Ivan Seidenberg, Verizon Co-CEO at National Press Club
Webcast on ConnectLive.com Networks
Monday, September 25, 2000 - 1:00 p.m. EDT

[Note: Disclaimer- This transcript is provided as a convenience to the audience. If you need to be absolutely positively sure what was said, please listen/video the video recording. Ellipses (...) indicate inaudible words.]

JACK CUSHMAN: Our guest speaker today is Ivan Seidenberg, the President and Co-Chief Executive of Verizon Communications, which as you know is the company formed by the merger of Bell Atlantic and GTE. They told me it didn't matter if I pronounced his name Ivan Seidenberg as long as I pronounced Verizon right. [Laughter]

Verizon, you all know, is the nation's largest local phone company and the largest wireless company. And think about the numbers: 260,000 employees, 64 million local phone customers, 25 million wireless customers; operations in 21 countries and sales in 1999 of 60 billion, way back in the last century.

Mr. Seidenberg first started in the telephone business in 1966 as a cable splicer's assistant, and I had to wonder if you did any cable splicing a few months ago during the strike. [Laughter] He's held a variety of engineering, management and government affairs jobs, and most of them were at that old New York Telephone Company which became NYNEX after the AT&T break-up, and after that, at its successor companies, although there was a nine-year spell at AT&T. And, if I can throw out a little more alphabet soup, he played roles in the groundbreaking 1997 merger between NYNEX and Bell Atlantic, and in this year's deal with GTE. And then, of course, was instrumental in the formation in 1999 of Verizon Wireless which combines the wireless operations of Bell Atlantic, GTE, and Britain's Vodafone, AirTouch. And he worked to convince the Federal Communications Commission to allow Verizon to enter into long distance in New York which was a first for a Baby Bell.

But no sooner did the ink dry on that Bell Atlantic-GTE merger than the newly named Verizon was hit by an 18-day strike by its two largest unions. Most Americans' introduction to the new Verizon brand came by way of news reports of a strike and the inconvenience it was causing them.

Now, Mr. Seidenberg is a mathematician by training. He's a Vietnam veteran. He's the father of two, and he's shown some agility in the M&A game, and today he's going to talk to us about his vision for a future in which ordinary consumers have long distance, mobile, cable, local phone service, high-speed Internet access which many of us got it in our homes already and many of us are shopping around for it. Please welcome Ivan Seidenberg. [Applause]

IVAN SEIDENBERG: Thank you, Jack, and good afternoon, everyone. I thank you for that very kind and, frankly, very comprehensive introduction. You know, the first big speech I gave right, after our merger closed back in July, I was introduced as the president of VER-i-zahn, so I guess we're making a lot of progress here today.

In any case, I'm particularly honored to have this forum to explain what's going on in the communications business. Now, on second thought, maybe it's easier to explain quantum physics. Frankly, when you think about it, the last 15 years have been an amazing ride. And from a shareowner's perspective, it's been a great ride. A single share of AT&T stock in 1983 turned into eight separate companies by 1984. As Jack said, a decade later, that went down by two, as SBC bought PacTel and Bell Atlantic merged with NYNEX. This year it changed again. US West was taken over by Qwest, SBC took over Ameritech, and Bell Atlantic merged with GTE, forming a new company, Verizon.

And that's not half of it. Along the way, AT&T split itself in two, which means you may own a piece of Lucent Technologies. Then AT&T acquired TCI, which means you're now in the cable business. PacTel split its telecom and wireless businesses, so you may also have owned AirTouch which, of course, was bought by Vodafone and then combined with our wireless business to form Verizon Wireless. Now, of course, if you looked at the last 15 years through the perspective of WorldCom or Sprint, you would see the exact same pattern.

And to top it off, Patrick Ewing isn't a Knick anymore. [Laughter] Now, in case you're wondering why that fits, if you like big, old, legacy guys, it seems like it should. [Laughter] Think about that one.

In fact, the landscape has changed so much in just the last five years that the list of the biggest telecom companies in the U.S. has changed almost completely. In 1995, AT&T was on top, followed by all of the former Bell companies, GTE and MCI. But if you look at the same metric for the year 2000, the biggest company is one we wouldn't have even called a communications company five years ago, and that's AOL-Time Warner. The next four slots are taken by companies created by mergers or acquisitions, including Verizon. And the rest of the top players are new entrants and cable companies. So the Telecom Act has clearly had an impact, and makes for good dinner party conversation -- of course, if you like that sort of thing.

All of this restructuring of the communications industry is, at the most basic level, a response to an unprecedented period of technological change that is reshaping industries, redirecting investments, and rewriting the rules that govern communications companies. Specifically -- you all know this -- we're seeing the emergence of two gigantic, new communications platforms, neither of which we could have envisioned in their current forms a few years ago, but both of which have the potential to disrupt our traditional ideas about communications.

