Thank you for your note about the Post story quoting Mr. Thorne. I was
not an addressee, but am glad to respond on behalf of Verizon.
First, because you might find it an interesting, small world-type of story,
I know and work with both the reporter who wrote the story, Arshad
Mohammed, and John Thorne, who was quoted. Each man is extremely bright
and principled and does his job well.
But, in this case, John was quoted on an issue where someone else --
Verizon's Tom Tauke -- is really the spokesman. Tom is Verizon's executive
vice president for public affairs, policy and communication; John is a
senior attorney who works in our legal department and, literally, wrote the
book on the 1996 Telecommunications Act.
Verizon supports Internet Neutrality, does not block anyone's access, and
has no plans to assess 'access fees' on Google. It's not as if a company
could do that, anyway -- the marketplace is a "voluntary" place. In fact,
we are doing more than any other company to provide high-speed fiber
connections to homes and businesses. It is our business plan to keep
people connected at higher and higher speeds-- that's how we keep customers
and investors happy in the new world of communications. If our customers
don't have access to virtually everything on the Internet at high speeds
and a comparatively low price , they'll go somewhere else -- it's that
You've, no doubt, read how much Verizon is spending on its new, fiber-optic
network to deliver high-speed Internet and video -- billions. And we
already offer video in parts of six states, having begun video deployment
only last fall. In the areas our new fiber network is already deployed, we
offer speeds of 5, 15, and 30 Mbps -- and the capacity to go even higher
when the market catches up. The power of fiber-optics is amazing, and
Verizon is doing more than anyone to make greater choices available to
To be fair to John, his comments were made in the context of a discussion
on telecom regulation at an academic conference. He did not call upon
Google to do anything, or call upon government to regulate Google. He was
making the point that network companies are highly regulated and highly
capital-intensive, and contrasted them with other companies in the
communications sector that face relatively no regulations and relatively no
investment hurdles and have huge valuations in the stock market. He was
arguing that regulations from the old world of telecommunications should
not be expanded to the new world of the Internet. But, to make a long
story short, these remarks were applied by the Post, without complete
context, to a hot story of the moment -- Internet Neutrality -- something
John did not intend.
I'm attaching for you the transcript of a media briefing by Tom Tauke where
he talks about Internet Neutrality, among other policy topics. He
articulates Verizon's view and answers questions from the DC communications
policy media. I think you will find what he says illuminating and more
comforting than what you read in the paper. The transcript follows:
Transcript by: Federal News Service, Washington, D.C.
OPERATOR: Good morning, ladies and gentlemen, and welcome to the Verizon Media Relations Conference Call. At this time, all participants have been placed on a listen-only mode for the duration of today's call.
It is now my pleasure to introduce your host, Mr. David Fish. Sir, you may begin.
DAVID FISH: The real host is Tom Tauke, and most of you have been to these briefings before. Questions are welcomed and answered, and today the only difference is we have several new people. Thanks to the people who are new - there are about four of you who haven't been to one of these before. And we have 45 minutes; usually we have an hour, so we'll get right to business.
As you know, Tom Tauke is our executive vice president, and he's the man with all the answers. (Cross talk, laughter.)
TOM TAUKE: Good morning, everybody. It's great to see you. I'm in D.C. today so I thought I'd take a little time to chat with you and try to address any questions that you might have.
Actually I was stuck in an intercarrier compensation meeting down at the United States Telecom Association, and I had the choice of staying there or coming here. And I just thought that this was the better deal. (Laughter.)
Well, a couple of opening thoughts. First, as you know, we are very focused right now on the deployment of our FiOS network, the expansion of our EVDO network in the wireless world, and all other things broadband. And this effort to respond to the demands of customers for increasing bandwidth is something that we see as a challenge, but also a great opportunity and we see it in large part as the future of the business. And so as a result we are focused on that.
One key element obviously in this broadband effort is the deployment of the fiber network to homes. We passed, as you know, three million homes last - as of the end of last year. We expect to do 3 million more this year.
