Broadband and the Future

National Broadband Policy

The Internet has changed the way consumers communicate, shop, learn, and entertain themselves. A person in New York can play an Xbox game against a person in New Delhi. A rancher in Montana can exchange herding tips with a rancher in Mongolia.

Broadband services facilitate the seamless sharing of pictures, songs, games, and video programming. Broadband enables co-workers located on different continents to collaborate on documents in real time, and turns living rooms into examining rooms and classrooms, reducing greenhouse gas emissions and bringing people closer together.

Broadband deployment also stimulates economic growth and creates jobs. Broadband services open up new markets for U.S. goods and services. And the purchase and deployment of broadband infrastructure creates high-paying jobs and increases skill levels.

For U.S. policymakers, the goal should be ubiquitous broadband deployment for all Americans - urban, suburban, and rural. U.S. policies should encourage investment in, and the rapid deployment of, broadband services and infrastructure. U.S. policies should focus on stimulating both the supply of broadband services as well as the demand for such services. For example, policymakers should look for ways to expand computer ownership and literacy - factors that stand in the way of greater broadband adoption.

Public-Private Partnerships to Increase Broadband Adoption

Congress recently enacted the Broadband Data Improvement Act of 2008, which will help target the deployment of broadband services to unserved and underserved areas. The legislation will facilitate partnerships using a combination of public and private resources and federal grants to fund initiatives to increase both broadband supply and demand. Public-private partnerships, such as Connected Nation, help identify gaps in broadband availability and create unique deployment plans in states and localities.

Where We Stand

Public-private partnerships present the best opportunity to examine all the relevant factors that affect broadband supply and demand, and to meet the needs of consumers in unserved and underserved areas. With the collaboration of a diverse array of governmental entities, businesses, labor and consumer groups, and educators, gaps in broadband deployment and adoption can be filled on a community-by-community basis. Just as important, these partnerships can assess demand-side factors - such as computer ownership and literacy - and develop creative solutions for bringing more people online.

Increasing broadband deployment and usage creates jobs and stimulates economic growth. A study by Connected Nation determined that a seven percent increase in broadband adoption would create 2.4 million U.S. jobs, save $662 million in health-care costs and $6.4 billion in vehicle mileage, and have an annual positive economic impact of $134 billion.

The Use of the Universal Service Fund for Broadband Deployment

The federal universal service fund has traditionally been used to help reduce the cost of providing telecommunications services in rural areas. Now, broadband services have become as important as, or even more important than, telecommunications services in ensuring that rural areas are connected to the world. There are some places in the United States today without broadband networks and services.

Where We Stand

If policymakers determine to use universal service support for broadband, these funds should be used to pay for one-time capital investment in broadband infrastructure, providing a means for infrastructure investment for the IP networks of the future. The universal service fund should not be used for ongoing expenditures related to broadband infrastructure and services.

Regulation vs. Market Incentives

Broadband services have been deployed commercially for approximately ten years. Over that time, policymakers have recognized the importance of creating market-based incentives to encourage broadband investment and deployment. Rather than applying the more-stringent regulations apply to telecommunications services and infrastructure - rules that, in many cases, are also outdated in the context of today's competitive marketplace for voice services - the Federal Communications Commission generally has applied an "old wires, old rules; new wires, new rules" philosophy towards broadband services and networks.

The removal of outdated and ill-fitting regulations and creation of investment incentives has enabled facilities-based broadband deployment and competition to flourish. Broadband providers utilizing infrastructure previously designed for telecommunications, cable, wireless, and satellite services now compete head-to-head for broadband customers. Such competition has increased the speed, quality, and sophistication of broadband services, while leading to decreased prices per Megabit over time. Competition has driven innovation at the application layer as well. As broadband services continue to become more robust, they support more and more bandwidth-intensive applications. For example, broadband has revolutionized video programming distribution and increased consumers' access to local and personalized content.

Where We Stand

Consumers are reaping the benefits of policymakers' decisions to increase incentives for all providers to invest in bigger and better broadband networks and services. Investment and deployment in next-generation broadband networks - such as Verizon's FiOS network - is happening at a remarkable pace, and consumers now have more choices than ever before.