The first is wireless which has rapidly evolved from a single-use, luxury product to a full-service platform spurred by the Web-to-wireless revolution. Already more people have wireless phones than have cable television. Worldwide, wireless subscribership has grown at more than 50 percent through the '90s and appears today to be even accelerating beyond that. There are now more wireless subscribers in countries like Italy and Finland than there are land-line phones.

In five years, it's estimated there will be 1 billion mobile devices -- and that's from a standing start just a few years ago -- many of which will be portals to the Internet. So you can buy a Coke in Finland from a machine, download karoake songs in Japan, or get stock tips in Singapore. And actually, all of you know, you can do all of those things today.

In fact, of the $1.5 trillion in e-commerce revenues generated in the year 2005, a stupefying one-half will be handled over wireless platforms. And that doesn't even take into account the growing presence of fixed wireless systems as a viable alternative to the traditional local telephone connection to the home.

The second platform is the Internet itself, or more precisely, the massive networks that run on the IP protocol that governs the Net. These global IP networks are capable not only of carrying vast amounts of traffic, but also embedding a whole range of functions we used to think of as separate businesses -- from entertainment, to commerce, to publishing, to communications.

Internet telephony is a reality right now, with rates as low as 4 cents a minute when it's bundled with other services. IP technologies are turning one-way cable systems into two-way networks that can provide a whole range of communication services, just as our telecom networks are evolving to provide all the services traditionally provided by cable companies. Content and transport are becoming inseparable as we see the combinations like AOL-Time Warner, AT&T and Excite@home, and Microsoft's wide-ranging investments in cable and satellite systems.

And if you think about it, the biggest communications network in the world may be AOL's messaging platform. And I mean this literally. As Jack said, Verizon has 63 million residential access lines, and Verizon wireless has 25 million subscribers. Pretty big? But AOL's two instant messaging services have a mind-boggling 138 million registered users, an Internet nation existing entirely in cyberspace.

Now, these two markets, wireless and the Internet, are the focal points for virtually all the investment innovation and growth that we're seeing in the communications industry today. Now, it's worth taking a look at what they have in common.

First, they are boundary-less. That is, not confined by geography or defined by distance. This means you can communicate with anyone, anywhere, usually for a single, nationwide rate, like you do today with wireless.

Second, they deliver a whole bundle of digital services, seamlessly, with no distinctions -- voice, data, Internet access, video, music, e-commerce -- all over the same platform, in the same endless streaming of bits. This opens up a whole world of price and packaging innovations. Subscribe to Internet access service, get Net2Phone for free. Sign up for a cable modem, we'll throw in long distance. One conduit, anything you want, at the price that's right for you. The possibilities are endless.

Third, they're governed by market forces. For the most part, there are no entry barriers, no price regulation, no subsidies -- only competition and customer demand to set prices and direct investment.

So the key dynamic in communications today is competition among the different modes -- meaning wireless, satellite, land line -- of delivering the Information Age services customers want anytime, anywhere in any form, through a multitude of consumer electronic devices: cell phones, Palm Pilots, laptops, beepers, and all of the rest. That's obviously good news for the American consumer. And it's also good news for the economy because it means more investment and it creates more jobs.

Now, contrast this dynamic, future-oriented environment with the view of the world as seen through the lens of the traditional communications regulatory environment.

Rather than being boundary-less, the regulatory view of communications is based on geography. Specifically, close to 200 artificially defined local calling areas -- not found in any atlas, by the way -- and governed by 50 different state regulatory commissions, countless municipalities, and an alphabet soup of federal agencies.

Rather than being seamless, the industry as viewed by regulation is a collection of separate services. Local is separate from long-distance, not because they're really two different businesses, but because the Telecom Act says they are. Cable, telephony, satellite, wireless -- each has its own bureau at the FCC. And the vast bulk of regulatory effort is focused on one ever-shrinking segment of the business: local voice communications.

Rather than being market-driven, competition in communications is managed by regulatory bodies who today dictate the terms of competitive entry, establish prices on retail and wholesale services, oversee our operations, and maintain an elaborate system of subsidies.

To put it more simply, as we see it, regulation is trying to pick winners and losers. The result of this approach is that the communications industry in this country has not been able to develop along natural, technological and market lines. However unintended, regulation has stifled progress in the deployment of new technologies. This has dramatic consequences for consumers in the form of less choice, less competition, fewer services and misallocated investment.

Now, there are several things that government can do to correct this uneven approach to regulating communications, but before I suggest what those would be, let me emphasize why we believe this is such an important issue for our industry.

