Verizon Communications Inc. has grand designs for the biggest telecommunications market in the country.
The New York company, which has for years been a distant second to SBC Communications Inc. in California's local phone market, last week announced plans to spend $3 billion over the next two years to upgrade its land-line and wireless networks. The aim: to make them work together at ever higher speeds, giving customers here and around the country new ways to consolidate and manage their phones, hand-held devices, laptops and other electronic gear.
Verizon plans to run fiber optic cable this year to more than a million homes nationwide. The company says it will also take nationwide a data-only wireless broadband service with speeds akin to DSL and that it will transform its switching gear to enable lower-cost Internet Protocol telephony, which transmits voice calls like e-mail.
Ultimately, Verizon hopes to sell local calling, long-distance and high-speed Internet services around the country without expanding its traditional land-line network much beyond the 29-state territory where it has local-service customers now.
Verizon is the nation's largest local phone company, and its Verizon Wireless unit is the biggest mobile phone carrier. The company's chairman and chief executive, Ivan Seidenberg, laid out the thinking behind the expansion plans in an interview with The Times. He also explained his objections to the rates that many states, including California, have set to foster competition for traditional residential service. The rates are intended to give competitors to the former Baby Bell monopolies access to home lines without requiring them to build their own networks.
Seidenberg has argued that the rates Verizon was allowed to charge AT&T Corp. and other rivals for renting lines and gear was below Verizon's cost.
In California, the company is asking state regulators to nearly triple the rental rates in urban areas -- and to raise them even more in rural regions. Regulators are expected to rule later this year.
Question: With your traditional land-line network in some of the most affluent markets in Southern California, would you expect that SBC some day will be competing in your territories?
Answer: We're both all over the state in wireless. And we're working our way to be all over the state in the business market. If they're one of our competitors, fine, but we have plenty of competitors in wireless and in enterprise. I think in the mobile area, our prime competitors are really the cable companies and the wireless companies.
Now, I think what you're getting to is what I hear a lot. Which is, until someone overbuilds the phone company, there's no competition. And the answer is that's not going to happen because it doesn't make any sense. Cable companies don't overbuild each other, but new technology comes in and you have satellite, and eventually you'll have wireless and eventually you'll have fiber. Competing by building yesterday's platform is not a smart idea.
Q: So you can't fault rivals for not wanting to build out old networks.
A: That's a different question. Let's look at it from your business. When people start competing with you through other forms of media, you rally around your core strength and you improve your content.
Now let's look at some of the phone company competitors. They have no strategic framework, nor do they have a financial basis to do it. How could you be one of the most revered companies in the last 100 years and your whole strategy is to lease facilities from somebody else? That's just nonsense. Now, you might make money on it for a little bit, but in the long term, it's not a strategy where you control your destiny.
Q: It isn't expected to be a long-term strategy, though, is it?
A: Where are they headed then? Look at cable companies. I think that cable companies and wireless companies are absolutely positioning themselves to compete for the consumer's dollar. And that's really where the game's at. But the people who are leasing our networks, they are just sort of wandering around waiting for an accident to happen. I am not predicting anything. Leasing facilities from us to compete with us doesn't help you against cable companies, doesn't help you against wireless companies. It's not a long-term thing.
Q: What's the common thread in your plans to expand and upgrade your wireless and wire-line networks?
A: It's digital convergence. What we believe is that, whether it's wireless or wire-line, if we can bring high-speed services to the marketplace, people will invent lots of applications to use that. And we create economic wealth for us and we create, I think, lots of opportunities for people to participate in this whole digital convergence activity.
Q: Nearly everyone in the industry agrees there are too many players and that some will have to merge or go out of business. How long will that take and when will it start?