West Street, just north of World Trade Center Tower II and kind of kitty corner to 7 World Trade Center, a 47-story building that also collapsed, that was badly damaged as were the two Twin Towers. 140 West Street is more than just a building really. It’s more like the heart and the lungs and the brain of the big part of the communication system in lower Manhattan.
In the hours and the 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 the New York City area. In getting the Stock Exchange up and running the Monday after the attack, we accomplished in six days what would normally have taken weeks and months to do. In large part, it was made possible by a cooperative spirit among the many communications’ companies with facilities in the area and that included; local, long distance, wireless, and data companies. 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 for our country.
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 people hours, millions of dollars, and more than 100 years’ worth of experience and commitment to do this job. I could easily tell you 100 different stories about the heroics of our people and the resourcefulness of our technicians in bringing the network of lower Manhattan back online. But to me, it comes down to this. The next time you hear someone refer to the local 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 industry, think about what happened at “Ground Zero” or here at the Pentagon and ask yourself, “Who else could have done what we did?” Now there, I feel a lot better having said that.
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 communication 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 offices, so customers could remain in service.
From a customer perspective, Verizon’s landline network was just one piece of a bigger puzzle. Wireless usage went up 50% across the country on September 11th. In New York City and Washington, DC, it went up over 100% and stayed that way for more than a week after the disaster. Users of broadband services like DSL or cable modems were able to communicate even when normal voice switches were overwhelmed, or in the case of New York City, disabled. Broadband allowed employees who couldn’t get into downtown areas to keep working by telecommuting and all over America, frankly 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 to how to ensure the security of the 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 the true security lies in having a diversity of technologies that give customers redundant capabilities and provide alternative ways for Americans to communicate. You need to have more than just Verizon.
If it can be said that anything positive can come from such a horrific event, well 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; simply, 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 citizen.
If you look at this 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 options 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 just a few marginal players.
I’d like to give FCC Chairman Powell, frankly, a lot of credit for cutting to the chase on this issue and making a sweeping decision about spectrum allocation that can actually move the industry forward technologically and benefit customers through a new generation of services. Now, if we can 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 there as well. 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. You must 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 “Townsend-Dingle Bill” [sp] is designed to do. We’re hopeful that the House 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 a 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 just 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 an investment is not a growth business. It will not help us, or the interchange companies, or the selecs for that matter, compete against the cable, satellite and wireless software and content companies for the new 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 refocus 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 a 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. Broadband is not just about cable modems or 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 – computers talking to computers, the next will be driven by more bandwidth, more information spread across these computers. Telecom spending on broadband will have huge multiplier affects on the computer, software, media and equipment industries. We need to get this capability in consumers’ hands fast.
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, as well as the one proposed by Senate Republicans that would give a 30% 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.
And finally, not just as the Co-CEO of a New York-based company, but frankly as a kid from New York City, let me put a plug in 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 lower Manhattan recover, but emergency aid alone won’t do the trick. To rebuild lower Manhattan and retain its leadership as a financial center, New York City needs investment dollars. 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 this Congress should act quickly to make this part of its plan to help rebuild New York 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 Giuliani and Mayor-Elect Bloomberg to Senators Clinton and Schumer, Assembly Speaker Silver, to Congress members Nita Lowey, Charlie Rangel and Jim Walsh. They’ve come together for a common good to help New York, and frankly, people all over America owe them a big debt of thanks.
This is in some way another major 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 or one of the largest capital budgets of any company in all of America. We have 250,000 million employees with unparalleled technical skills and resourceful. 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 frankly, 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 increase our investment, 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 our 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.
I really appreciate the fact that you gave me a chance to talk. Thank you for listening and I do look forward to your questions.
[Applause]
MR. RYAN: Thank you. Having heard this speech, I hope you do have some questions and will write them out and send them up to me and I will ask them. What is it that you can tell us that Verizon learned about its network from the September 11th attacks and what changes do you anticipate making as a result of that?
