Verizon CEO Calls on Labor Leaders and Government to Join Verizon in Restoring Growth to Telecom Sector

DETROIT - Calling the communications industry a bellwether for the 21st century, Verizon CEO Ivan Seidenberg today called on labor leaders and government to recognize the dramatic changes that have transformed the communications industry, and to work with the company to restore growth and prosperity to the industry not just for this generation, but for the next.

"At Verizon, we are determined to shape our own destiny," Seidenberg said, "by doing everything within our control to compete in the marketplace: control costs, invest in new technology, provide great service, and focus on innovation. We're committed to creating a company that is 'built to last' in a fast-changing industry."

Speaking before the Detroit Economic Club, Seidenberg outlined the challenges facing the industry from cable and cellular companies, software developers and other communications companies that resell Verizon services on a wholesale basis - changes that are transforming the fundamental industry. (To see the full text of the speech click here.)

With no price controls and little or no embedded technology investment, competing companies "operate according to different rules than apply to the local telephone business," he said.

The result, said Seidenberg, is a challenge not only to Verizon, but also to the unions.

"The union leadership is standing at a crossroads," Seidenberg said. "They can hold onto the old industry - and accelerate the flow of jobs and investment away from traditional telecom companies to the newer competitors. Or they can join the fight for our mutual survival - and help us find a new model that will help us preserve jobs and compete in the marketplace."

He likened the current state of the communications industry to the automotive industry in the 1980s, which was challenged by a "new breed" of competition from Japan and Germany. Instead of sticking with the status quo and watching a profitable business slip away, the auto industry "fought back and began the long, hard process of reinventing around new competitive realities," he said.

He noted that over the past 20 years, U.S. automakers - working in partnership with their unions - have committed to quality, used technology to become more efficient, attacked their cost structures, and "ratcheted up the gee whiz factor in their products."

"The lesson is that because labor and management made a mutual commitment 20 years ago to quality, competitiveness, and the long-term survival of their companies, we still have a domestic auto business in this country today," said Seidenberg. "I believe the stakes are just as high for the communications industry in 2003 as they were for Detroit in 1983."

Traditional businesses could "dig in their heels to protect the status quo," he said. But to counter this shift, companies have to attack their cost structure, government should provide incentives for companies to invest and penetrate new markets, and unions must change their mind-set so as to not risk "tomorrow's job security and prosperity."

With an eye on the upcoming bargaining for a new contract with its unions, Seidenberg said, "We're not looking to reduce wages - our people will be among the best-paid union workers in the country after the ink is dry on a new contract, just as they are now. But we are looking to move from an old paradigm to a new paradigm on these issues, in a way that protects current workers, but also preserves jobs for the future.

"We do believe there's a solution that will work for everybody involved, and we look forward to working with the CWA [Communications Workers of America] and IBEW [International Brotherhood of Electrical Workers] to find it," he said.

Government, too, has a role in securing the future of the communications industry, he said. The FCC's recently concluded review of telecom rules represents "a mixed bag in terms of communications policy." While the new rules remove some barriers to investment in new technology, he said, they maintain an elaborate and uneconomic system of price controls and unbundling rules for the existing network. This review reveals a confusion that has profound consequences for the economy. He continued:

"This year, Verizon will spend $4 billion less capital than we did in 2000. When you multiply the effects of this contraction across the economy - on suppliers, content developers, computer manufacturers - the result is to turn telecom from an economic engine into an anchor, weighing down the entire technology sector.

"What we will continue to ask for is the removal of uneconomic regulations that impede investment in technology that would materially benefit the U.S. economy."

In closing, Seidenberg said: "Industry, labor and government can continue to see this business in the old ways. Or we can embrace an expansive vision of the future and work together for solutions that grow the pie for everyone. I know which path great companies -- and great industries - pick. We look forward to working with all our stakeholders to initiate a new dialogue, and with it, a new era, in this great and vital industry."

Verizon Communications

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 135.8 million access line equivalents and 32.5 million Verizon Wireless customers. Verizon is also the largest directory publisher in the world. With more than $67 billion in annual revenues and 229,500 employees, Verizon's global presence extends to more than 30 countries in the Americas, Europe, Asia and the Pacific. For more information on Verizon, visit www.verizon.com.

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