A key component of the business plan for fiber deployment is video services, and we are in the business now of offering video services. We started in Keller, Texas. We are in a number of other communities now, and it's - the early returns are terrific.
We do, however, face some challenges in getting the local franchises. I will say that, to date, we have been able to secure the local franchises we've needed from a business perspective. I assume that will - I expect that that will continue throughout 2006, but the hill, in a sense, keeps getting higher to climb as we move forward because the numbers are just overwhelming.
Bottom line is that we therefore have, in essence, a four-part strategy to break down the barriers to video entry. First, of course, we do it the old-fashioned way: going community to community. We, as of the first of the year, had about 50 local franchises that had been approved. We are in about 400 communities now where we are actively engaged in negotiations for local franchises, and that effort will continue to expand as the year moves on.
Second, we have been working hard at the state level to pass legislation for state-wide video franchise relief. As you know, we were successful last year in Texas. This year we are very encouraged by the progress in Virginia. Just over the last couple of days we were able to reach agreement with the key legislators on a statewide video entry package in Virginia, and much to my surprise, frankly, the Virginia Cable Television Association also has endorsed the package. And so I think this is real news where we have both the telecom sector and the cable sector supporting legislation for video entry in the state of Virginia.
So we are active in Virginia, we are continuing to pursue New Jersey. We believe that we have a lot of support in New Jersey for moving legislation there that would facilitate our entry into the video market across that state.
We will also be putting a lot of attention on California. California is obviously a state with a lot of local franchise areas. We have some unique challenges in California because in California if you enter a community, you must do the whole community - build out the whole community, even if you don't have a network for the whole community. And because of the history of our company, the history of telecom generally, of course, we don't build networks according to community lines. The old GTE served a lot of rural areas that have now become urban areas in California, and there are lots of areas where our network serves part of a community but not the whole.
So as we rehabilitate our network and turn it into fiber-to-the-home, we would like to be able to offer video services to our customers, but the California law as it currently stands would require us to build out to areas where we do not now have a network, which of course makes the financial hurdle very, very high.
So we see that as a barrier to entry. We think we can get that issue addressed in California. We will be focusing on that this year.
In addition, we will be active in Florida, possibly Maryland, possibly New York, possibly Massachusetts, as we look at the early part of this year and try to move things at the state level. We also have been active in Indiana, which I should have mentioned in the first group because legislation passed the state senate in Indiana, 40 to 6 - that was last week or this week? I guess it was this week. It seems longer ago than that, though it was this week. So the legislation passed in Indiana, and in the Senate, and seems to be moving forward in the House as well. So I think we may have some breakthroughs on the state side on the video front.
Obviously this issue has a substantial amount of political support because of what it means for consumers. Not only does it give consumers choice of video services, some of which consumers have been clamoring for for some time, but it also has impact on price, even for those who don't exercise the choice. I think you're probably all familiar with the FCC's study, which came out - I guess it was - the FCC's report, which as I recall said that where there is competitive video, the average price is 15 percent lower.
The GAO looked at it and they said it was a 15 percent reduction in markets with competition versus markets without competition. The Bank of America looked at what's happening where we had been introducing FiOS, and the Bank of America on the 23 rd of this month said cable companies are matching or undercutting FiOS pricing where video is available. Cable companies are not advertising these prices at all, but the discounts to cable-advertised prices run to 20 percent in the areas where we're offering FiOS. In Keller, where we - which was of course our first area of entry - Keller, Texas - the (incumbent) cable ran a promotion with a 50 percent bundled discount when we entered the market.
So I guess the bottom line is that cable prices, of course, have been going up at four times the rate of CPI since 2001 - CPI is the Consumer Price Index - and when we enter the market, the cable prices come down, and of course we also are providing competitive prices. So it's a great deal for consumers; they get alternative choices. We believe, in our case, we're offering a lot more attractive programming packages. But in addition, the price of their existing service tumbles. So there's a lot of support for this, and I see this happening at the state level.
