Introduction by Alan Murray, Deputy Managing Editor, Wall

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Ivan Seidenberg

Council on Foreign Relations

CEO Series

April 6, 2010


Introduction by Alan Murray, Deputy Managing Editor,
Wall
Street Journal
.


Thank you, Alan, and to Richard Haass and the Council on
Foreign Relations for the opportunity to speak to yo
u today.



2010 marks the 25
th

anniversary of the
birth of the
commercial
Internet. Since th
e launch of th
at first dot.com website back in
1985, the Internet has become the major platform for global
commerce
--

the equivalent of the shipping lanes that f
acilitated
world trade
in the days of Magella
n or the railroads that opened
the west during the Industrial Revolution.

Today, the Internet
drives some $400 billion in
annual
economic activity
, transports
billions of dollars’ worth of intellectual cargo

an
d has turned
every multinational company that wants to
remain competitive

into a giant information processing machine. A robust and
functioning Internet is a laboratory for innovation,
a platform for
collaboration,
a spur to productivity, a means to
highe
r
living
standards and a conduit for exporting values of openness

and
freedom

around the world
.



With advances in fiber and wireless technologies, we’re on the
cusp of a new growth curve for the Internet and a wave of

2

innovation

with

tremendous potential

to address the big issues
facing the global economy, including energy, poverty, education
and health care.


The Internet is not a static thing, however.

As it grows in
complexity and importance, i
t requires constant investment,
improvement, and re
-
inve
ntion.
A
s we think about America’s
competitiveness and the drivers of global prosperity in the 21
st

century, we need to think about
how to assure

the
continued
security
,

stability

and expansion

of this vital platform.


***


It

may be

counterintuitive for
you to think
of

Verizon as a global
Internet company, but actually
we’ve
played a big role in
creating the

digital trade routes


on which
the world’s
economy
runs. We own and operate
much of the infrastructure that
comprises the Internet today, including

almost half a million
fiber miles of backbone

networks

connecting six continents and

more than 150 countries. The firm TeleGeography has ranked
us the #1 most connected public Internet backbone network for
ten
consecutive year
s
. And we

re partners in la
ying high
-
speed
undersea cables connecting Europe, India and East Africa, as
well as a trans
-
Pacific cable that increases the capacity between
the U.S. and China by 60 times.



3

We also
operate
ultra
-
broadband
backbone networks in the U.S.
and
are reinvent
ing our
access
network with fiber

technology
capable of delivering 100
-
megabit capacity

directly to
customers’ homes.
Fiber
-
to
-
the
-
home


what we call FiOS
--

is
the gold standard for wireline broadband anywhere in the world.
With more than 15 million ho
mes passed,
Verizon has deployed
more fiber
-
to
-
the
-
home

lines than all the
countries of Europe,
combined
.
A
nd
going forward,
we
think
FiOS will be

the perfect
platform for a slew of i
nnovations coming down the pike
--

from
immersi
ve video to 3D imaging an
d more.


On the wireless front, it’s hard to overstate how fast this
technology has evolved in the brief 25 year history of this
industry. In 2002, Verizon began to deploy a 2G all
-
digital
wireless
network. Since then, data traffic on that network has
in
creased 300 percent. In 2004, we introduced 3G technology,
which increased data speeds by a factor of 10, giving customers
the ability to do e
-
mail, use GPS, share photos and access the
Internet on a wireless device. We now have 3G throughout our
whole n
etwork, creating a highly mobile broadband environment
that surrounds customers with Internet connectivity wherever
they go.


This first great wave of investment and innovation
on the part of
the world’s communications companies
has brought

us to the
ver
ge of a great tipping point in human history. Today, there are

nearly 2 billion
Internet
users and
4 billion
mobile phones
users


4

worldwide. The
next

billion will likely be connected by wireless,
which will certainly be the most economical way to drive
br
oadband to underserved populations, both here and abroad.
Verizon has been preparing for this new wireless broadband era
for some time, acquiring spectrum and working with our
vendors and technical associations on a technology for wireless
broadband calle
d LTE that is rapidly becoming a global
standard.


