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Verizon’s Captain Charts Slow, Steady Course

Seidenberg Sees Carrier Becoming ‘Rich Communications Company’

      

Verizon Communications will transcend voice, entertainment and wireless and become a “rich communications company” by leveraging its disparate components, Chairman-CEO Ivan Seidenberg said yesterday during a wide-ranging keynote conversation at the McGraw-Hill Media Summit New York.


Verizon, the carrier’s chief said, is positioning itself as an alternative to cable in the entertainment space with its Fios initiative; a corporate player via its MCI acquisition and the newly formed Verizon Business unit; and a leader through its industry-leading Verizon Wireless.

Building a fiber optic network and acquiring content, Seidenberg said, are only two challenges the carrier is facing in its battle to become an alternative to cable. Regulation – proposed and real and fueled by the incumbent cable operators – will “be solved and we’ll move on … in two years or less than that. It costs money but it’s the cost to get into the market.”

The bigger problem, he said, is the “bizarre” behavior of municipalities who demand amenities from Verizon in exchange for being allowed to do business in their towns. The carrier is flexing its government muscles seeking regulatory help to thwart those sorts of local efforts, often initiated by the incumbent competition.

Verizon, he said, is not awed by incumbent providers.

“We’re bigger than them anyway, so I don’t care,” he said.

The “devil-may-care” façade dropped when the Verizon chief addressed the ongoing “net neutrality” issue where content providers, with increasing help from the government, are seeking to open up Verizon’s broadband networks.

“I hate the term,” Seidenberg said, noting Verizon doesn’t block content providers using “best-effort” broadband networks. Better levels of QoS, though, are expensive. “We don’t block anything; never have, never will. It’s not part of what we do.”

On the other hand, those riding on Verizon’s broadband networks should be responsible for picking up some of the costs of building an extensive backbone to carry heavier traffic, he said.

“We won’t be quiet on the point. Everybody that participates in the broadband world needs to participate” in paying for the infrastructure, he said. “Everybody’s got to pay. We have a right to extract value for what we build.”

With regulation looming, Seidenberg suggested “people come to the table and talk this through and we stop this silliness that’s going on with legislation.”

The other thing Seidenberg said he’d like to stop – although he said he was somewhat powerless – is the negative view investors take of the company’s stock valuation.

“I feel bad for our investors and employees because what we do is more valuable than what’s been reflected in our stock,” he said. “I can’t influence how the market treats valuations.”

Verizon’s goal, he said, is not flashy. It’s simply to be “big, dumb and slow. We don’t view ourselves as sneaking up on you.”

Putting $15 billion capital expenses primarily into the Fios fiber optic-led infrastructure build-out this year, isn’t sneaking up on anyone and is a little bit more than the company would like to spend on an ongoing basis, Seidenberg admitted.

“We’d like to drive our steady spending at a slightly lower rate if we can do that,” he said, pointing to the “mid-teens” as a more palatable rate. “I don’t think the future of our company is built on better, faster cheaper.”

Seidenberg consistently portrayed Verizon as a conservative behemoth moving glacially forward that will have to live with investor and customer expectations in a new communications environment. To do that, it will “create a new model” and become a “total communications company” working with both internal and external resources.

“We see unlimited opportunities to grow vertically,” he said. “Horizontally, there are lot of people in the world we don’t serve.”

A possible vertical growth area could be the buyout of Vodafone’s minority stake in Verizon Wireless.

“We always like to buy more of ourselves,” Seidenberg admitted, before emphasizing that Vodafone has the final say. “It’s not in our court; it’s in their court. They have the option to put to us to leave.”

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