MR. SEIDENBERG: I think in terms of our own network we feel pretty good about how robust it was, and so when you think about isolating lower Manhattan and looking at the rest of the country, I think we were able to reroute traffic, isolate the affected areas and we had good restoration plans. The other thing we found out is that in working with the 4,000 trading partners of the New York Stock Exchange, we were able to assist them in getting their services back up in just a few days. But as I said in my talk, probably the most striking thing to me when this happened was the spirit and the mettle of our people. This was not just – you know this – we fix hurricanes and disasters like that all the time. This wasn’t just a hurricane. This was an attack on our country and I think all our people just rallied to the surface. So I think that to the extent, Dick, that we can capture that spirit on an everyday basis, we’ve got something that we can really cook.
MR. RYAN: Can you tell us how Verizon or what Verizon is doing to make its facilities and employees less vulnerable to terrorist attacks?
MR. SEIDENBERG: How do we become less vulnerable to terrorist attacks? That’s a really interesting question. I don’t know that there’s any one thing we can do. Certainly, we will begin to rethink the concentration of our facilities in a few places, but remember, even in lower Manhattan we had six switching centers to handle the density in lower Manhattan, so we didn’t have everything in one place. We had it spread out, but I think what we’ll do is have more back office operations at places outside potential terrorist target sites. We’ve started a massive education program with our employees to give them more information about what to look for, how to be safe, how to work in these kind of environments, and frankly, we have to work with our customers on all these issues. I’d be less than remiss if I didn’t say that this is a tough issue. We don’t know how to plan for planes coming in and hitting our cities, so we really have to work on this a lot. As I mentioned in my talk, the other thing we need is more diverse competitive technologies out there that gives everybody a little bit more security going forward. But what I might say is, we’re part of several different industry task forces to take a look at this issue and see if there are some programmable things we can do that would, in effect, create more redundancy and more security for communications’ infrastructure.
MR. RYAN: This question notes that on September 11th that wireless connections in Washington became almost impossible to get and it asks a series of questions. Was it too many people on the system? Was it the result of the loss of the New York relays? Or was it government interference with signals because of concern that some terrorists might be using cell phones?
MR. SEIDENBERG: The conspiracy theories abound don’t they on this? I think it was pretty simple. I think 150% of the people were trying to make calls through a system that’s designed for a lot less traffic. So, I think this is just a simple case where everybody picked up their phone. Think of Mother’s Day squared. Have you ever picked up the phone on Mother’s Day and then took a couple of different shots to get through the system? You couldn’t design a system to handle the traffic on Mother’s Day every day and I think that’s the issue that you have with respect to what happened on 9/11. It had nothing to do with the Towers in New York or any place. It was just a lot of capacity that was necessary, which, by the way, to the extent there was more spectrum available and we could continue to [Laughter] – continue not just for us but for all the companies, the systems could have been bigger. They could have handled more capacity and so the issue would have been there would have been less blockage. But the fact is, we need to rely on wireless more in the future than we’ve probably ever done before.
MR. RYAN: Well, with relying more on wireless, this question wants to know if you think that vital communication links and hardware should be buried deeply underground to safeguard them from sabotage and bombings?
MR. SEIDENBERG: I think I want to ask Brian and Kevin if they want to go maintain that stuff and dig underground, you know. [laughter] Again, I think the answer to that is yes and no. I think there’s certain things that could be buried, but you know, this stuff needs maintenance, it needs power, and so I think we can’t – we have to make sure, to be frank about it, that the cure isn’t worse than the disease here. So, before we turn around and bury everything or hide everything in the hills someplace, that we’re careful about what’s necessary. Clearly, in a place like Washington, in a place like lower Manhattan, Chicago, San Francisco, the obvious places, I think we need more creative ways of protecting not just our networks but others. But I don’t think we’ll go to a step where all of a sudden we’ll have top-secret locations for all our switching stations. I don’t think that would necessarily work. Besides, whose house shall we put the bunker in? Yours? [Laughter]. Imagine what would happen if we did that?