The first, ironically, is that it delays the benefits of competition in the local and long-distance markets. As you probably know, last December, four years after the Telecom Act was passed, Verizon became the first former Bell company to get long-distance approval in the state of New York. Lo and behold, competition has done what it usually does: it stimulated the market. Since our entry, prices have gone down, long-distance output has increased, and the number of competitive lines increased more than 70 percent. Even more tellingly, New York was the first state in the country where the big three long-distance companies actually invested their own capital to provide local residential telephone service. They had to. I'm hopeful that this door has been opened once and for all.

As many of you know, we filed our application to provide long distance in Massachusetts on Friday, and hope to expand the footprint across all of our big states in the next several months. The trouble is, we cracked the human genome in less time than it took to open the long-distance market in a single state. [Laughter] Now, the funny thing about all of this -- if you think it's funny -- after years of regulatory inducements designed to entice competitors into the local market, the only thing that really worked to get competitors to invest in local networks was to let us into long distance. Some of you may think this is just normal Verizon or Bell rhetoric, but these facts are all verifiable. Just look them up. Imagine what we can do if we erased the local- and long-distance distinction entirely and offered consumers the kind of nationwide pricing and packaging innovations that have energized the wireless business.

Now, a second issue has to do with Internet access. Today thousands of mid-size and small American towns have no direct, affordable access to an Internet backbone, and most won't likely get it anytime soon. Now, we're talking about places like Wichita, Bakersfield, Sioux Falls, Shreveport -- hardly remote, out-of-the-way locales. The fact is, 60 percent of the country's metropolitan areas have no access to an Internet hub, and the situation is even worse in rural America. The reason is that telecom companies, like Verizon, which arguably have some of the strongest resources and expertise when it comes to competing in the Internet market, are effectively prohibited from investing in these kinds of facilities because Internet traffic is considered to be long-distance service. It's ironic that the boundaries drawn up to break up AT&T in the early '80s, years before the Internet was commercially viable, are serving today to determine who can participate. The result is to keep some of America's strongest companies from investing in the very infrastructure on which our economic future depends.

Now, the third point is that current regulations favor certain technology platforms over others, even though the Internet is making these kinds of distinctions obsolete. Now, let's consider the cable and telephone industries. Driven by the logic of the Internet world, both platforms are evolving toward the same vision of the future. Cable is upgrading its one-way broadband pipes to handle two-way communications so it can provide voice, data, Internet access, and video. Telephone companies are upgrading our two-way lines with broadband capacity so we can do exactly the same thing.

The result should be flat-out competition between two robust platforms racing to deliver New Age services to America. So what's the problem? The problem is we're playing this game by two sets of rules. We're trying to upgrade our networks with broadband capabilities while operating under a line-of-business set of rules that restrict our revenue growth, and wholesale pricing rules that devalue our infrastructure. Cable, on the other hand, is permitted to leverage its monopoly in the broadband arena, which means it can lock-up programming, Internet access, instant messaging, and huge libraries' worth of intellectual property on closed proprietary systems. Anything that delays innovation and investment in open platform, broadband technologies cannot be good for the market.

And finally, there's the overriding public policy issue of American leadership in a globalizing industry. In recent weeks, there has been intense speculation about the possibility of cross-border acquisitions, takeovers of American communications companies by telecom providers in France, Germany and England, fueled by valuations of those companies that are much higher than those of their American counterparts. The reason for this imbalance is pretty simple. Investors rightly view the communications marketplace in America as both more competitive -- which is good -- but more regulatory than that of our foreign counterparts. For example, European countries don't make any distinction between local- and long-distance service. We seem to be more balkanized than the Balkans.

The result, from the capital market's point of view, is a lower long-term growth outlook and a much riskier climate for investment. You could read any analyst's report; they'll tell you the same thing. Meaning that the market is driving up values of foreign telecom providers, to the disadvantage of American companies. Just to make the point, at least one European telecom can afford to buy any one of the top five U.S. players, pay a substantial premium, and suffer no dilution in its stock price.

Now, public policy may not concern itself with stock prices, but it should concern itself with attracting the investment that will fuel economic development and job creation. And therefore, it's worth considering what policies will have a positive impact on the flow of capital into these markets. On that, the evidence is crystal-clear. More competition is good, accompanied by much less regulation. Anything less puts the American telecom industry in jeopardy of being a runner-up in the most vibrant sector of the global economy, for reasons that have nothing to do with our ability to compete in global markets. That's just an unacceptable outcome for us all.

Now, the bottom line of all this is that the current form of managed competition and economic regulation has run its course and is now more harmful to consumer welfare, investment, and market-based competition. It's time for a new approach to regulating the technologies that are at the heart of America's economic prosperity -- one that allows the market to develop around what consumers really want.

