Prepared Remarks of Verizon EVP Tom Tauke …

            Prepared Remarks of Verizon EVP Tom Tauke
                 Media Institute Luncheon Remarks
                      Tuesday, July 11, 2006

  Thank you, Patrick, for that kind introduction. It's a pleasure
to be here, and to be with good friends like Dick Wiley and
Preston Padden. I have to say, though, that they're still
adjusting to the notion of Verizon being part of what we think of
as media.


  But then, the whole notion of media is changing. Cable
companies are in telecom. Broadcasters are doing data. Print is
doing video. Broadband is connecting everything the media
produces everywhere consumers are. And consumers aren't
just digesting the content. They are creating it and distributing
it across the many platforms now available to them.


  What's occurring is nothing less than the democratization of
media, with broadband serving as the great equalizer. Virtually
every broadband user ­ wireline or wireless ­ can be a writer,
film maker, software designer or entrepreneur, with the ability to
reach hundreds of millions of people worldwide.




                                1
  People no longer have to wait for their future to be shaped by
others. The can shape their future themselves. This ability to
drive change is affecting not only individuals, but markets.


  Six months ago Disney was offering primetime programming
for a fee on iTunes. Now ABC and other networks stream those
same shows at no cost on their web sites. NBC is even showing
its new fall shows online before folks see them on TV.


  We read last week that AOL is reconsidering its subscription
model for broadband users. And just about every web site ­
from blogs to newspapers to e-commerce ­ now incorporates
some form of video streaming, something that would not be
possible in a dial-up world.


  All of these changes are taking place in a highly competitive
marketplace, driven by highly disruptive technologies.
Consumers can access and participate in this new broadband
world via networks deployed by telecom, cable, Wi-Fi, satellite,
power companies, even municipalities.


  What makes Verizon an integral part of the 21st century media
industry? We are the single largest investor in broadband
technology ­ wireline and wireless ­ in America. We provide




                                2
DSL and wireless broadband, and we are building a world-class
fiber-optic network that will pass 6 million homes this year, with
a reach of as many as 20 million households by 2010.


  Verizon's FiOS network delivers the fastest Internet access in
the marketplace. Customers go online at speeds up to 30
megabits per second downstream and up to 5 megabits
upstream on a network capable of 100 megabits and beyond.


  That's an amazing amount of capacity ­ limitless really. It's
the kind of capacity that puts the notion of an "Internet slow
lane" in the category of things like steam-powered automobiles,
black and white TVs, and 16-bit computers.


  FiOS is transforming the speed and flexibility of the Internet
and that is a huge draw for customers. Yet the big driver of
demand for fiber to the home is video.


  Consumers want to see the same kind of competition in video
that they've had in phone and Internet services. That's what
FiOS does. FiOS TV has more than 400 channels, more than 20
hi-def channels, and upwards of 2000 on-demand titles. And
consumers save between 20 to 40 percent on their monthly
cable bills where Verizon is competing.




                                 3
  Because of FiOS's enormous capacity, robust Internet access
and a superior video product are just the beginning of the
services consumers will receive. We see opportunities to offer
services that change the way we work, and the way businesses
of all sizes access global markets. We see new opportunities for
students and the disabled to grasp new ideas and enter new
worlds. We see virtual medical applications that make house
calls part of the future instead of the past.


  With these new wireline and wireless networks we'll see more
innovations enabled by telecommunications in the next ten
years than we' seen in the last 100.
             ve


  It's important to note that these seismic shifts in business
models and consumer expectations aren't taking place in a
virtual vacuum. They are the result of policy decisions that
unleashed broadband and wireless markets from the tether of
government regulation and allowed them to work.


  These policies are being discussed anew, and we should not
make the mistake of believing the future we envision is assured.




                                  4
The outcome of this debate will determine whether the
broadband world isn't just delayed, but denied altogether.


  As a result, we find ourselves at a critical pivot point. We
have a window of opportunity to step into a new world of
broadband and consumer choice, or we can step back into the
old world of limited innovation and limited opportunity for
consumers. The stakes are high. The time to act is now.