Given these successes, policymakers should reject efforts to impose new regulations - including common carrier-type requirements such as nondiscrimination - on broadband networks and services. Such network regulation would get in the way of innovation and deter continued investment in new and better broadband networks and services. Such regulations also could prevent broadband providers from protecting network security and integrity, blocking spam and computer viruses. Network regulation would be particularly problematic for wireless broadband networks, which are inherently shared-bandwidth systems in which the large consumption of bandwidth by one user within a cellsite can negatively impact the Internet experience of all other users within the cellsite. Such regulation would also reduce innovation and investment in broadband services by eliminating the ability of broadband providers to experiment with new business models.

The U.S. broadband market has multiple facilities-based providers that use different technology platforms to compete head-to-head for customers. This competition enables policymakers to largely rely upon market forces, rather than regulation, to ensure that consumers receive innovative services at reasonable prices. As new facilities-based providers such as Clearwire continue to enter the broadband market and increase competitive alternatives for consumers, policymakers should continue to rely on market forces to maximize consumer benefits and to encourage broadband providers to rapidly deploy robust networks throughout the United States.

What Others Are Saying

"Never before has the United States had such an opportunity for an economic return on investment as is available when we make broadband an infrastructure priority. Together, we have to elevate the understanding of the transformative power of broadband so that those who are the nation's most vulnerable will not remain on the wrong side of the digital divide, therefore allowing for an economic impact of proportions never before possible in the history of our nation."

Brian Mefford
CEO, Connected Nation
Press Release
October 14, 2008

"The role of information technology in promoting economic growth and productivity is well documented. Digital computers allow information to be stored, analyzed, manipulated - and turned into useful knowledge. High capacity communications networks allow those computers to work together, and increase exponentially society's ability to create knowledge and put it to work. Ethernet inventor Bob Metcalfe formalized this notion in what has become known as Metcalfe's law: the value of a communications network is a function of the number of users, squared."

Jeffrey A. Eisenach, Ph.D.
Chairman, Criterion Economics
Before the U.S. Senate Committee on Commerce, Science and Transportation
April 24, 2007

The Bottom Line

Verizon agrees that policymakers should continue their focus on a national broadband policy. That policy should facilitate the deployment of robust broadband services to all Americans by maintaining and creating incentives for investment in next-generation broadband networks. It should also include steps to stimulate consumer demand for such services. For example, policies should increase the level of computer ownership and literacy, and promote applications training and usage. These are significant factors affecting the rate of broadband adoption. A national broadband policy should minimize regulations imposed upon the competitive broadband marketplace, and use targeted strategies to help ensure that broadband services are available in unserved and underserved areas.

Broadband services are now a central part of the economic and social fabric of the United States. By providing incentives to broadband providers to deploy broadband networks, and to consumers to subscribe to broadband services, policymakers can increase broadband adoption in the United States, especially in unserved and underserved areas. Increasing broadband deployment has a direct impact on the U.S. economy, and especially on the economies of communities located far from metropolitan areas. Policymakers should apply the right mix of incentives and support to ensure that ubiquitous broadband deployment becomes a reality.

Healthcare Reform and the Adoption of Information Technology

The current American healthcare system is facing tremendous challenges that threaten to diminish critically opportunities and choices for quality and affordable care.

Healthcare spending is rising rapidly in absolute terms and in the context of employers' budgets, threatening their ability to provide affordable healthcare options to employees, retirees and their families. Verizon provides healthcare coverage to more than 900,000 employees, retirees, and their family members at an annual cost to the company of more than $4 billion. The reasons for these increasing costs are many, including cost shifting from medical providers (which is how the U.S. pays for care of the uninsured), and the failure to use untapped technologies.

What It Is

Verizon's CEO, Ivan Seidenberg, serves as the current chair of the Business Roundtable's Consumer Health and Retirement Initiative. The Initiative has proposed a specific plan on how to achieve much needed reform. The proposal contains four specific pillars:

• Creating greater consumer value in the healthcare marketplace;
• Providing more affordable health insurance options for all Americans;
• Placing an obligation on all Americans to have health insurance coverage; and
• Offering health coverage and assistance to low-income, uninsured individuals and families.