Now, the basic elements of such a new system might be the following: Create a clear path -- a clear path -- for eliminating economic regulation at both the state and federal level on the entire communications industry, modeling it after the success of the wireless industry. For those of you who know this issue, reciprocal compensation, which is a big debate here in Washington right now, is a perfect example of why the current system needs a major overhaul. Focus public policies and regulation on those areas that are really meaningful to consumers. Some regulation is okay. Ensuring the availability of basic service, upholding service quality, and protecting consumer interests in the Internet Age, through open access policies. Enforcing privacy protections and meaningful enforcement.

Another area: deregulate broadband investments and services immediately, to promote sensible investment and ensure maximum competition among all the technologies. Deregulate the business market immediately where, by any reasonable measure, competition is alive and thriving.

Now, we're encouraged that a growing number of federal and state lawmakers have recognized that changes are required. Congress is considering a number of bills that would remove some of the restrictions on data investments, and the FCC has proposed its own restructuring plan. The challenge is to make all of these changes now and do them very quickly.

Last week the FCC's head technologist, David Farber, acknowledged the difficulty of regulating the new economy. "Regulation takes around three years," he said. "How many Internet generations does that amount to?" It's time to stop playing tomorrow's game with yesterday's equipment. Now we've seen the competition, and they're swimming in sharkskin bodysuits while we're still in Speedos. [Laughter]

There's a revolution going on in your kid's bedroom today -- a cell phone in the pocket, a beeper on the belt loop, a hundred instant messages flying across the Internet, and a million more new services just waiting to be invented. Connecting our customers to this hugely creative global market is the reason Verizon was created, and it's what we want to deliver to our customers. To do that, we have to have faith in the discipline of competition and market forces to unleash innovation and create growth, and the courage to be bold enough to try new approaches to governing these dynamic, new markets. Thank you. [Applause]

JACK CUSHMAN: Thank you very, very much. We have a lot of questions -- several of them mine. [Laughter] You brought up Speedos. When is the time going to come that we can watch the Olympics live over our cell phones, no matter where it's being held?

IVAN SEIDENBERG: If you all get laser surgery, you can probably do it now. I think that, by the way, there are little devices, like Palm Vs and Palm VIIs, that you can begin to see when that day will come.

Just as an aside, what we know is that if you look at the research, 60 percent of people who log-on to the Internet have downloaded a video clip, which is an amazing statistic. Forty percent of people who log-on to the Internet have downloaded some music. So I think the day is coming quickly when you'll see devices created to give you short bursts of video that will attract your attention to things like the Olympics, or anything else, or a speech here at the Press Club.

JACK CUSHMAN: Are you talking four years, eight years, 12 years?

IVAN SEIDENBERG: Oh, no. I think you have some devices that are out there now, but I think more mass distribution within the next 18 to 24 months.

JACK CUSHMAN: What does the strike against Verizon and the terms of its settlement tell you about labor relations these days with the economy that we're running nowadays?

IVAN SEIDENBERG: Well, as you know, we did have a 15-day strike in one place and an 18-day strike in another. But since we've seen our strike, there have been three or four or five others that have percolated around the country.

I think there's a couple of messages. One is unique to our industry, and one is more general. I think as we approach an election year, as a business executive, what I sense is that workers want to make sure that they participate in the growth of the entire Internet boom and all this great economy. So I think there are lots of legitimate issues like wages, benefits, work rules, less -- in our case -- issues of overtime and issues of things of that nature. So there is a legitimate set of issues that would normally go on in any bargaining.

I would point out that in our case, the history of our company is there tends to be a strike every three years, whether we need it or not. [Laughter] So in this case, it lasted a few extra days which we didn't like, but I think those issues tended to be resolved to the satisfaction of both the workers and the management and the union.

The second issue, however, in our particular case, was that there's a great fear that the union -- the union -- would be left behind because it didn't have access to the jobs at the wireless industry. And as you see more growth in wireless, this became a flagship issue for the unions. And the reason we had a difficult time with it is that, from our perspective, we were very concerned that the procedures under labor law that would allow unions to organize wireless workers were just a clear violation of the privacy of our employees. People would not have been given a fair and open chance to decide whether or not they wanted to be in a union. They would have been subjected to peer pressure and lots of tactics that were geared to simply force people to sign cards to say they were being represented by the union. And that was a strike issue, and it was resolved to the satisfaction of both sides. We think we have rules that protect the integrity of the system, protect our people's opportunity for making a choice in a fair and open way, and the union has an opportunity to organize in a fashion that they feel and see fit.

So I think the message is that as the economy continues to grow and all this new technology, there's just these natural tensions that will come to the fore every once in awhile, and I think it takes good, hard cooperation on both sides to reach acceptable solutions.