MR. RYAN: Can the communications’ industry, and Verizon in particular, do anything to help improve the government’s ability to monitor and intercept communications of countries and organizations such as Al-Qaida that mean us harm?
MR. SEIDENBERG: Well, this one is not my job. I think on this issue, you know, all of you know this. We probably grant a couple of thousand – Bill Barr is right here – we have all sorts of requests that we get from government to surveil people and we do that. There are some Bills pending that would create some changes in our network to let people get on surveillance and so I think that’s the way we should help. Our biggest shoe in that, is to make sure that those standards apply to all providers of communications not just us, because I think we’re not the only ones that have communications’ infrastructures. It’s everybody that does that. So, the answer is we’re certainly willing do our part. We want to make sure that it’s fair and somebody pays for it.
MR. RYAN: Given the events of September 11th, what is the time frame for implementing e-911 locator technology for mobile wireless phones?
MR. SEIDENBERG: I have the feeling that the quicker I answer these questions, the more ridiculous they’re going to get as I get through this. [Laughter]. Right. You know, let me make this point. The e-911 in New York never went down and we had the location of e-911 located at our West Street building. As soon as it ran into trouble, we shifted the whole facility to another location and e-911 never went down. Now, it’s true on particularly some calls didn’t get through the first time, but those who got through using a land-based phone they were fine. Now, this question on e-911 for mobile, there’s a proceeding that’s pending now in an action, but we need to take some steps to comply with the e-911 by the middle of 2002, I believe it’s the date. I have some folks in the audience. Is that about right? Where’s Howard? Is Howard here? Yeah, I think – I don’t want to give – that’s on – I’m on track so [laughter] – okay, I’ve just got enough information to say I don’t need to say much more than that. But there is a program that we’re putting in e-911 and should have e-911 capability deployed beginning in the first half of 2002.
MR. RYAN: This question notes that half of America still doesn’t have a dial-up Internet connection. How will more expensive broadband connections help them?
MR. SEIDENBERG: Well, this is a good question. Okay. [Laughter] First of all, let’s get the facts. I mean I don’t think the facts are correct. Seventy‑four percent of Americans have access to the dial-up Internet. That’s a big number. Probably 80% of Americans have access to a computer. So the fact is, people have demonstrated a willingness to either access the Internet, purchase a service through an ISP and participate in this global revolution. I think when you look at the next generation of that, what you find is you have about 10% of the public that has some form of broadband connection, whether it be cable modem or a DSL service. So I think what we need to do here is exactly what points I tried to make in my remarks and that is, is to take America’s willingness to participate in this Internet space, in the dial-up space, and begin to push a better value proposition to them in broadband. Meaning that we have meaningful competition between DSL and cable, so we have infrastructure that can serve, and that we take the barriers down to the local networks and the cable networks and have open architecture so people can, in effect, choose whatever ISP or whatever service they want, remove government regulation where it’s getting in the way and then allow the thing to flourish.
I think, you know, this is a really interesting point. Even the Silicon people, Andy Grove and all those, have been saying the same thing. If you look at the late ‘80s and early ‘90s, what you found is that the surge in the American economy, in part, was created by this IT revolution. And what people found is that the ability to have computers talking to each other fueled a great value proposition for people, and therefore, we saw a bump in the economy and people estimate that was maybe three or four percent on GDP, which is a big number. What we’re seeing now is, what we need is, to take computers and connectivity and increase the bandwidth, take the entry barriers down for people to develop applications and improve the value proposition. So, I think, the answer to this question is, the American public gets it. What isn’t working are the policies to promote new capital investment in these technologies. And here, what we have is the cable industry running around unregulated and the phone industry running around being over-regulated. I don’t think it adds up to the right answer.