Then on the federal side, we are continuing to push for federal legislation. Frankly, I was a little surprised that we didn't see more movement on federal legislation last year. I think however we see both sides of Congress - the House and the Senate - interested in moving this year. The Senate committee, as many of you know, has scheduled a dozen or so hearings on the issue. Our CEO, Ivan Seidenberg, will be testifying Tuesday in the Senate, before the Senate Commerce Committee, on the video issue - Senator Stevens' hearing. And so I think there is some head of steam building up on the Senate side.
On the House side, the House continues to work on a comprehensive legislative package. Frankly, I think the House may want to consider looking at some of the experience of the states where the approach to video entry has been to look at the new entrants and how you ease entry rather than looking at the BITS approach that has been the focus of attention in the House. They, of course, have to decide what they want to do. But if they want to get off the dime here, it may be they may want to take a look at a little slightly different approach.
So finally at the federal level we also are - expect some action at the FCC on the proceeding that Chairman Martin has teed up. We believe that the FCC has some ability to define what is unreasonable action by local franchising authorities in terms of the amount of time that they can take to act on these franchise applications, on the kinds of build-out requirements that they can apply as a condition for these franchises. Third, they can take a look at all of the other things that we are being asked to do when we apply. You know, you've all seen stories about some of these things that come up. Some of my favorites are the - you know, providing seed money for wildflowers, putting baskets on all the light poles in the town. I was personally approached about funding a sculpture in front of the city hall in one community.
There are lots of these things; some less expensive, some more expensive, but generally, the things that are unrelated to the offering of video services, just shouldn't be part of this process. We know local communities are scrapped for - strapped, I should say, for money, but we don't think that it's appropriate that we fill that hole that may exist in some communities through the franchise process.
So overall I think that the - with the FCC looking at it, with the Congress looking at it, the states looking at it and our efforts in the communities, we're going to be able to get the ability to move forward with video entry throughout 2006 and beyond.
The other thing that I'd just comment on briefly is the whole net neutrality issue. I think it is fair to say that over the last decade we have been on the side of the open Internet. We believe that consumers should be able to go where they want to on the Internet. They should get the appropriate services they purchase. And they should not be restricted in the way in which they access sites and access content on the Internet.
We've been there before. We have worked with hundreds of ISPs throughout the years in order to have them use our network to offer services to consumers. We argued when we were trying to encourage cable to allow more than one ISP to be available to the cable customers, we argued at that time that the marketplace would eventually work. And we think the marketplace has been working and that the consumers have been very well served by the forces of the marketplace, the forces of consumers.
Nevertheless, we are aware of discussions by some about potential restrictions on customers' access to the public Internet. And so we want to again confirm that we support the notion of a full and open access to the Internet. We think consumers should be able to go where they want to go. We think that they should be able to have full disclosure of any meaningful terms that relate to their service when they buy their service. We think they should be able to attach any device. We think they should be able to run any application of their choice. Bottom line is, when they purchase from us, whether it's 760 kilobits or 5 megabits or 15 megabits of capacity for access to the Internet, we think they should be able to use that as they see fit. We also would like others in the industry to support that kind of effort. In many ways, we have had near consensus in the industry in support of the various sets of principles.
The High Tech Broadband Coalition, I think, was the first one out with their connectivity principles. The High Tech Broadband Coalition's principles got widespread support. The FCC then, last year issued its policy statement on Internet neutrality - again with widespread support from the industry. And we encouraged and promoted this effort at the FCC. Various organizations - yesterday, I became aware of a new coalition, Free Press - that has a variety of consumer interests, but essentially is talking about the same four things - access to any website, attach any device, run any application, full disclosure of the terms and conditions to consumers when they purchase an Internet access capability. And we think that it's important to keep hammering on the value of these principles for the orderly development of the market.
