Changes in Federal Policy Needed To Spur Broadband Revolution, Verizon Executive Says

MADISON, Wis. -- Changes in national telecommunications policy to encourage more investment in new technologies

would have a dramatic impact on the nation's economy and telephone competition, a Verizon executive told a gathering of

utility executives and regulators meeting in Madison Wednesday.

John O. Dudley, president of Verizon's Great Lakes region, spoke about the need for federal policy changes during the

Wisconsin Public Utility Institute regulatory policy conference sponsored by the University of Wisconsin - Madison School

of Business.

Dudley said local telephone service competition is alive and well, both in Wisconsin and nationwide. Of particular note,

he said, is the widespread - and unmeasured - competition arising from consumers' increasing use of wireless services,

cable telephony, paging, e-mail and instant messaging.

"The reluctance of state and federal policy makers to eliminate Depression-era regulation has significantly impeded

the pace of local phone competition. That reluctance has had a chilling effect on investment in advanced technology by

firms like Verizon which are subject to those rules," he said.

"Progress and growth in any industry comes from competition among rival technologies. That takes

investment-investment that can enable innovation and drive product differentiation. And, investment only occurs when

there's a reasonable expectation of making a profit," he said.

Dudley noted, however, that Verizon and other local phone companies are burdened with subsidy-laden rates that price

wholesale and retail services below actual costs.

"This is not the way real competitive businesses operate," said Dudley. "If you want to know why most

Americans are still waiting for the broadband revolution, it's because regulators have chosen to overlay those

horse-and-buggy rules on the data and broadband markets."

He told Institute participants that public policy for traditional telephone service should match the increasing array of

choices in the marketplace. That requires reforming state systems of subsidies and allowing telephone companies to

charge prices to recover actual costs.

"Verizon will play a vital role in providing the advanced technologies that are the engines of growth in the 21st

century. I'm talking about fiber optics, broadband and intelligent electronics. As we saw throughout the last decade,

investment like this promotes adoption of new technologies and economic efficiencies across the country," he said.

Dudley also said an AT&T-backed initiative to split-up local phone companies into retail and wholesale entities is a

flawed concept that is "corporate welfare disguised as public policy." He said the initiative would bring

higher prices and profound confusion to the marketplace.

Dudley told conferees that the rise of telecommunications operations run by municipalities must be clearly evaluated to

ensure that taxpayers are not forced to subsidize local government's entry into telecommunications. "Running a

telephone company is not a core competency of state or local government," he said.

Verizon Communications (NYSE:VZ) is one of the world's leading providers of communications services. Verizon companies

are the largest providers of wireline and wireless communications in the United States, with 125 million access line

equivalents and approximately 28 million wireless customers. Verizon is also the largest directory publisher in the

world. A Fortune 10 company with about 260,000 employees and more than $65 billion in annual revenues, Verizon's global

presence extends to 40 countries in the Americas, Europe, Asia and the Pacific. For more information on Verizon, visit www.verizon.com.

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