LTE will increase data speeds on wireless networks by up to 10
times, comparable to today’s wired broadband solutions. But
the real transformative idea about 4G goes beyond the whole
notion of a wireles
s “phone.” In the 4G world, wireless will
connect
everything
: not just people
-
to
-
people, but also people
-
to
-
machine and machine
-
to
-
machine. As 4G capabilities get
embedded into our environment, there’s really no limit to the
number of connections that c
an be part of the mobile grid:
vehicles, appliances, buildings, roads, medical monitors,
inventory on trucks or in warehouses

or on supermarket
shelves
. This “Internet of things” will infuse intelligence into all
our systems and present us with a whole n
ew way to run a
home, an enterprise, a community or an economy.


We’re testing LTE as we speak and will start to deploy it
throughout the U.S. later this year. We are also jump
-
starting
innovation in LTE handsets, equipment, software and machine
-
to
-
machi
ne applications by opening up the development

5

process to entrepreneurs and creating our own innovation lab.
And we are galvanizing the worldwide development community
by forming a joint venture with China Mobil, Softbank and

Vodafone


who, together

with
Verizon
, have a combined
1

billion customers

across four different continents
.


With LTE, the U.S. will be a prime mover in this vital and
innovative new technology.


I know this goes against the conventional wisdom that America
is way behind in
wireless a
nd
broadband. The truth is, that
belief is more about the
past

than it is about the
present

or
certainly the
future
. Asia’s cell phone ecosystem developed so
fast because
the mobile handset


not the PC


has been

their

primary means for accessing the In
ternet.
Europe’s wireline
broadband infrastructure spread quickly because of state
subsidies and a compact geography
, among other things
.
The
U.S.
market has developed differently
, based on
a
private
investment
model
and competition among different
wired

and

wireless
technologies. The result is that


today



the U.S.
market
stacks up very well
in the global market in terms of
:




Choice



with the vast majority of Americans having access
to two or more broadband networks;



Utilization



with higher broadba
nd penetration and wireless
data usage than

Europe as a whole;

and


6



Quality



with
the most advanced fiber and fourth
-
generation
wireless data networks being deployed in the world today.


As for the
future
, the center of gravity when it comes to
innovation
has shifted decisively to the U.S. The
smart phone

revolution is centered in the U.S.
Our
4G LTE networks

will
leapfrog the world in
wireless. The rest of the world is catching
up to the game
-
changing
fiber networks

being deployed by
America’s communica
tions companies. And all the innovation
and entrepreneurial energy
in the Internet ecosystem of devices,
applications and operating systems
is

coming together around
these world
-
class network platforms

and will drive our industry
going forward
.


Clearly,
Verizon has made big bets on our vision of the future, as
has our entire industry. In fact,
America’s network companies
invest more

capital

in a year

than the Federal government
invests in transportation.

Last year, investment in information
and communic
ations
technology accounted for
an astonishing
43 percent

of all non
-
structural capital investment in the U.S.
These investments are a major engine of our economy.
One
study
estimates that

direct investment in networks create half a
million new jobs over

the next five years

and stimulate

innovation in applications, software and equipment.
This
multiplier effect has ripples across the whole global economy.
Businesses report that every dollar invested in
Internet
technology creates
four dollars of value i
n return.
The World

7

Bank says that for every 10 percent increase in high
-
speed
Internet access, economic growth goes up by 1.3 percent. Th
e
ability to move, manage and analyze data is now a basic
economic input for all global businesses, on par with capi
tal and
labor.


So we believe

broadband, wireless and global IP technologies
are

at the heart of
American competitiveness

and global
economic progress
.
Moreover, we believe c
ommunications

will

be
key to solving

the big challenges we face as a society.



***


Technology allows us to address issues and solve problems in
ways that simply weren’t available to us before.
Already,
researchers are developing micro
-
cameras that can be
swallowed like pills to diagnose illness. E
-
wallets and mobile
commerce wil
l remove yet another layer of friction from
commercial transactions
, as is happening in Japan today
. Using
smart grids and mobile technologies to manage electric power
could create 280,000 new jobs and cut carbon emissions by
more than 20 percent in the n
ext ten years.
The list goes on.


And if we think of the impact of widely available broadband in
the developing world, the possibilities for progress are mind
-
blowing.
The GSMA recently published a survey of
women

in
the developing world, who as you know

are the pri
ncipal drivers

8

of local economie
s. Forty

percent of

them reported

that the
very
fact of having a cell phone increases their income.