Now, having said that, however, we are not sure it's a great idea to start adopting a lot of regulation pursuant to this. You look at what's happening with government involvement in the Internet across the world, and the efforts by our government and others to get the European Community from trying to take over the management of the Internet. You see what's happening in China where companies are cooperating with the government in order to restrict the content that consumers can receive over the Internet in that country, which is happening in other countries as well. And all of these things, I think, highlight the potential danger of having governments get involved in the regulation of the Internet space. The old notion of government keeps its hands off the Internet we still think has merit.
So how do you reconcile this notion of We want the principles to be followed while at the same time want government to stay out? I'm not sure. But I think one thing that we're looking at, and we look at, you know, get other companies to publicly embrace these sets of principles, and perhaps have some mechanism whereby consumers would know which companies are with the program and which ones aren't when it comes to the Internet neutrality principles. So we continue to explore ways to address the issue without getting bogged down in a substantial amount of government regulation.
I've talked more than I intended so let's just open it up for any questions that any of you might have.
Q: Could you expand a little bit on your suggestion that the House drafters of the bill might want to look at the states and what they're doing with their legislation for some education in how they might
MR. TAUKE: You're determined to get me in trouble, aren't you? (Chuckles.) Listen - we of course commend the leadership of the House committee for really the terrific effort that has been made to try to pull together telecom legislation. But we've worked at it for a year now, and this package does not yet have wings. Therefore, rather than have another year go by without actually having something come to fruition, we would like to see the House consider some alternative approaches. One might be to simply break the pieces apart and start passing what has a lot of support. We would suggest, for example, that it may be possible to move the Video Choice piece through fairly quickly, while it may take a little more time to deal with some of the issues relating to things like universal service and inter-carrier compensation, although my guess is that those kinds of things will also have to move through the Congress in the not-too-distant future. So I think that might be one option.
Another option would be to say We've tried to do this on the basis of technology. We're having problems with that approach, so maybe we need to look at another approach. And in the video entry area, I suggest that looking at it from the standpoint of new entrants who already have the authority to deploy a network may be being treated differently from those who have been in the traditional cable space may make some sense. So bottom line is, we're anxious for movement. We think that the current laws don't very well fit the conditions on the ground in communities, nor do they help meet the needs of consumers, and therefore we'd like to see Congress act. And if you can't get the whole loaf, let's take a portion of it.
Q: Just sticking with that, what type of video franchising - or the video competition section, you called it - what do you want to see in the House bill to help you get into video markets easier?
MR. TAUKE: You know there lots of ways to approach this, but the bottom line is we are looking for a way to move through the video franchising process with some ease. So it could be, as Texas did, we would have something like a statewide video franchise. Or, as Virginia is doing, you have a mechanism where the local communities start the process, but if you don't meet agreement within a certain time, then there is a default to a statewide franchise, and that could be an alternative. So there are many ways, if you will, in which to skin this cat. But I think the bottom line is that the Congress should look at the current statute at the federal level and determine whether or not it's facilitating entry into the marketplace, and competition for consumers and the lower prices and other benefits that come from that. Or is the current law hindering entry? And we'd argue right now the current law is a barrier to entry.
Q: Have you heard anything about Representative Pickering has been talking about maybe taking an approach where it would just be in markets where there is competition rather than focusing on the actual technology? I mean I've heard a bit of talk about that.
MR. TAUKE: I don't know if I'm referring or know about the exact thing you're talking about with Rep. Pickering, but the notion that, if you will, the rules change when there is competition in the market, we certainly agree with that concept.
We've never been of the view that we're trying to keep the burdens on cable that cable has. We think that there a lot of regulations that cable is subject to which don't make a lot of sense for them either. Times have changed, you know? But our focus, frankly, is on entry, our entry into the market, which brings about competition.
Q: Are you at all concerned that the limited way in which you're actually taking advantage of the statewide franchises in Texas will undercut the argument that it is community franchise that makes things so slow rather than the investment and business operational thing that you have to do to actually enter a market?