To achieve this the following actions should be taken: encourage the adoption of interoperable standards in health information technology; improve transparency of cost and quality of services and supplies; reward providers for the quality of outcomes versus the volume of treatments; foster a more competitive insurance marketplace creating regional pools rather than individual states; and support universal coverage by lowering costs and providing subsidies for those in need. In addition, all Americans should be encouraged to participate in employer sponsored or community based wellness, prevention and chronic care programs.

Healthcare benefits protected by the Employee Retiree Income Security Act (ERISA) must continue in order to maintain a national system of benefits provision. A national system promotes economies of scale, bargaining power on behalf of the employee, and allows for standardized benefits to be provided by companies with a nationwide presence at a lower cost.

Rapid and sustained deployment and adoption of health information technology is crucial to the health care reform agenda. Verizon believes broadband will be a transformative technology in the provision of healthcare. Verizon's next generation broadband networks are currently providing transmission for at-home patient health monitoring. Doctors at the National Children's Medical Center and The University of Maryland Medical Department in Baltimore use Verizon's network. The University has had success with its "Operating Room of the Future," where outside medical experts can monitor in real time a patient's condition and remotely assist the surgery team.

Specific actions policy makers can take to accelerate the implementation of healthcare information technology include: develop incentives for providers to adopt healthcare information technology; encourage use of telemedicine to address cost issues; and enact national healthcare information technology legislation that accelerates the adoption of national information technology standards.

The Federal Government can resist attaching costly regulations to such networks, which makes them less profitable to build and maintain. Further, it can take a leadership role in establishing standards by providing incentives for the use of technology in its own health programs.

Implementing healthcare information technology will improve healthcare safety, quality and efficiency, and reduce costs. This would be achieved through widespread adoption of standards based interoperable solutions such as Personal Health Records (PHRs), Electronic Medical Records (EMRs), remote monitoring and consultation solutions, and telehealth applications, to name a few. In addition to those, electronic prescribing (ePrescribing) enables healthcare providers to better monitor a patient's prescriptions and dosages, and reduces the potential for medical errors (e.g. unclear notation in medical records, failure to get prescriptions filled, and adverse reactions). The RAND Corporation estimates an $81 billion potential savings from healthcare information technology.

Prior to the launch of the Health IT Now! Coalition (www.healthitnow.org), health information technology was not on Congress's priority list. Through its many activities, the Coalition was able to reengage Congress, and legislation moved in both chambers. The Coalition is known for working with all parties to craft legislation that advances good public policy and addresses the key issues. Looking ahead to the 111th Congress this foundation will allow for successful passage of some form of Health Information Technology legislation in 2009.

What Others Are Saying

There is agreement that advanced healthcare information technology can improve the quality of life, the quality of care, and drive down medical costs.

Privacy issues may be the greatest hurdle to implementing this broadly supported initiative, and those issues must be addressed. However, while some may seek to derail the initiative on this basis alone, such objections can be overcome through public education about the enhanced choices and improvement in quality healthcare that will result. An informed public will demand action to bring about these benefits.

The Bottom Line

"The problem with the healthcare market in this country is that it doesn't really function as a market - leaving major consumer needs unmet, costs unchecked by competition, and basic practices untouched by the productivity revolution that has transformed every other sector of the economy."

Ivan Seidenberg
Chairman and CEO of Verizon Communications
Chairman of the Consumer Health and Retirement Initiative at the Business Roundtable

A functional and supportive system must act to put consumers in charge, create a system of interoperable standards that foster wide adoption of health information technologies, support market based competition, and realize universal coverage and transparency for consumers.

Network Management

What It Is

As broadband networks have evolved, so too has the debate over acceptable network management practices. The current debate is an outgrowth of the earlier policy discussions concerning "net neutrality."

Network management is nothing new. It is an essential tool long used by network operators to ensure that consumers receive high-quality, reliable, and safe broadband Internet access services.

