Verizon Policy Chief Says 'Now is the Time' to Set The Right Policy for Industry Recovery

ASPEN, Colo. - Saying we have a new chance to get the economics right to spark growth in the industry, Verizon's chief policy officer called on regulators and policymakers to adopt rules that spur investment in the telecom sector.

"We have had plenty of time for study and debate - it is time for action," said Tom Tauke, senior vice president for Public Policy and External Affairs at Verizon. Tauke spoke to Progress and Freedom Foundation conferees this week at the group's annual summit in Aspen.

Tauke said policies promoted by the Federal Communications Commission in the late 1980s were designed to stimulate growth of the Internet but only distorted the pricing and economics - particularly of local access to the Internet. These regulatory-induced distortions encouraged bad business plans and poor investment decisions.

"We're enduring a wave of bankruptcies because of the economic distortions that have plagued the industry for years," said Tauke. "That's unfortunate and that's hopefully behind us. We've got to get back to business in the telecom sector - running solid businesses based on solid judgments."

Tauke said the fundamental shift in the Internet's development to a packet-switched optical network will require billions of dollars to make it work properly. But capital is not going to flow to an industry that is over-regulated, especially today. As a result, he said, we need policies that promote growth.

The keys to achieving this, said Tauke, are to change the way we think about convergence and to have policies that change rapidly.

"We are in a new world of communication where different technologies deliver different kinds of services. Whether we are in marketing or network building or investing or regulating, we have to think in terms of that newly emerging market," he said. "If we don't get the timing right due to policy problems, we're going to watch this growth engine of the economy move to other parts of the world."

To encourage growth you've got to give people an opportunity to make money if they invest, said Tauke, and government today isn't doing this very well in the telecommunications sector of the economy.

Tauke said that policymakers should focus on three things. First, we need a viable policy for the wholesale business, and we need to get it right. It has to make sense from a technology perspective and it has to make sense from an economic perspective.

"If companies invest in network facilities, they have to have the ability to make money on it," Tauke said. "You can't give that business away and expect the new networks to evolve."

Second, we need consumer access to content, but at the same time, content providers need to receive a fair return for their work.

"The fact of life is that network providers know this whole thing won't work unless good content is made available to consumers. And just as the telecom industry needs a fair return on our investment, content providers need a fair return on their investment," he said.

Third, we need to permit the market to evolve. That means that new technology should not be burdened from day one with regulations meant for traditional telephony. As time goes by and new products - such as IP telephony - become a part of the marketplace and are replacing traditional telephony, there will be plenty of time to consider whether there are legitimate social issues that require regulatory oversight that the market is not addressing.

"There is plenty of work to do," said Tauke, "by policymakers and by the companies in the industry. Companies need to reduce debt; they need to develop new products and services; they need to work together instead of fighting one another. And we need to develop a value proposition for our customers."

Referring to an idea promoted in "Co-opetition," a book written by a Harvard Business School professor and a Yale professor, Tauke said that to create value people can't act in isolation.

"That's what we need in this industry - a recognition that we are all in this together," he said. "That together we need to create growth and bring value to all consumers. If the industry can figure out how to do that and the policy makers do their part, then we will have done something important for our country."

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 135.1 million access line equivalents and 30.3 million Verizon Wireless customers. Verizon is also the largest directory publisher in the world. With more than $67 billion in annual revenues and approximately 241,000 employees, Verizon's global presence extends to more than 40 countries in the Americas, Europe, Asia and the Pacific. For more information on Verizon, visit www.verizon.com.