MR. RYAN: This may be kind of a touchy political question, but this question notes that the FCC has authority to do much of what you propose on deregulation. Do you think that Chairman Powell is doing as much as he could, or is he maybe dragging his feet?
MR. SEIDENBERG: Is that a political -- [Laughter] Chairman Powell is a wonderful human being. You know that. [Laughter] But unfortunately he runs an institution that has its own memory bank. So, I think, part of the problem here is that you wouldn’t expect somebody in my job to sit here and throw flowers to the FCC. I think the thing I would say is that it takes a while for somebody who is thinking in a direction to change the institution he works for. So, I think that, as I said in my talk, Chairman Powell did make a fairly sweeping decision on spectrum by eliminating the caps, which as you know for eight or nine years was taboo. People would say the world would fall apart if you did that, but he figured out that adding more capacity is the right idea. He’s given some speeches. He has some proceedings in play that I think are beginning to create the right dialogue and create the right debate. I mean honestly, we don’t have all the right answers either, but we want to make sure we have a healthy debate on tomorrow’s issues, not look at the industry through a rearview mirror and regulate it the way we always did. You know, I think the Chairman is making noises that he wants to do that, but I think it remains to be seen whether the institution he leads is on the same page as him.
MR. RYAN: A couple of questions that sort of deal with the Townsend-Dingle Bill, as you know the Bill is in Congress, and said that should the Townsend-Dingle Bill arrive in the Senate Commerce Committee, how much alteration to the legislation would be acceptable to Verizon in order to make Chairman Hollings pleased with the piece of work?
MR. SEIDENBERG: Now, there’s no way that anybody expects me to answer that question. [Laughter] Not even close. Okay. [Laughter] Who asked that question? [Laughter] Now, here’s the way I think about this, because I’m not here in Washington every day. We have people who sort of do this and understand the process. I think from my perspective the Townsend-Dingle Bill has done two things. It’s raised the policy debate and it’s created some specific legislation around that policy. It’s taken a while. All signals suggest that it will be enacted. It will be passed in the next – this session of Congress. I think everybody knows this in Washington. There’s probably three or four variations on what the policy issue might be and what the solutions might be on the Senate side. I think the fact that the Townsend-Dingle Bill will probably pass quickly will really focus the debate on the Senate side and I think what we need to do is let that cook. Just participate in the process. You know, I’ve been around to everybody on the Hill who will listen. I think there are lots of things that can be done and I frankly think the Senate leadership, I think the White House, I think anybody that cares anything about telecoms thinks that we need some changes in policy. So, I’m hopeful that the people who know how to do this will take the benefit of the Townsend-Dingle and do something on a comparable basis in the Senate and bring this to closure in a reasonably short period of time.
MR. RYAN: Sticking with Congress again, as you seem to like it so much, we have a – this questions notes that the quarrel in Congress over the economic stimulus package seems to be related more to repealing the alternative minimum tax than it is on the issue of investment tax. So the questioner would like to know what you think about how Congress could break this impasse?
MR. SEIDENBERG: I’m going to pass on this one. I think that – you know, obviously as an important company in this process, I happen to think the right solution touches several different constituents. So, you know, the proposals to deal with investment-based tax credits are every bit as important as perhaps some proposals to deal with the consumer side of this. So, I think, there needs to be a clear balance. What I want to make sure, however, is that if Congress really is intent on adding to the debate and to the solution on economic stimulus, that it not forget what it needs to do on this issue of investment spending, because let me give you a statistic. As a rule of thumb in our business, for every $100 million incremental increase that we spend on capital we create 1,000 jobs. So we can debate and, in effect, reapportion what we have, or we can figure out a way to increase the total pie. And I think what I would hope the Congress would do is deal with these depreciation policies and these tax policies in balance with everything else. Now, how do you break the tie? I think Christmas will break the tie. I mean they will get there by the time they get to the end of the month. They always do and they will. I think the right people, frankly, know pretty much what needs to be done and I think if you were bargaining this you wouldn’t give up too fast. So I think, you know, this will happen.