MR. TAUKE: Well, I think we've responded pretty aggressively to the action taken in Texas. We're now in 29 (sic) communities in Texas as I recall the right number, Eric? And we've stepped up our investment in the state this year from what was planned. I don't think we've given (budget) numbers on this, and I'm not going to disclose these things so we don't file 8Ks, but there has been a substantial step up in investment in the state of Texas as a result of the passage of the Texas video legislation on our part. I believe I'm correct in saying - and you'd want to check this with AT&T - but I believe AT&T has indicated that they are spending an additional $800 million in Texas for more rapid deployment of their network facilities in order to be able to take advantage of the opportunity to offer video services in the state. So my sense is that Texas is an example of where the investment is increasing substantially as a result of the quicker entry into video made possible by the Texas legislation. And our own ability to offer video services to consumers moved ahead rapidly in 29 communities in just a month or two - a couple months - since the legislation has passed. And more is going to happen in 2006. Bottom line is that we would have been in - I think I'll give myself a little wiggle room here - five to ten communities as of today, rather than 29, if we had not had the legislation passed in Texas.
You know, I don't want to ignore the fact which you may have pointed out that deploying the network is a big task. It's a very expensive and a very significant undertaking. But we are, by the end of this year, we will have 6 million homes passed. And that's about 20 percent of our network. And we'll do another 3 million next year. So, I mean, we're moving pretty rapidly.
Q: How do you anticipate approaching Congress to break something off to address this, given they're - the Democrats were very unhappy with the BITS 2 bill and concerned about public interest obligations, redlining, and things like that in a legislative period that I think Congressman Dingle said the other day is 60 days?
MR. TAUKE: It's tough. I don't disagree that this is a challenge. I also acknowledge that the leadership, the key players in the House and Senate seem to be committed to doing something. So these are the facts on the ground, and we try to deal with those. Again, given the short time available, and also the commitment, my sense is that we need to suggest to Congress that they focus on what's doable now. And if, going back to what I earlier suggested, if you can't get the whole loaf, then at least let's do part of it this year. We had indicated in response to another comment you made - we have indicated we're willing to pay the franchise fees. We agreed to that in Texas. We agreed to it in Virginia. We're willing to carry the PEG channels. We're willing to live by the redlining provisions in the federal statute that apply to cable. We are not unwilling, if you will, to address the concerns that people have about our entry into the video marketplace, and we recognize the legitimate needs of communities. So I don't think those things ought to be a barrier to getting this legislation through.
Q: With all due respect, on the last point about carriage, or franchise fees and carriage, I don't think your fellows across the street necessarily see eye-to-eye on that one. Does that complicate the efforts? And I'm talking about lower-case AT&T.
MR. TAUKE: (Chuckles.) Now, you're really trying to get me in trouble. Listen, I think that there are always some differences of viewpoint on details of issues among various players in the industry. But we talk to our friends and colleagues, and I think that things move along in time, and I think that what I have outlined here is something that the industry as a whole could live with. Or put another way, if the Congress moved in that direction, I think that we'd have a lot of support in the industry.
Q: Could you just elaborate on the anti-redlining provisions you just said you could live with? What exactly does that mean? Does it mean when you go into a county, you're going to serve all the county; or wire center, you'll go into all the wire center. Or just that you don't specifically discriminate by some characteristic, race, income, whatever.
MR. TAUKE: The federal statute - I don't have the wording in front of me - but the federal statute as it applies to cable essentially says that you can't redline on the basis of any factor, including income. And we traditionally as a business, we don't redline. You know, if you look at our wireline services. We've rolled out wireline services as we've rolled out wireless services, our objective is to serve our customers, and to offer the services as rapidly as we can. So we don't have any nervousness about complying with any anti-redlining provision because we don't do that. So the federal statute, I think speaks to that issue, and we're happy to comply with it.
Q: What about build-out? I mean no build-out whatsoever? If you want to get this, and you want to get it quickly, what are you going to give?
MR. TAUKE: Our preferred position is no build-out requirement. If you look at the Virginia statute, which we are - or the Virginia legislation that we are supporting, it has a build-out requirement. This is a build-out requirement that reaches 65 percent of a local franchise authority within seven years, and 80 percent within ten years. Now, each state, if you look at it on a state-by-state basis, what works in one state may not work quite in another state. But I guess what I'd say to you is that if you look up what the situation is in Virginia, you might reach the conclusion that this is not a religious matter for us, you know? This is a matter of what's practical.