Having a cell
phone means they have

access to capital through mobile
banking. They use text messages to check

crop prices. They

can

disseminate health information in rural villages. They’re
learning to read through literacy programs tailored for mobile
devices.

When women’s incomes go up, their communities get
richer because they spend 90 percent of their earn
ings on their
families.


A philanthropist who works with women in the developing world
puts it more simply: “Cell phones change lives.”


This is a profoundly optimistic vision of the benefits
communications technology can deliver for the world. To
achi
eve that vision, there are some challenges we have to face
and overcome.


First, we need to continue to
invest

in a bigger and better
Internet. Already, the amount of digital information created
exceeds the available storage space. Global IP traffic will

grow
at a 40 percent compound annual growth rate from 2008 to 2013,
driven by demand for mobile data and high
-
definition video.
Internet traffic is growing by more than 25 percent a year in
Asia
-
Pacific, the fastest in the world.



9

As a wise man once said
, “
I think
we’re gonna need a bigger
boat.”



T
he major policy goal for government should be creating an
environment conducive to the massive capital investments
required to expand and maintain the
Internet of the future.

We
should be looking at all the
policy levers within our grasp


from
tax policy to regulation to trade agreements


through the lens
of what it does for
, or to,

capital formation.


Second, the Internet needs to be
secure
. Just as we have to
keep our shipping lanes free from pirates, we

need to keep our
digital thoroughfares
open and
free from cyber
-
threats
.


The
Verizon security teams tell me that they monitor more than
5
billion



that’s “billion” with a “b”


security events
per day

on
the global Internet. Because of the design of ou
r networks, we
are able to intercept the vast majority of those breaches before
they can do harm to us or our customers.

We need to be able to
keep innovating, keep building intelligence into our networks,
and build in the reliability and security on whic
h the Internet
economy relies.

Policies that limit innovation on the part of
network providers, such as net neutrality, run counter to this
goal.


Third, we need to increase our capacity for
innovation
, across
the whole economy.
Government can set the to
ne by not
imposing rigid rules on rapidly changing industries like the

10

Internet. But mainly, this is a question about
people



and in
this area, America faces a critical talent gap in the areas that
generate innovation and create competitive advantage: s
cience,
technology, engineering and math. Worse than that, we have
a
basic skills gap, with a shocking
40 percent of our young people
failing to graduate from high school.


In the last three years, Verizon has invested more than
$60million through our F
oundation to increase teacher
effectiveness and student achievement in reading, math and
science. We created a website called Thinkfinity.org as a free
educational resource to help teachers innovate in the classroom
and use the Internet to engage students

and parents in a 21
st

century way. We’re vastly updating our online curriculum to
include thousands of STEM
-
related resources. As a nation, w
e
need to focus our resources on improving student achievement
in math and science, increase our national invest
ment in R&D
and redouble our efforts to put the tools of digital literacy in the
hands of all our young people.


Finally,
we need to expand the
culture of openness and freedom

that has nurtured the growth of the Internet since its inception.
The
New York
Times

reported recently that some 40 countries
restrict their citizens’ use of the Internet in some fashion.
In a
major speech on Internet freedom in January, Secretary of
St
ate
Clinton talked about

how
the U.S. is working through the United
Nations and o
ther international bodies to combat
governments

11

who
use the Internet as a tool to implement their repressive
ideologies.


The
most

powerful force against censorship and repression is
the
persistence

of

individuals in getting access to information
and
the

bravery

and
ingenuity

they display
in using the Internet
to outsmart and ultimately to open previously closed societies.

This is in part a testament to the power of technology. But even
more than that, it’s a testament to the power of
values
.
Secretary
Clinton said
as much when she spoke at the Council
on Foreign Relations last year, saying her goal was to advance
“a

new era of engagement based on common interest, shared
values, and mutual respect … and promote universal values
through the power of our e
xample and the empowerment of
people
.



It’s because of the power of our values that I’m optimistic about
America’s capacity to
lead the next era of Internet
-
driven growth,
and I look forward to continuing to build the platform
s and
deliver the innovations

that will create
a competitive, growing


America.


##