MR. RYAN: Will DSL access rates ever go down from their current $50 levels?
MR. SEIDENBERG: We’re getting hostile now. I can see it. [Laughter] Whoever wrote that, I don’t know where you live, but we have a $29.95 rate right now. So, I think, the answer is – I think like in any technology driven issue, of course, pricing will be reflective of volumes. And so, when we get to 74% of America having broadband, my guess is that you will see some softening of prices. I would make this point. Last time I looked, DSL that we offer is cheaper than any cable modem anybody offers and they’re selling those things like hotcakes, so I don’t think pricing is the issue. We’re installing DSL just about as fast as we can provide it to customers. What we’d like to do is be able to do it faster and I think some of the issues associated with that have to do with a myriad issues we have with unbundling and interconnection and separate subsidiaries. So we do force customers through a lot of very difficult steps in order to get DSL and I think that will improve. But on pricing, I think we have a good price now, and yes in the future, I suspect pricing will improve as we see demand and volumes increase. Can I see the record for the number of questions asked and answered? [Laughter]
MR. RYAN: A record for the number of questions asked and answered?
MR. SEIDENBERG: Yeah, I’m getting close.
MR. RYAN: Uh, I don’t know. We’ll have the Library check on that rate. [Laughter] I meant to ask last time, or answer last time you were here.
MR. SEIDENBERG: Too many.
MR. RYAN: Too many [Laughter] Well, we’ve got a few more to go. [Laughter] What new technologies or applications for the enterprise will you be introducing in the coming year that will help jump‑start the tech sector again?
MR. SEIDENBERG: Okay.
MR. RYAN: Is that good?
MR. SEIDENBERG: That’s a good one.
MR. RYAN: You like that?
MR. SEIDENBERG: That’s a good one.
MR. RYAN: Well, all right. [Laughter] We’re in business.
MR. SEIDENBERG: You know, those of you who are witnesses versus testifying in Congress, you know the answer. Lawyers always tell you, when you’re a witness, you say very few words. When you testify, you talk forever so no one can ask you another question. [Laughter] So, I think I’ve screwed this up a little bit. But I think on the enterprise market, this is a good one. I think for us what we feel will happen in this enterprise space is that (and we have three of our people here who do this all the time), what we’re looking to do is increase broadband connectivity for our customers so we can offer them virtual private networks, Web-based solutions, Internet connections and, in effect, provide the kind of broad network capability that lets people connect onto their proprietary networks, but work at home, work at the office, transmit data across countries, across boundaries. So for us it’s, you’ve heard the terms not to get technical about it, but it’s virtual private networks. It’s Web-based solutions. Our affiliate genuity is offering these kinds of services. It’s basically the kinds of things that the long distance companies offer, but we feel that we can add to that by having another company do the same thing. But bottom line is really broadband, because as so goes broadband so goes the enterprise market for these services.
MR. RYAN: When Verizon wins long distance authority in all your East Coast states, will you need to buy a long distance carrier? Is that a good one?
MR. SEIDENBERG: Is that a good one? I don’t know. [Laughter] I get to rate the questions. It’s great. [Laughter] Will we need to buy a long distance carrier? Here’s what I think about all this. I don’t think we need to. I think that if you’ve watched our company in the last four or five years, we’ve been big believers in gaining scale and scope and we’ve been big believers in growing our products’ sats organically. So, we’ve put a lot of effort into long distance approval, so we can develop a long distance service. We’ve built DSL and all these things we can do better and faster I agree, but the fact is we’re a business that has focused on gaining scale, achieving synergies from all these deals and then reinvesting. I think that, however, underneath that question, I do believe that in an industry that’s as fragmented as the one we work in, there will be another round of consolidation at some point in the future. I happen to think that our company is positioned past that step already. I don’t know that we need that. To the extent that long distance companies have assets that are useful to us, they tend to come maybe on the international side because they have networks there, or perhaps to extend our business market capabilities. But for the plain old garden variety long distance business, we have no real need for it. We already have 7,000,000 customers in long distance. We probably are the fourth, almost the third largest long distance company so I don’t see that, but you can expect other consolidation to occur probably over the next two to three years.
