NEW YORK -- Commenting on last week's Federal Communications Commission ruling on unbundled network elements (UNEs) and other telecommunications issues, Verizon Chief Executive Officer Ivan Seidenberg today told financial analysts that the FCC's policies are flawed both legally and as a sustainable business model for creating competition.
In keynote remarks at Merrill Lynch's Global Communications Conference here, Seidenberg said, "The regime of UNE interconnection has always been flawed. Our view is that it would eventually die anyway, and not because of regulatory convention. It would fail because, in the long term, technology would displace the bootstrapping of other people connecting to pieces of our network."
In response to questions, Seidenberg said that building a competitive business based on UNEs is a strategy that "eventually runs out of steam" because these businesses have no networks of their own to offer customers differentiation, innovation or value-added services.
"What do you do with all the UNE customers? They cause a lot of expense, and where do you migrate them to? There's no place for them to go. There's no UNE heaven," he said.
In his formal remarks, Seidenberg said the FCC had the opportunity to assert leadership and create focus and stability in the telecommunications industry, but instead produced a decision that, on the day of the ruling, took $15 billion in market value out of all industry segments as investors voiced their displeasure. He said the decision was "confused and circular" and that it wrongly threw decision-making on national policy to a "committee" of 50 states.
Seidenberg said, "We will take this to court."
In the meantime, Seidenberg said, Verizon will continue to focus on the things the company can control. In 2003, Verizon will continue to generate cash, continue to drive strong margins through expense management and continue to grow its business.
Seidenberg said the financial impact won't be known until the company can review the FCC's final written order -- which will not be available for several weeks. He said he anticipates that the full financial impact will take up to a year to materialize, after court challenges.
Seidenberg said that the FCC's ruling theoretically left some upside potential for Verizon in broadband markets, but added that the company needs to see the written order before assessing the practical impacts in this area. For example, the FCC's press release indicates that phone companies "may not retire any copper loops... without first receiving approval from the relevant state commission." Seidenberg said that if the intent here is to create a veto over whether obsolete facilities can be replaced, then the FCC has in effect failed to deregulate broadband.
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 33 countries in the Americas, Europe, Asia and the Pacific. For more information on Verizon, visit www.verizon.com.