And here is the - what you have to look at when you look at build-out requirements - the higher the build-out requirement, the tougher or the higher the barrier to entry. Because if, in order to serve home 1, you have to commit to the investment that is allowing you to serve the last home or, you know, 80 percent, or whatever it is - that becomes a barrier to entry because this is a new business for us; it's a new business to other entrants.
You know, Cavalier, for example, has been working with us in Virginia and in New Jersey on this video-entry legislation. Cavalier is in a much different situation than we are. So while we may be able to live with certain build-out requirements and so, okay, from a practical perspective, this is something we can go with, and from a public-policy perspective, it might not be great for others who are entering the video market place.
So I'd go back and say for us it's a practical issue. What is practical and reasonable that we can live with and still execute the business plan? From a public policy standpoint I think that legislators should be concerned that any build-out requirement is a barrier to entry and the higher the build-out requirement, the more difficult it is for other players to come into the market.
Q: Just on that point, how are build-out requirements different from redlining prohibitions?
MR. TAUKE: Well, build-out requirements say you have to serve everybody or you have to serve a certain percent. Redlining provisions say you can't just focus your build on, or your services, on a certain segment of the market. So that is the difference.
Q: Well, are you exposed to redlining charges if - you know, cable has this sort of posture where you can't serve anybody until your service is available to everybody. And so are you vulnerable to redlining criticism if your build-out starts in sort of the wealthy suburbs or something like that and it's 20, 30 percent after three or four years. I just - some people separate this issue and I don't quite get how they are different.
MR. TAUKE: Well, here is how they are different if I may - I think it's fair to say that there are a lot of companies that don't serve the universe of the population - full universe of the population. We have generally tried to provide service to everybody with all services that we offer.
Obviously on day one you don't provide the service to everybody. So, for example, with our EVDO capability in Wireless, we have started in urban areas and we are gradually filling in the capability across the country and with more broader and broader coverage for our EVDO high-speed data service on wireless.
When we rolled out digital services, we rolled them out in some areas first and gradually you expanded to until now our whole network is digital. So you have a - you can't serve everybody immediately; you have to do it as you build the facilities that allow you to serve.
I think redlining suggests that as you build the facilities you can't focus on - I guess to be blunt -- all of the high-income areas without also serving - you can't have a pattern that discriminates against certain groups. And we are happy to comply with that so that as you - as you look at our buildout, you'll be able to say, yeah, they are trying to serve people across the board; they aren't just focusing on one segment of the market.
Q: Ed Whitaker made a speech that everybody is talking about where he said he wants to potentially charge for tolling and what - does Verizon have the same point of view on that issue?
MR. TAUKE: I'm not going to comment on what Mr. Whitaker said, and I think AT&T should address - answer those questions. Our position is I think - well, let's put it in a different term and if you don't like this term you can try it a different way. Do we want to impose access charges on Internet access? No.
Q: Could you address, though, your willingness to deal with those who want some kind of net neutrality as a price for a video competition bill?
MR. TAUKE: We want - we want Internet neutrality, too. I have outlined the principles that we support. The question is what does it mean to put it in statute and what is in the statute? So I think it's a topic that is open for discussion.
We would prefer, frankly, to deal with the Internet neutrality issue without having government engaged in the regulation of the Internet as opposed, to a certain extent, this is a matter of religion. The - I think that if we had had government regulation of the Internet 20 years ago or 10 years ago or five years ago, it would not be serving consumers as well today as it is.
To the best of my knowledge, there is no problem today with Internet neutrality. I'm not aware -- outside of the Madison River case, I am not aware of any instance in which we have a problem. So it seems as if there is an attempt to legislate or regulate to solve a problem that doesn't exist.
