Our CEO, Ivan Seidenberg, gave a keynote speech today at the Supercomm conference. Ivan gave an overview of the industry’s performance and our investment and product strategy at a high level and I thought he raised some interesting facts both as to where we are in the industry and the potential for the future. Some of his key points:
“Four years ago, I stood on this stage and talked about how fiber and 3G mobile were transforming broadband and wireless. Three years ago, we talked about how IP technologies were creating a flatter, more networked global economy. Two years ago, we signaled the melding of TV and Internet by introducing you to our 1 millionth FiOS TV customer. Last year, we previewed the “everything connected” world being ushered in by 4G mobile technologies. And this year, we’re seeing an explosion of new devices, applications and tools to deliver all this power to customers over the high-I.Q. networks our industry has built.
In these five years we’ve seen the economy boom and we’ve seen it bust. It doesn’t matter. Communications companies are doing what we’ve always done: Invest, innovate and deliver service and value to customers.”
Ivan then went on to note the key metrics for our industry in terms of investment, competition, and innovation:
“Our industry is building the smart networks that will be a platform for growth, not just for us but for America and the world. And Verizon is in the very center of this transformation, as we reinvent our networks around mobility, broadband and global connectivity. . . All told, we’ve invested more than $80 B over the last five years to build these platforms for growth. And that’s just Verizon. On the larger scale, America’s telecom companies invest more in networks every year than the Federal government invests in transportation. In fact, if you exclude real estate, investment in information, communications and technology accounted for an astonishing 43 percent of all capital investment in the U.S. last year. Since the start of the recession, these investment levels have held up better than almost any other sector of the economy – down just 2.5 percent through the second quarter of ’09, as compared with a drop of more than 20 percent in private investment as a whole.
With net private investment at its lowest level in more than 60 years, the value of this infusion of capital into the world’s economy is simply astounding.
Why is investment in networks so important?
For starters, because it creates growth through competition. The price of a broadband connection has fallen by half since 2001. Wireless prices are down even more. Broadband and wireless penetration levels have doubled in the last five years. Most markets have at least eight facilities-based providers, with new entrants challenging market leaders everywhere you look. And when you add it all up, real bandwidth power in the U.S. averaged 2.4 megabits per capita in 2008 -- about 100 times what it was in 2000.
Broadband investment also creates jobs – 500,000 new jobs for every $10 B increase in digital investment. Or to put it another way, for every one percent increase in broadband penetration in a state, employment goes up 2 to 3 percent a year.
The reason we have such a big impact is that our technology is inherently productive, which has a multiplier effect throughout the economy. The economist Robert Atkinson says that all of the acceleration in productivity growth since 1995 has been due to the IT revolution. And a new study by Frost and Sullivan confirms the fact: in a survey of 3,600 enterprises across ten countries, they found that every dollar invested in IP technologies and collaboration tools generated four dollars in return.
But the most important thing communications investment does for the economy is expand the capacity for innovation by building intelligence into the core of the network like never before. This stimulates demand for richer content, more advanced software and more sophisticated electronics. And it puts a whole new set of tools in the hands of customers, which enhances the quality of life today and promises new solutions to the biggest issues we face as a society going forward.”
He went on to explain how our business models have changed, moving more towards models that are focused on innovation, partnership and openness:
· “Through our Open Development Initiative, we’ve certified more than 60 devices to run on our 3G network, ranging from inventory-management to smart energy meters to wireless medical charts.
· We created an LTE Innovation Center in Waltham, Massachusetts to develop products for 4G wireless networks.
· We published specifications for applications and software developers who want to market their innovations to our wireless customers and plan to launch our 4G apps “storefront” by the end of the year.
· We formed a joint venture with Qualcomm to develop machine-to-machine devices and services.
· And we just announced that we’re partnering with Google to develop smart devices based on the open Android operating standard.”
By working with inventors and entrepreneurs and investing in new spectrum and new technology, we grow … and so does everybody else. “
I don’t think people realize how much has changed in our industry – not only in terms of technology but also in terms of how innovation has evolved and how widely our technologies have penetrated society and economies globally, including in developing countries. As Ivan noted:
“If, like me, you’ve been coming to Supercomm for many years, you know that our industry has building toward this new broadband future for a long time. What’s different now is the ability to deploy on a large scale. According to the International Telecommunication Union, everyone in the world who wants a mobile phone will have access to one within the next five to ten years. Some form of broadband will be widespread, even in developing countries. The magazine The Economist wrote, ‘It is now clear that the long process of connecting everyone on Earth to a global telecommunications network, which began with the invention of the telegraph in 1791, is on the verge of being completed.” And with this monumental technical progress, we have the opportunity to create massive change on a scale the world has never seen before.’”
I think Ivan’s speech lays out some facts about the progress in our industry that few recognize. It just seems to be there. It just seems to happen. But the point is it doesn’t just happen. And looking at the progress in perspective as Ivan does, the results and impacts on society are astounding. Ivan is upbeat in his assessment but he does end with an appropriate caution:
“But while this hopeful future is imminent, it is not inevitable, and the decisions we make today -- as an industry and as a country – will determine whether the benefits of these transformational networks will be felt sooner … or much, much later.
Tomorrow the FCC will release its order on net neutrality. We have not seen the final language of the order yet, but certainly the terms of the debate on this issue have been troubling, to say the least.”
Despite these cautions, Ivan ends on an upbeat assessment of the role of government and how it can work with industry to ensure the continued growth of this amazing sector of our economy:
“Rather than impose rigid structural rules on a rapidly changing industry, the FCC should focus on creating the conditions for growth. We need to increase the availability of spectrum. We need to streamline the process for the siting of cell towers. We need to overhaul the outdated subsidy system supporting universal service and the outmoded payment system for the exchange of traffic. And we need to protect consumers by insisting on transparency in the provision of products and services by all Internet providers, including applications developers.
I do believe the government can play a constructive role in promoting a healthy, competitive communications industry. But public policy should be about ends, not means. Our industry has shown that we can work with the government as well as our partners and competitors to achieve our mutually desirable goals of more competition, consumer choice and broadband expansion.”