JACK CUSHMAN: A member of our audience sent up a question. Any interest in buying AT&T's Consumer Long-Distance Division? I didn't see Michael Armstrong actually out there. [Laughter]

IVAN SEIDENBERG: Well, I think this is an easy answer. We'll get their customers without having to pay for it. [Applause]

JACK CUSHMAN: In my business, we call that a newspaper war. [Laughter] What will prompt the next rewrite of the Federal Telecom Act?

IVAN SEIDENBERG: Oh, I don't think I can stand another rewrite of the Telecom Act. [Laughter] I think, as usual, in these cases, what we find is that -- the Telecom Act was pretty good. I'm a believer that it did a lot of things that it was intended to do. The dilemma, of course, is the market and technology moves faster than all of us move. You have to pick up the paper every day to figure out what's going on in some quarters of the industry.

So, I would hope that the next time public officials tackle this, it's with the goal of thinking about, not things that used to be and trying to figure out a better way to run the old industry, but to anticipate where we need to go and create a much more sweeping set of changes that rely on market forces and technology to deal with it.

JACK CUSHMAN: Can you tell us what has surprised you the most during your career and the industry since the passage of the Telecom Act in 1996?

IVAN SEIDENBERG: Probably the speed of technological advancement. You know, we would talk about, when you think about it, look at the growth of AOL in just the last three or four years. Look at the Internet, look at how we're moving to, as you even asked the question about video on wireless. It's just, to me, it's fascinating and energizing to really dig into the business and see all of the changes that are occurring in the technical infrastructure and in the software development and all the applications that go over it. So to me, the most exciting thing is, without question, it's all the new stuff that you get to use and sell and buy and develop.

JACK CUSHMAN: Is Verizon rolling out DSL -- these are these high-speed data lines into the home -- as fast as you would like?

IVAN SEIDENBERG: You never do anything as fast as you would like, I suspect, but we're moving as quickly as we feel we can. We will have, by the end of this year, 60 percent of the households that we serve will have basic 640 kilobit, which is pretty fast, access to the Internet. By the and of next year, that number will move to 90 percent and then every year after that, we'll start to increase the bandwidth even more above the 640 kilobits.

And so, this is a process where first you have to upgrade your infrastructure, develop your software, figure out your marketing. By the end of this year, we should have close to 500,000 high-speed connections to the home. By the end of next year, we're looking to make a quantum leap in that number, and as you probably are aware, we acquired a company, NorthPoint, that will give us a national reach.

So we take this DSL market very seriously. It's a very important part of the transformation of our company, and I think there are some issues in the way. We'll work them out. I think there are some technological issues, there are some regulatory issues, but these are things that we'll tend to work through over the course of the next 12 months or so.

JACK CUSHMAN: Is it pretty much neck and neck in the competition between DSL providers and cable-TV providers of high-speed access? How do you see that competition shaking out?

IVAN SEIDENBERG: Well, cable modems are ahead now. Most estimates would suggest by the end of next year that there will be something like 9 million or so cable modems out there and something in the vicinity of maybe -- I'm sorry, the number's wrong. By the end of next year, there should be about 5 million cable modems and there are probably in the vicinity of 3 million DSL customers. What's happened now with the accelerated roll-out of companies like us, SBC, the analysts now project by the end of 2002 we'll have more DSL customers out there than the cable companies will have cable modems.

But what's more important about all of this is that when you add them together, 50 percent of the households in the country will have some form of high-speed access, which is really cool, because that says you can deliver all sorts of new stuff to the consumer. And whether it's us or the cable, it's a great new market to develop applications directly into everybody's home in the country.

JACK CUSHMAN: You know, a lot of the value in a box of Corn Flakes isn't the corn, it's the marketing costs. Is this true of my telephone service too? Am I paying, in my phone bill, for a tremendous amount of advertising that I see every time I turn the corner?

IVAN SEIDENBERG: Not from us. [Laughs] Actually, the greatest part of the cost of providing the service to you is our infrastructure costs. I mean, we're spending tens of billions of dollars every year in investment to upgrade the network. You know, a company like us in the markets that we serve, if you look at TV advertising, we're spending one-half of what AT&T is spending on TV advertising and mass marketing. So most of the costs to serve you are basically looking at the infrastructure bill.

