Verizon CEO Says Market Can Sort Out Tough Issues

Ivan Seidenberg, Verizon CEO, said at a Council on Foreign Relations meeting that there was a danger of government regulatory overreach of several types in the current environment.

" I always worry about unintended consequences of government reaching into our business," Seidenberg said. "But I believe the players in the industry--like Google, like Microsoft, like the Silicon Valley players, as well as AT&T, and us and the rest of the industry--we're creating a better dialogue."

Seidenberg also thinks the industry has to do a better job of self-policing, though, more on the model of the advertising industry. That would lessen the need for very-detailed rules crafted "in advance" of a particular problem occurring, rather than a focus on fixing such problems as actually do arise.

"In the telecom business we need industry to do a better job at policing behavior, because, in the final analysis, government could never possibly regulate every condition, in every single circumstance that could ever happen, and do it efficiently," Seidenberg said.

Seidenberg thinks one of the key problems with proposed "network neutrality" rules that would prohibit virtually any sort of packet prioritization is that it makes very hard the task of providing different types of service to customers who may want it, at the lowest-possible prices.

 "Most people think a carrier wants to charge for every minute on a linear basis in perpetuity, infinity," he said. But "we don't really want to do that."

"What we want to do is give you a chance to buy a bundle, a session of 10 megabits or a session of 30 megabits," he says. "The problem we have is five percent or 10 percent of the people are the abusers that are chewing up all the bandwidth."

"So what we will do is put in reasonable data plans, but when we now go after the very, very high users, the ones who camp on the network all day long every day... we will throttle and we will find them and we will charge them something else," he says.

"We don't want to have a linear pricing scale," he said. "We do want to find a way to give the majority of people value for bundles, but we have to make sure we find a pricing plan that takes care of that 10 percent that's abusing the system. And it's that simple."

"And therefore you have to have rules, give us discretion to run our business," Seidenberg said. "Net neutrality could negate the discretion to run your business."

"Anytime government, whether it's the FCC or any agency-decides it knows what the market wants and makes that a static requirement, you always lose," he said.  Seidenberg noted that although access speeds might be higher in Korea or France, household penetration in the U.S. market is higher than in any country in Europe, he said.

"Japan may have faster speeds, but we have higher utilization of people using the Internet," said Seidenberg.  "So our view is, whenever you look at these issues, you have to be very careful to look at what the market wants, not what government says is the most important issue."

"If you look at minutes of use, the average American uses their cell phone four times as much as the average European," Seidenberg says. But what about penetration rates?

"If you look at Europe, they publish penetration rates of 150 (percent), 160 (percent), 170 percent meaning that people have more than one phone, two phones, three phones," he notes. Seidenberg suggests the high roaming rates are the explanation.

"My guess is you probably have two or three different phones to carry to use in different countries because your roaming rates are so high," he adds. "So my point is it's a fallacy to allow a regulatory authority to sit there and decide what's right for the marketplace when it's not even close."

In fact, Seidenberg argues that the U.S. market is more advanced in ways that count.

"Verizon has put more fiber in from Boston to Washington than all the Western European countries combined," he notes. Also, "if you look at smart phones, they have exploded this market in the U.S. market."

"Ask any European if they're not somewhat envious of the advancements of smart-phone technology in the United States," he says.

The FCC is "overreaching in regulations," he says. "It's a real problem to have well-intentioned people in Washington regulating the business as they understood it to be in 1995. Bad idea."

"I don't think there is no role for government," he says. "I just worry about, when you allocate capital and you look at consumer behavior, that is not a strength of, I think, everyday transactional activity of government agencies, particularly federal government agencies."

On the technology front, Seidenberg pointed out that the opportunities for distributed, remote or cloud-based applications is growing very fast.

"But here's the thing about the iPad that's very interesting," Seidenberg said. "We look at it as a fourth screen."

"Now, the interesting thing about the iPad, from how Verizon looks at it, from a network person, first of all, it has no hard drive, right?" he said. That means lots of need to get applications from the network, sort of reversing the trend of the client-server era to put more processing and storage at the edge of the network. That has postive implications for a firm such as Verizon.

Seidenberg also does not think the FCC should attempt to take spectrum away from broadcasters and reallocate it for mobile use, Seidenberg says, although Verizon has said it generally supports FCC plans to reallocate spectrum for mobile use. "I think the market's going to settle this," he said.

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