MR. RYAN: Sticking with long distance, this questioner notes that you are selling long distance through your home service and giving away on your wireless. When will all services include long distance at no extra charge?
MR. SEIDENBERG: Huh, I don’t know that we’re giving it away on wireless. I think that [Laughter] – I think, remember, somebody buys a big bundle of minutes and, you know, they pay whatever they pay for it; $35 or $45 or $55 or $65. So, I think it’s a pricing issue. Now, if we can get rid of this 271 restriction, I’ll be happy to offer you a bundle of minutes on the local and give away long distance free, if that’s what people think is a good idea. But I think it’s a question of – it’s not free. It’s just a way it’s marketed to customers. And in wireless you are paying – you know this – you pay anywhere from – depending on your carrier – from $.12 to $.14, $.15 on average for all your minutes. So if someone says your LD minutes are free, they’re really not because you’re paying $.12 to $.14, $.15 for your wireless minutes. If you go to your landline, what’s interesting is your local minutes tend to be free. That’s why you pay for your long distance minutes, so this is an issue of it’ll come out in the wash. It’s not free. Trust me. It’s not. [Laughter]
MR. RYAN: This questioner has sympathy for many of our listeners on the National Public Radio and CSPAN and I’m sure some of the audience, but they would ask you to explain in plain, non-technical language how an unfettered broadband spectrum can be good for consumers? Just what the heck is a broadband spectrum in words an average telephone user can understand? Now, that’s a good question.
MR. SEIDENBERG: Well yeah, I guess. [Laughter] Okay. It’s not in my interest to explain this simply. You know that don’t you? [Laughter] No, what broadband is to the average person is a lot of capacity, so it’s taking the -- if I can use an example -- everybody knows what cable television is. You’ve got 50, 80, 100, 300 channels. You’ve got all these very interesting surfaces that come over a cable pipe. What we need to do is take another pipe and make it big enough so you can order up 10,000 different Internet-type services over your cable modem or your telephone line. So the whole idea of this is to increase the bandwidth. So instead of a one-inch water pipe, it’s a 5‑inch or 20-inch water pipe. Now, what happens I think, is that once you increase the capacity into everyone’s home you no longer have to buy a bundled cable service with 500 channels. You can start to buy one-by-each things that you really want. You can buy an ISP service from anybody you would like. You can buy medical services from people who offer it. You can buy individual education channels. You can buy individual entertainment. So, I think what a broadband pipe does is it completely puts the power of choice in the hands of the customer and takes it away from the companies that today have a stranglehold over broadband. And today, cable companies, they offer good products, but they have a stranglehold over broadband. No matter how much people complain to me about telcos, our services are much cheaper than the cable services that you pay and every day the cable companies raise rates. So, I think the simplest way I can look at this is, we need to create a broadband connection in everybody’s home that gives customers the choice of the different products and services they want to buy and not force them to buy a big bundle from one company like the cable companies.
MR. RYAN: Can you tell us what you think the odds are that we will see another merger between the remaining Bell companies in the next year, or the next few years?
MR. SEIDENBERG: And you actually think I’m going to answer this.
MR. RYAN: Hmmm [Laughter]
MR. SEIDENBERG: Well, frankly, I think the odds are pretty substantial, I suspect. There will continue to be consolidation. I’m not sure which companies will be involved and who will do that, but there certainly is going to be consolidation and I wouldn’t be surprised if that occurs over the next 12 to 24 months. As I said earlier, I think we’re past that in a lot of ways, but I’m sure there will be.
MR. RYAN: You may not like this one. Although you disparage resale, isn’t it true that a great deal of Verizon’s own long distance sales are accomplished through resale?