But I'd like to make a point on this. This may be a little different way of looking at it, although you might expect this from me. There's tremendous focus on what people pay for communications. Now, on average, by the way, if you added up all your electronic services, which is basic, long distance, wireless, your cable service, your Internet service, you might be spending between $140 and $170 a month, which is a big number in most people's minds. But it's less than $1,500 a year, and you're getting great value for that. I think the fact is that you use these services so much more than you ever did before. Yet people will buy a car and spend Lord knows what on a car and never put the same degree of effort into distinguishing the difference between a $25,000 purchase and something they're spending 1,100 to $1,500 for. So, there's a tremendous, sort of personal attachment that people have about phone service. But when you think about it, the value we're delivering is extraordinary, so you're getting your money's worth.

JACK CUSHMAN: Well, I'm sure if I add up my cell phone, my home phone, my DSL, Internet service provider, cable or satellite, that Verizon wants to sell me 100 percent of it. How important is it to you to sell this bundle of services -- to sell all of these services to your customers?

IVAN SEIDENBERG: Well, our view is that we want the ability for you to make the choice as to whether or not you use us for all of those services, or you choose to use us for some of them and let others ride on our services to provide other services to you.

So, for example, if you look in our case, you can buy a DSL line from us, and you can access any ISP you want: ours -- an Internet Service Provider -- either ours or anybody else's. But if you buy a cable modem, you don't have an open platform. So our view is that we want to make sure that we're in a position to provide you a wholesale network connection and let you decide your own retail ISP. Or, if you choose, you want one bill from us, we'll sell you the whole thing. So it's important to us to be able to compete for all of the products and services, and it's important to us there's balanced policy that requires all these networks to be open.

JACK CUSHMAN: To what extent are you focusing on alliances and partnerships in Europe or other parts of the world, and when do you expect to be announcing any such thing?

IVAN SEIDENBERG: Okay, you want to know what our next merger will be. [Laughter]

JACK CUSHMAN: Why not?

IVAN SEIDENBERG: Can you keep a secret? [Laughter] Sure, right. You know the old line, "If I tell you I have to--." And usually somebody over here says, tell him anyway, you know. [Laughter]

Alliances are part of I think the way to get at the international market. Just to put this in a very quick sort of story: To be strong globally, which is really all over the world, we like to follow the chess analogy. For those of you that are chess players, the grand masters will tell you that to be a successful winner in chess, you must control, or at least own, the center of the chessboard. If you put your king in the corner, you know what happens -- you get picked off and you lose every time.

So as a company, we're trying to move to the center of a chessboard. And in our case, it means moving into these wireless and data and DSL types of services. And it's also solidifying our market presence in the North American market. Once we do that, we become a tier-one player. We're no longer a regional company like Bell Atlantic used to be, but now a national company when you put together GTE and Bell Atlantic. We can now have relationships with companies in other parts of the world where we can serve customers in a common way.

A perfect example of that would be our alliance with Vodafone. Vodafone serves primarily the European wireless market; we serve the U.S. wireless market. We have a joint venture with them here in the U.S. We spend a lot of time focusing on bringing product to market, standardizing around, for example, the new technologies -- 3G, third-generation wireless -- trying to bring all sorts of new marketing approaches using a common base. So I think alliances have a great place if you can find ways of leveraging your customer base to bring more product to the market.

Over time, you want to expand, you know, much the same way that a General Motors or an IBM or a Coca-Cola or a Pepsi have expanded over the years. They've become global over a long period of time. I think it will take Verizon many years to become truly a global business, but our strategy is to become strong in the North American market first and then migrate from that strong base.

JACK CUSHMAN: Now, meanwhile, off in the corner of the chessboard called Germany, you've got Deutsche Telekom, who would like to move to the center of the board and purchase a company like VoiceStream, or even Verizon; who knows? What do you think about overseas-based companies moving into the U.S. market?

IVAN SEIDENBERG: Okay. Now, this is also a difficult question. First of all, as a large-cap business and somebody who really doesn't want a lot of rules, this becomes a difficult line to walk. In theory, we have no issue with any company anywhere in the world that would be trying to expand off a natural base. So if you're a Deutsche Telekom and you believe that VoiceStream's technology base, which is the same as the European wireless, that will give you some international synergy, that should be fair game. The trouble is, the rules under which they operate and the rules under which we operate aren't the same. And that's the problem.

So for us, it's troublesome to think that our own internal U.S. policy would allow companies like DT to purchase Spectrum here in the U.S., when in fact they can do that with stronger valuations, much more support from the German government in terms of the valuation of their business, and in fact the German government would continue to be an owner of the business. So it just seems to me that there are some difficult issues.

Now, the other part of the question is, you know there's legislation pending that would sort of prohibit that sort of thing.

In the final analysis, defensive legislation probably in the long term isn't the right answer, but we're attracted to the principles, in the short term, of making sure that we don't allow foreign companies to take advantage of the situation while we still have a different form of rules here. So, hopefully we can find a better balance to sort of move our own policy along prior to the Germans making a concerted effort to gobble up companies here in the U.S.

