Verizon chairman: Telecom has ‘bright future’

ATLANTA--

Verizon Vice President and Chairman Lawrence Babbio told Supercomm attendees yesterday the telecommunications industry has a bright future ahead of it.

“The industry still has great, great potential,” Babbio said. “There is still a focus on entrepreneurial activity and innovation, which is in sharp contrast to the gloom and doom you read about.”

Speaking at the luncheon keynote sponsored by the International Engineering Consortium, Babbio also repeated the oft-heard refrain that growth will be delayed until telephone carriers get regulatory relief that will put them “on an even playing field” with other service providers, notably cable. He said regulatory challenges are “holding progress back.”

“They need to create an environment that incents investment,” Babbio said, adding that America’s technology dominance “is not a birthright.”

Nevertheless, Babbio also said telecom’s future is bright primarily because the American public and others are continuing to adopt technology “at an astonishing rate.” He said that while Verizon has lost access lines, it has seen an increase in demand for services. As evidence, Babbio said the average monthly bill for all communications services has risen from just under $100 to about $120.

“The demand for telecom is not going down overall. It may be down in traditional offerings, but demand is going up in other areas,” he said.

However, in a press briefing after the keynote, Babbio acknowledged that carriers must find a way to increase their value proposition and said speeding broadband deployment was integral to the process. “The pipes need to be large enough and fast enough to give everyone the experience they desire.”

He also said carriers need to restore profitability. “You can’t price your services below the point where you can survive financially,” he said. “Right now the industry is out of balance. We’re driving huge benefits for customers and not enough value for shareholders.”

Babbio pointed to long distance as an example. “Consumers love it, but the carriers have a hard time making money.”

He said the price being charged for DSL is lower than it should be, and could be 40% to 50% higher if prices were based solely on the cost of providing the service. He stressed, however, that Verizon has no plans to adjust its DSL prices in that fashion.

He said the carrier would continue to offer introductory rates of about $30 per month for DSL service and said there is growing evidence that sales for the full-price offering “go up dramatically” once users experience the speed of DSL.

Babbio said Verizon is looking at fixed wireless and wireless broadband to bring high-speed data services to areas it can’t reach with its wireline offering. “We’re trying to get ADSL to as many people as possible, but the copper loop is only so long,” he said. Babbio estimated that currently 32 million of the carrier’s 61 million lines (just over 50%) are DSL capable, and he hopes to see that percentage rise to about 65% in the next year.

He said Verizon is undecided as to whether to bring back Genuity, which it is eligible to do once it receives approval throughout its 13-state region to provide in-region long-distance service under Section 271 of the Telecom Act. Currently, the carrier has approval in six states--New York, Connecticut, Pennsylvania, Massachusetts, Vermont and Rhode Island--and expects a favorable ruling from the FCC on its New Jersey application “any day.” The carrier also has an application pending for Maine.

“Genuity has lost a fair amount of money,” Babbio said.

He also said Verizon has no interest in acquiring an interexchange carrier primarily because of the debt and goodwill that would come with such an acquisition.

“Frankly we don’t need them,” Babbio said. “If it were cheaper to buy or lease an asset than build, we would, but we’re not interested in taking on the regulatory and integration headaches.”