MR. SEIDENBERG: That’s a very good question. You know, there’s a difference between purchasing wholesale and remarketing than there is between resale and unbundling. This I will get technical on because it’s an important point. You know, America Online tells its customers to buy a local phone line from us and then they layer on top of that a whole set of services and computer systems and they add value and people pay for it. So that’s an example where someone is reselling our local service as a service and then they add something to it and the public says, “That’s a good deal.” We do the same thing in the long distance service we offer. We offer the customer a retail relationship. You call our office. You can buy our products and services. We, in turn, buy capacity from the long distance companies in order to, in effect, connect you to any place in the world. We take the service at just about full list price and add something of value on top of it. Now, the resale that I can constantly jawbone about here in Washington is not really resale. It’s people going into the government agencies and saying, “Tell Verizon to lower its rates to as low as we can get them to do it, so we can connect to their network, save money, ship cost to Verizon so we can compete.” That, to me, is not a good idea. It’s not a good idea for us and it doesn’t teach the market the right way to behave. So, I think, anybody should be free to buy anything from us that they want and add their own value on top of it, but what people shouldn’t be doing is jawboning about interconnecting to us at lower or below-cost rates just for the sake of shifting cost away from their operation to our operation.
MR. RYAN: This questioner would just like to know what might be the impact of the collapse of Enron on the broadband market?
MR. SEIDENBERG: Well, I’m not getting into the energy business. That’s for sure. [Laughter] Well, you know, Enron was getting into telecom. So I guess, I hate – this is kind of silly, but to some extent they’re not going to do that now. But I think what it says is, you know, from a financial – I guess this is really a corporate governance issue. I guess all of us in large institutions, the first thing we want to make sure is that we have a firm handle on exactly how our financing was done, where it was being done, and so what we’ve done is like everybody you would expect us to, we’ve really doubled back to make sure that all of the trails for accounting and auditing and controls on where we borrow money and how we spend it are there. And I think that’s the broader question that was – as I look at the Enron situation, the thing that’s probably most disconcerting to me is how the flow of so much debt could be out of the eyesight of perhaps the Board. And I think that’s something that we’ll have to take a look at and make sure of that and I think we’re fine.
MR. RYAN: Before asking the last question, I have a little bit of business I’d like to do up here. First of all, I’d like to present you with a Certificate of Appreciation for your appearance here today and, of course, the famous National Press Club coffee mug that I wish to present to you for use for whatever you would like to put it to. [Laughter] -- carefully now.
The last question I’d like to ask is, I note in the introduction how large Verizon is in providing service to one-third of the nation’s population, and one-third of the Fortune 500 company headquarters. Is Verizon in danger of becoming another AT&T and have to be broken up at some point?
MR. SEIDENBERG: Well, thank you, Dick for inviting me here this afternoon. [Laughter] I don’t think so. Remember, when AT&T was broken up in ’84, it was the only game in town. I think what you have now is an industry structure where you have not just Verizon, but you have America Online, Time Warner (AOL/Time Warner). You have Southwestern. You have AT&T and WorldCom. What I think is we’ll end up with three or four mega-companies like us for sure and I don’t think you should break them up. I think you should let them compete, because they will bring the resources to innovate and expand the market, and then I think below that, you’ll have hundreds of companies competing. It would be a huge mistake to go after any of these four or five companies because of their size. The only other point I’d make is, we operate today in a more global market. Wireless is a global marketplace. It’s not just a U.S. marketplace, so I think you need, America needs global companies. For sure, I don’t think we should be the only company in this space. There should be three or four of us, but we should resist the temptation to punish bigness because you need it in this evolving industry structure.
MR. RYAN: Thank you. [Applause] Thank you, Mr. Seidenberg. Thank you, all, for coming here today and thank you for those who have watched on CSPAN or are listening to the program on National Public Radio. We are adjourned.