JACK CUSHMAN: Do the recent changes in trade relations between the United States and China, and China's coming ascendancy to the WTO, do these represent significant opportunities for your company?

IVAN SEIDENBERG: You know, I've been going to Asia since 1988, and it's slow. And, you know, my feeling is every one of these steps is probably a good thing, but it really does take an enormous amount of energy and discipline to follow this through, year by year, month by month, day by day, so on and so forth. So, while I think these are positive things, you really have to have a desire to really focus on these markets in the long term. Very few companies can do that. They are not meant for the small entrepreneur who can dabble in these things, because they'll get swallowed up over time.

So yes, we do have an interest, but we recognize it's slow and it requires a great deal of discipline. And it's important that all these policies continue to move the ball forward because I think that the power of the underlying technology is what will drive the opening of these markets more than any other political negotiations that occur. People in China know the benefits of what wireless or data or any of these technologies bring. So we're hopeful that this will work over time, but really it isn't a short-term opportunity for us.

JACK CUSHMAN: Does either major presidential candidate have a position on telecommunications that appeals to you or your company?

IVAN SEIDENBERG: Well, that's an interesting one. [Laughter] Do either presidential candidate. Does that include -- "either" doesn't include Ralph Nader, I guess, huh? [Laughter]

JACK CUSHMAN: Well, I think I said "major."

IVAN SEIDENBERG: Major, major, major. Good. [Laughter] All right. Make sure you get the name right on that when you get that later. [Laughter] No, our view of this is kind of simple. I mean, having been in this industry this long, and focusing on telecom policy for over 25 years, I tend to think that the actual policy organ tends to be much less partisan in its practice. So I don't see much difference here from either administration -- I haven't seen much different over time.

I think, if I had one overriding comment, I would believe the candidates today would have a greater sensitivity to know that we need some sweeping changes in the structure of our policies and regulation. I think most people would understand and agree that there's an economic link between the way you regulate an industry and the jobs you create and the economic value you create. I think both sides understand that.

I think, regrettably, we haven't seen a lot of debate on our industry in this particular presidential election. My guess is, it's because both sides tend to probably know and agree that major structural changes probably are in order, and hopefully that will happen, once the election is over.

JACK CUSHMAN: Do you have the sense in Congress that telecommunication law has been written by a bipartisan bloc in the middle, or is there a partisan split on telecommunications law in Congress?

IVAN SEIDENBERG: There are people in the audience more qualified than me, I think, but from my perch as sort of a corporate person outside of Washington, for the time being, what I think happens is that the telecom debate tends to start out as very well-intentioned, at 10,000, 20,000 feet. But telecom and telecommunications is so local -- it touches every district -- that by the time that it gets to writing legislation or enacting something, it's not partisan, because both parties are affected by the grass-roots applications of these things. And I've had members on both sides of the aisle reflect on that issue.

I think people know this is pretty important. If you look at who's sponsoring all these different bills over the last three or four years, it flip-flops. I think you get people on both sides. You get some combinations you wouldn't expect. So I happen to believe that the underlying power of telecom is more bipartisan than almost anything else. So it's really, for people like me, it's education, and it's really discipline and focus on continuing to tell our story, and hopefully we can get the kind of changes that we think are important.

JACK CUSHMAN: Our first e-mail question took a little while to get here, and it's from Bill from Chicago. And maybe the reason is that his question is, "What can be done to speed up DSL installation times? [Laughter]

IVAN SEIDENBERG: I think that in our case -- by the way, he probably was transmitting that e-mail over somebody else's long-distance network, instead of ours. [Laughter]

I think DSL is a good question. Here's where we are with DSL: 70 percent of the installations that we do with DSL today, customers do by themselves. So you order up, you dial us up, you call us on the Internet -- let me just say this. Seventy percent of the installations you do on a self-installation basis, we send you out a little box, we send you out a filter, you plug it in yourself. And believe it or not, 50 percent of all the installations for us in DSL right now, as we speak, are done over the Net. So we've made enormous progress in the last two to three months, in terms of actually getting better at marketing the service. What we need to do to really speed up, to get this user's question, in Chicago -- and I suspect, is he our customer, in Chicago?

JACK CUSHMAN: He didn't say.

IVAN SEIDENBERG: He doesn't say. Well, I can give advice as to how to help Ameritech get there, [laughter] but I suspect the -- no, but I think the answer for us is quicker deployment of the technology, you know, better distribution of the modems. And I think it's a fair point. We could do better as an industry, and I think we have been and will, over the next several months, in terms of continuing to speed up the process.

JACK CUSHMAN: A questioner says that Wall Street appears to be growing worried about a slowdown in telecom equipment purchases by phone companies, large and small. What are Verizon's capital spending plans for the next five years or so?