I think what we're looking at as a company is how do we ensure that the problem doesn't develop so that there is no compelling need to regulate. If we could help that process along we would like to do that.
So I think that we'll look at these issues as we go along as the legislative process evolves, as the FCC looks at these issues. The FCC has acted - it's laid out principles. We supported what the FCC did. At the current time frankly we don't see a need for a lot more. We think the FCC already has the authority to enforce these principles. And so we don't see a need for a lot more at this juncture, and we are trying to do what we can within the industry to create the right climate so that there isn't a need anymore.
Q: Forgive me if you already announced that, but what are you doing to get a kind of private-sector momentum behind it.
MR. TAUKE: We're talking to other players, but I don't want to - I can't go beyond that now because obviously you have to have a lot of players in order to play - (inaudible, cross talk) - that's meaningful.
Q: (Off mike) - not have any players.
MR. TAUKE: No, I wouldn't say that; that would be a wrong conclusion.
Q: You have other -
MR. TAUKE: I am not getting ahead of myself. I think I have said as much as I am going to say right now, that we're trying to work with other players in the industry to see how we can create the right climate to ensure that there is if you will market pressure on everybody to abide by the open Internet principles. And if you have an outlier who doesn't want to abide by those principles, the consumers would be fully aware of that.
Q: Didn't a Verizon official at CES map out kind of an Internet platform that Ed Whitaker was talking about that wouldn't necessarily run afoul of net neutrality - something along the lines that the market develops premium content - sort of an HBO services for the Internet - that is the way the market works, and that is not a violation - net neutrality. I don't know who it was, but didn't Verizon -
MR. TAUKE: There were several of us out there, but there were two of us talking to the media, Ivan Seidenberg and me. So I'm sure - (inaudible, cross talk, laughter).
Q: Hasn't Verizon discussed that a bit?
MR. TAUKE: Yeah, we have talked about it. I mean, we have talked about this for a decade.
Q: More - (inaudible, cross talk) - that there can be a super-highway perhaps that doesn't necessarily run afoul of net neutrality.
MR. TAUKE: Correct.
Q: Would you elaborate on that?
MR. TAUKE: Let me try to address that issue. If, let's say, we offer somebody 5 megabits of Internet access and they purchase that 5 megabits of capacity, over the same type that comes into the home, we will be offering them video services. The video services are not part of the Internet access 5 megabits. And so we think that as you - as you offer this capacity to consumers that gives them full access to the Internet, you also ought to be able to do other things.
Now, in the future - we don't have anything like this now, but in the future if we have these 5 megabits or 15 megabits for Internet access and we have the video services on the pipe coming into the home, it may also be that someone will want to offer another service that we don't necessarily envision.
One example I've used - I'm not sure it's a great one - but suppose we had health monitoring where the local - let's say, Johns Hopkins University Hospitals are going to have health monitoring for their patients. This is something that has been talked about a lot. So you have the heart patient who leaves the hospital after surgery; they want monitoring of that patient.
Obviously if they do that they are going to want a network to give - a network provider to give the security, because it's a medical issue; they are going to want to have certain assurances about quality of service, and so they are going to necessarily want to have a single network provider offer end-to-end network services.
That means you aren't on the public Internet but you are using the network for end-to-end service. If we enter into a contract with Johns Hopkins to do that, we don't in anyway think that that interferes with the open access to the Internet, but it is something else that rides on the pipe.
So that is the kind of thing that we do all of the time. For 20 years we have had what we call virtual private networks for businesses, where a business will come to us and say, Look, yes, we could use the public Internet, but on the public Internet you are dealing with a network of networks where no one is solely responsible for insurance of quality of service from end-to-end or providing a certain level of security end-to-end or maybe some other feature that you want. So therefore, we are entering into an agreement with you for a contract for a visual private network.
As we deploy more broad-banned capabilities to consumers, businesses are not only going to want to have these kinds of arrangements for business-to-business relationships, but we could see that they would want them for business-to-consumer relationships to do things like healthcare monitoring or certain other on-line activities. And we think that given the capacity of the networks that will be available, you'll be able to have video services, you'll be able to have Internet access services, you'll be able to have the virtual private network services all coming together, and all of that is benefit of consumers.