  Two weeks ago the Senate Commerce Committee cleared
video-choice legislation. The entire House passed similar
legislation last month. House Energy and Commerce Committee
Chairman Joe Barton and Senate Commerce Committee
Chairman Ted Stevens are to be congratulated for their
leadership and clear vision in setting goals that re-shape 20th
century telecom policies for a 21st century world of broadband.


  Congress has made a great deal of progress on a legislative
package for broadband that is good for consumers, the
marketplace, and our nation. Congress has the opportunity to:


· Accelerate broadband deployment across America;
· Provide consumers real choice for video services;




                                5
· Save consumers money on their monthly cable TV and
 telecommunications bills;
· Stabilize the Universal Service Fund; and,
· Strengthen first responders' communications capabilities.


  Congress has done well, for the most part, in keeping its
focus on consumer needs in the still-developing broadband
marketplace.


  The potential for problems rests with some policymakers'
penchant for falling back on old-world regulatory solutions for
problems that simply do not exist in the broadband world. This
is most evident in legislative approaches to "net neutrality" and
VOIP interconnection.


   "Net neutrality" is perhaps the oddest Washington debate I
have seen. It amounts to holding a Congressional vote on
hypothetical business plans.


  On one side we have policymakers giving consumers the final
say in the kinds of Internet services they use, while innovators
are free to do what they do best: create and offer new products
and services to their customers.




                                6
  On the other side we have policy makers suggesting that new
and different business models driven by innovation actually may
harm consumers and the Internet. They want government to
take pre-emptive action because bad things could happen.


  This debate is taking place in a highly competitive market
place, where consumers have full access to the Internet, and are
demanding more speed, more choices and more services.
Companies are making massive new investments, providing
more network capacity and innovative services, and they're
doing it through commercial transactions and agreements with
no government regulation.


  To their credit, the House and Senate have focused on
consumer access to Internet content, such as the Senate's
detailed and enforceable "Consumer Internet Bill of Rights."
And policymakers have rejected attempts to establish a
preferred business model.


  Yet some of the more extreme "net neutrality" supporters
seem to fear the market and a future where consumers get more
of everything, and are in control. They want the commercial
agreements the Internet has lived and grown by regulated in the
same way old-world phone service was regulated.




                               7
  Frankly, this fear of the market simply doesn't compute. The
government's hands-off approach to the Internet has been
enormously successful. Voice, video, and data services are
competing on all wireline and wireless broadband platforms.
Consumer choice is growing exponentially as new broadband-
enabled products and services emerge. Internet speeds are
increasing rapidly. Prices for high-speed access have dropped
dramatically. And the broadband share of homes connected to
the Internet has grown from about 25 percent in 2002 to more
than 60 percent in 2006. Consumers are getting more access,
more speed, more services, and more choices. Yet somehow
there's a problem that requires the government to step in? I
don't think so.


  What could be the motivations to get government in the
middle of a market that is working so well? I can see why some
of the big companies that have done exceedingly well on the
Internet of today want to lock in the current business model.
They'd like to perpetuate what is working for them.


  But for consumers and the country, government regulation of
this developing market is a lose-lose proposition.




                                8
  First, we've seen what happens to innovation when the
government imposes old world, common-carrier regulations and
tries to anticipate or impose business models. Remember? It
was called video dialtone. It didn't work then, and efforts to
apply so-called "non-discrimination" standards to access IP
networks today will have the same result ­ denying consumers
real choices, denying the marketplace competition and
innovation.


  Second, old world regulation would severely hamper the
deployment of the new networks that are the essential
foundation for the broadband world.


  Today there are about 800 million Internet users globally, a
number that will double in ten years. Average online surfers
today use about 2 gigabits of data per month; in ten years that
figure will be 220 gigabits. Downloading one high-def movie
devours more bandwidth than downloading 35,000 web pages or
2,300 songs.


  Today's access and backbone networks don't have the
capacity to handle that kind of traffic. Important features, such
as security, aren't built in to today's Internet. Improving the
Internet will require the investment of substantial amounts of




                                 9
risk capital. If government policies reduce the opportunity to
earn a return on that investment, network operators simply
won't be able to deploy them.


  Finally, without the ability to sign commercial agreements,
network operators could not meet innovators' needs.