IVAN SEIDENBERG: [Chuckles] Well, these numbers are mind-boggling, when you think about it. In 1999, if you just put GTE and Bell together, by the end of the year, our capital spending -- capital spending -- would be $18 billion. We know of no companies that spend that kind of money -- $18 billion. In 2001, we'll spend about the same. So if you just multiply that out by five, and assume there are some normal increases, you're looking at a capital spending program of between 90 billion and $100 billion over the next five years.

There's plenty of opportunity for any kind of vendor -- whether it's fiber, electronics, it's modem manufacturers -- to bootstrap on that market. The trick here in this industry is you can't get from where you were yesterday to where you need to go tomorrow without investing in the core of the company. You know, the medical industry has done it, the car manufacturers have done it, the telecom industries have done it.

What we find -- if I can put in a commercial here -- there is a problem when you look at the capital spending of the long-distance companies, it nowhere near matches that which we're doing in our networks. All three long-distance companies spend just a little bit more than we spend alone. So if you added in BellSouth and U.S. West and Southwestern Bell, it's not even close what we're spending. So I think capital investment is really the acid test that will tell people what we're willing to do to be better, to improve, and to broaden the base of technology that we bring to the market.

JACK CUSHMAN: A lot of members of the Press Club work for companies that only a short time ago got rid of hot-lead type. And I wonder what you think, as they expand into the Web and other technologies, from your vantage point, where do you see the news business going in this digital world?

IVAN SEIDENBERG: Well, I think on this issue, you all know the answer. I don't think there's any replacement for the editorial side of this business. So if you're good at what you do, you go after the facts, you construct good ways of people thinking about it, and you report in a fashion that interests people, it doesn't matter the medium.

People thought for years that the Internet -- let's take it back. People thought that TV would get rid of radio. Not the case. People thought that cable would get rid of television, broadcast. Didn't happen. People worried about wireless getting rid of the land-line business. It just doesn't happen. Technologies come into play tend to expand the market.

I think in this industry there will clearly be -- and there already has been -- enormous technological advancements. So I think you'll have to change the way you do things. You know, every morning I tend to get up and look at one of the Web sites from one of the newspapers across the territories we serve. Now, if I may just sort of say this, they're all pretty boring Web sites. They're all in text. It's almost as if people go out of their way not to make it exciting. But most of the newspapers feel they have to have a Web site.

And I think over time what you'll start to see is you can download video clips, you'll be able to have interviews, you'll be able to talk to people, and the Web site will be additive to the things you do. So I'm a big believer that if you focus on what you do well, which is the content side, and we focus on what we're interested in, which is the distribution side, that's a good marriage. It works.

JACK CUSHMAN: I suppose that higher speed service to the home is an important part of allowing people to do that, since our peak hours tend to be when people are on company time and company lines.

IVAN SEIDENBERG: Well, high-speed access to the home broadens the market. You know, it's pretty interesting. As my kids have grown up, I realize there is no such thing as a standard clock, and young people just operate to a different beat than we do. Now, the Olympics are in Sydney, so you see that.

But I think with broadband, what you'll find is there'll be all sorts of different ways of people using the high capacity. When you think of what you can do when you sit at your computer at work -- fast; you can do almost anything with it -- it's amazing. When you think about being able to do everything you do at work at home and connect the whole world together, it's pretty interesting. It's really exciting.

JACK CUSHMAN: Well, before I ask our last question of the afternoon, I'd like to thank you for the very detailed and thorough presentation. We'd like to present you with our certificate of appreciation, suitable for digitizing. [Laughter] And, of course, the world-famous National Press Club coffee mug. It takes Java. [Laughter]

IVAN SEIDENBERG: Takes Java. Thank you so much.

JACK CUSHMAN: Thank you. And we do have one last question. Should cell phones be allowed in restaurants? [Laughter] What does Miss Manners say about using them there?

IVAN SEIDENBERG: Well, if they're ours, they're okay. [Laughter] Actually, you don't need a cell phone in a restaurant. You know, you can put it on buzzer and you can go outside or you can transmit your e-mails; you can look at it. So the answer is, smoking shouldn't be allowed, so I think we should have some rules about cell phones in restaurants.

JACK CUSHMAN: Well, thank you very much. [Applause] I also would like to thank all of you in our audience for coming today, and to thank the National Press Club staff members Melinda Cooke, Pat Nelson, Joann Booze, Melanie Abdow Dermott, and Howard Rothman for organizing today's lunch, and thanks to the National Press Club's excellent library for its research.

Ladies and gentlemen, we're adjourned. Thank you. [Strikes gavel]

[END]