And by the way, let me ask myself one other question that people ask that you haven't ask, and that is suppose somebody puts up a website with video services, and they want to use your 15 megabit capacity in order to download the video services in competition with you, Verizon? We said that's okay. That is part of it. If they buy the capacity then we think they ought to be able to do that.
Now, if somebody - it's also feasible that a company that would say to us, okay, we want to have a video service available through your network but we need certain security for copyright protection; we need other things and that way it will be a virtual private network deal.
So I think that, you know, as we look at these new networks with more capacity, you have got to understand that there are various ways in which services could reach consumers and in fact one thing that we think is a constant is that when consumers purchase access to the Internet, they ought to be able to have that that full access without any of the limitations that we have previously discussed.
Q: So when you have the virtual private network, would that be running over the same pipe that your video service is on or does that run over the pipe that the public Internet travels on?
MR. TAUKE: It runs over the same pipe, if you will. When we have got fiber to the home, you have got a lot of capacity on that pipe.
Q: But you have different wavelengths, right, in terms of the -
MR. TAUKE: Well, yeah. I mean, there are different ways in which you separate it out, sure. But in that -
Q: (Inaudible, cross talk.)
MR. TAUKE: Pardon?
Q: Which one would the VPN run on; the wavelength that carries upon the Internet?
MR. TAUKE: No, it would be something different. I mean, today, just like video is some place - I'm not the technology guy here, but the bottom line is, is that you have the ability on this kind of network with this kind of capacity to be able to offer an array of services to consumers, and that's what we hope to do. As I said, we don't have anything - we don't have these kinds of things in place yet; I don't have anything - I'm not announcing anything, but it's just that - as you think to the future, what is this going to mean? We would hope that there would be educational services, healthcare services, a variety of other things, that would be offered to consumers by various providers out there, and those providers are going to need some way to get their services to the consumer, and one way could be the public Internet. In some cases they want a quality of service or a security feature or something else in order to be able to offer that service to consumers. So we think we can facilitate that while also ensuring global access to the Internet.
Q: So when you're talking about having a private network that runs along the same pipe as the public Internet, then clearly if you're going to pass traffic around the country you have to have deals with other Internet providers, right? So are you guys talking about those kinds of deals, to have a seamless private network that runs from - so that everyone can use that same - (inaudible)?
MR. TAUKE: (Inaudible) - in a sense talking about those kinds of deals here for the consumer market. Clearly we have that kind of thing for the business market and have had that for 10, 20 years. I mean, pick a major customer - Bank of America - that has facilities all over the country. Somewhere along the line they want a network that connects all those facilities and they want somebody to manage that network, offer service guarantees, security guarantees and so on. And so, yes, network companies then will cooperate with one another in order to provide that kind of capability.
Q: Just thinking about this, your strong insistence that the consumer should be able to get the full capacity that they're purchasing. What in law stops someone from port blocking right now, which you seem to imply you would be against, and would you support, as a kind of dumbed-down or compromise net neutrality, some federal law that says No port blocking; the consumer gets the full amount of the bandwidth they've purchased?
MR. TAUKE: Yeah, maybe it's my little wariness of government in the space, but I think there's reason to be worried of government in the space. If we had a problem I think I would say to you, Yeah, we probably need to have some action. But right now we don't have a problem. If we did have a problem with port blocking, I think the FCC, with what it's already done in terms of the principles I've stated, and with the authority it has, could act promptly to address that issue.
So I think we already have sufficient, if you will, safeguards in place to ensure that if there is a problem there is an action the government can take. Do we need more? Right now I don't think we need more.
Q: How long do you think it will take for Congress to cave in and put things off?
MR. TAUKE: I have no idea. (Laughter.) That is a decision the lawmakers have to make. We can say what we would like them to do, but they have to make their own judgment.
Thanks very much.http://se7enpc.com/transcript.htm