NEW YORK-Telecommunications is like chess, because the grand masters emerge as victors by controlling the center of the board, Ivan Seidenberg, president and co-chief executive officer of Verizon Communications Inc., said.
“In our case, the move to center means four platforms: robust local access, local broadband, wireless and Internet backbone. Our focus is to be one of the tier-one companies in this geographic area (North and Latin America),” he said recently at PricewaterhouseCoopers’ “2000 Global Entertainment, Media & Communications Summit.”
“That gives you leverage to expand into other parts of the world. You can’t become international and think you’re global. We’re in 30 countries, but we don’t have scale. I suspect it will take another five to 10 years for us to be global.”
At the same time, Seidenberg said he believes the largest wireless and wireline carrier in the United States must continue to grow or else it will wither.
“When you’re big in a capital intensive industry, the only solution is to get bigger, and not all companies can do this. If you start from scratch, you can focus on niche markets and then grow,” Seidenberg said.
“This doesn’t only mean mergers and acquisitions. It also means partnerships, like our joint venture with Vodafone (Group plc) in which we have a controlling interest in the United States. In the rest of the world, the only places we overlap are in Greece and New Zealand, so we can work together on new product development, marketing and project management.”
And yet, the larger Verizon has grown, the more it has narrowed its focus to two or three things it wants to do better and well. Network construction and management is its historical and contemporary primary business.
“That which used to go over the airwaves is going over a fixed medium, and that which went over the fixed medium is going over the airwaves. The wireless wave of the future is like the building of the Interstate highway system in the 1950s,” Seidenberg said.
“It’s an amazing story, and you can think of a company like us as one of the biggest construction companies in the United States, installing towers, inter-office cables, back-office systems.”
Asked about the health effects of radio communications towers, Seidenberg said: “We have been very careful about safety and are confident there is no issue regarding health effects. The industry even funded research, and it’s all clear.”
Improved customer service is the second key area of attention for Verizon.
“Our goal is to provide people closest to the customer with more decision-making power. For example, in our wireless company, you can go into any of our stores, and you will get instant decisions and fast service,” he said.
“Today, there is an explosion of features and functions, and many of our customer service reps are dealing with (and getting blamed for) legacy software systems, which we are modernizing to improve customer service.”
Mandatory overtime for customer service representatives was a key issue in the recent strike against Verizon. Going into labor negotiations with unions that have struck during bargaining for eight of the last 10 contracts, Verizon was prepared to limit overtime and improve training, he said. On wages and benefits, the union “did fine,” he added.
“This was one of the first opportunities for labor to have a visible platform during a presidential election year, and it had not been as successful in the ’90s as it wanted to be,” Seidenberg said.
“Labor and management will continue to have fault lines, but we have some of the best union jobs in the country. I am sorry we had to display our family issues in the newspapers.”
Another key issue in the contract negotiations was organizing opportunities for Verizon’s 30,000 wireless unit employees, all but 45 of whom are non-union. Verizon, Seidenberg said, successfully countered two union organizing demands, to which AT&T Wireless Inc. and SBC Communications Inc. have acceded.
First, union officials did not gain the right to conduct organizing activities inside company buildings. This kind of access would violate the right to privacy of Verizon employees, he said. Second, union organizing campaigns must be conducted over a period of six months, not 30 days.
As Verizon pursues its growth path as a network owner and operator, it must guard against the tendency to take customers for granted, Seidenberg said.
“We can fall into the trap that success depends on who owns the physical assets, but that is not necessarily the same as who owns the customer’s mind share,” he said.
“The market will force us to think wholesale, leasing the medium to others who package the services, and retail, as a gateway provider. … At some point in the future, we might dabble in vertical apps, but for the most part we are a network provider.”
It is important for Verizon to remain “agnostic on content, maintaining an open architecture that incents content application development and does not exclude proprietary content,” he added.
However, should the occasion arise where Verizon sees an opportunity “to create a value proposition, we will invest in certain kinds of content,” Seidenberg said.
The chief executive also brushed aside concerns that have been raised about the commoditization of telecommunications, particularly voice communications.
“Calling, whether wireless or landline, will always be popular, and voice over IP will make long distance cheaper. Calling is not a commodity, because any one of us gets upset whenever service is out,” he said.
Asked whether he believes in the possibility of continued worldwide economic growth, on which telecommunications depends, Seidenberg called himself a “romantic” about capitalism.
“If the right people in power can keep the peace, we have a great chance of a continued booming economy, because we are in the midst of incredible technological change that transcends national boundaries,” he said.
Asked to describe his version of nirvana, the Buddhist state of perfect blessedness, the Verizon chief executive said: “For a medium of distribution, that would be fiber into every room and equal bandwidth into every cell phone.”