  For example, online video gaming is a growing business, and
consumers of those sites expect a seamless experience for their
role-playing and action games. Let's say a gaming company has
a game that requires 25 megabits of capacity. Consumers may
be paying for Internet access speeds anywhere from, say, five
megabits to 15 megabits. That company could enter into a
commercial agreement with Verizon to provide online gamers
the megabit burst they require for a quality experience.


  This, by the way, is something many online companies
already do today in one form or another through commercial
agreements. The business rationale is clear: Is it easier to pay a
network operator, or get each and every consumer to pay each
time they play a game or watch a movie?


  If policymakers decide that network access cannot be created
differently we drag broadband back to the days where there was




                                10
no incentive to innovate and very little competition. In a world of
30 or 50 or 100 megabit networks ­ more than enough capacity
to meet the needs of everyone ­ there are no network problems.
In the midst of this healthy, emerging marketplace imposing
regulations isn't policy approach government should be taking.


  We're also seeing this old-world thinking with Congress's
approach to Voice Over Internet Protocol services. VOIP is a
fast-growing market, and Verizon is already a leader in the
marketplace. So, like our competitors, we have an interest in
ensuring that networks can connect VOIP customers with
anyone they call, regardless of who serves them.


  In the old world of circuit-switched telephony, interconnection
was and continues to be heavily regulated. It's a burdensome
and complex system governed by regulations covering
everything from pricing to technical standards. It's also a
market that performs badly, with lots of litigation and arbitrage,
and poor incentives for investment. In short, it's a mess.


  On the other hand, in the Internet and broadband world,
interconnection has never been regulated. Companies
exchange Internet, or IP, traffic based on commercial
agreements without any government-imposed obligation to




                                11
connect with one another, or any regulation of the terms. This
market has worked exceedingly well.


  With VOIP we have a service that straddles both worlds. VOIP
generates voice calls, many of which are bound for customers
on the circuit-switched networks. We must ensure that VOIP
providers can interconnect with the circuit switched world,
without upsetting the IP market that has worked so well. Yet the
House and Senate bills address the question of VOIP
interconnection by conjuring up the worst of the old world
interconnection rules and applying them to VOIP, and possibly
to other IP traffic. This simply won't do.


  The IP world is developing new opportunities that we can't
begin to predict. For example, Verizon recently announced an
arrangement with Microsoft that will allow their 240 million users
of Windows Live Instant Messaging to send calls to phones
through our VOIP service. Old telco regulation can't begin to
keep up with these innovations, and will almost certainly
strangle progress if we allow it to migrate into the IP space.


  To guarantee interconnection for VOIP without endangering
our IP future, legislation could say that telecommunications
carriers can't refuse VOIP traffic. This could be done without




                                 12
applying the existing tangle of telco regulation. Where disputes
arise, VOIP providers should have some recourse ­ perhaps
through a complaint to the FCC. At the same time, any
legislation should also make clear that no regulation should
apply to interconnection on an IP-to-IP basis, which should
continue to be handled through commercial agreement.


  These issues aside, both the House and Senate have brought
forward two bills with a framework for a healthy, competitive
broadband future. Consumers stand to gain more of everything
they experience from broadband: more video choices, more
innovative services, and more savings. Broadband deployment
will continue with the certainty of an open marketplace and the
knowledge that there will be the opportunity for a return on the
investment in networks.


  We're hopeful that we can work with the Senate to keep that
focus on the needs of consumers, and move video-choice and
broadband legislation to a vote by the full Senate immediately.


     Let's not lose sight of how radically our world has
changed. I'm standing here with cable operators, content
developers and deliverers, and policy makers. In the new world
of broadband we are no longer separated by sector or




                                13
technology. We are all part of the new, converged world of
media, communications, and technology.


     Some people look at broadband and they see an uncertain
future. We look at broadband and we see nothing but unlimited
possibilities. The power of broadband to innovate, integrate and
equalize in the marketplace will not come from imposing
limitations, but in lifting them. Verizon is building an amazing
network based on a transformative technology. But it's only
transformative if people can use it to its full capacity. Our
network's future depends in large part on our ability to give all of
our customers the ability to make the most of their own futures.


     That is why Verizon is committed to an open, vibrant
Internet, to broadband, and to working with all of you to ensure
that this innovative technology reaches as many people as
possible so that this promising future we all envision arrives
faster.


     Thank you.




                                 14