In providing consumers with broadband services used to access the public Internet, broadband providers employ a variety of practices, with goals ranging from the mundane - such as provisioning the service at the level that the subscriber selected - to the vital - such as protecting networks and subscribers from security threats traveling over the Internet. Some broadband providers also face an increasing need to use network management to safeguard the performance and quality of their subscribers' services by minimizing the network congestion that can degrade the usefulness of their services. Policymakers should encourage - not restrict - broadband providers' ability to engage in these pro-consumer practices to respond to evolving challenges that threaten consumers' services. Competition and innovation will best protect consumers from possible abuses by network operators.

The network management practices required to provide consumers with safe, reliable, and high quality broadband services to access the public Internet are complex and evolving, and these practices are best left to network engineers who must respond to real world concerns. The arguments asking policymakers to prospectively restrict providers' network management practices fail to account for the complexity, and importance, of these practices. Sweeping arguments in favor of regulation ignore the real world need for broadband providers to manage their networks in a wide range of contexts and using a variety of methods in order to deliver high-quality and safe broadband services to their consumers. In fact, there appears to be a broad consensus that network management is both appropriate and necessary, and a recognition that intrusive, anticipatory regulation would result in harm to innovation and to consumers' services. Ex-ante (before the event) regulation cannot anticipate all possible threats consumers might face on the Internet. Further, the government should not be picking winners and losers when it comes to network management practices used by network operators.

The existence of robust broadband competition further alleviates any need for regulation because competition encourages network management practices that benefit consumers. As with other broadband provider practices, existing and growing competition is the most effective check on providers' network management practices. Broadband providers are engaged in intense, intermodal competition across a number of dimensions, including speed, price, service quality, and features. Given this dynamic and working marketplace, any provider that engages in network management practices that harm consumers will be identified and punished, while those that employ practices that benefit subscribers' broadband experience will be rewarded. The efficiency of this approach is furthered by the meaningful information that broadband providers, by competitive necessity, provide subscribers about their service plans, including information concerning the parameters of, and any material limitations on, subscribers' services. Armed with this information, consumers are able to choose the broadband services that best meet their needs. And, as recent events prove, the vigilant and vocal online community provides additional scrutiny of the practices of broadband providers, thus effectively eliminating any possibility that providers could surreptitiously engage in practices that harm their subscribers, even if they wanted to.

This is not just a network issue. Rather, all players in the broadband space - network providers and application and service providers alike - must act reasonably and responsibly. It is equally incumbent upon application and service providers to design and develop services in a way that takes into account and minimizes their effect on other consumers, applications, and services. Likewise, application and service providers should provide consumers with meaningful information about, for example, how their products utilize consumers' bandwidth and whether they are designed to be compatible with other applications and services a particular consumer may use, as well as their effects on third party users on the same network.

Effective network management practices also may also be essential to furthering national security interests, given the increasing reliance of government agencies and emergency responders on the Internet and broadband networks.

In any event, the FCC, FTC and other federal policymakers have shown that they are closely monitoring broadband providers' practices - including network management practices - and will not hesitate to act if they find that problems arise. In its recent order condemning certain network management practices employed by Comcast, the FCC made clear that it was prepared to uphold its previously announced broadband principles. Similarly, the Federal Trade Commission has engaged in oversight of Internet practices and usage. In light of this attention to providers' practices, new legislation or more regulation, with all their unintended consequences, is not needed.

Where We Stand

There is no problem today that warrants the imposition of regulation of the Internet, such as restrictions on broadband providers'network management practices. Any consideration of providers' network management practices must account for the multiplicity of reasons for network management, the various forms of existing and potential network management practices, the technological and practical constraints limiting the practices available to broadband providers, and the costs and potential harms of adopting regulations in the context of the dynamic and evolving broadband marketplace. Foremost, policymakers must take into account that network management practices serve customers' interests in receiving high quality and safe broadband services, and thus help them to take advantage of the full range of content, applications, and services available on the Internet. Given these considerations, there is no reason to adopt prospective regulation in this evolving area.

At the same time, there also is broad consensus that any network management practices - and the related practices of application and online service providers - should be reasonable and that consumers should be given meaningful information about those practices so that they can make informed choices.

The Bottom Line

Rather than adopting regulations that could harm the quality, safety, and reliability of consumers' broadband services, policymakers should encourage all players in the Internet industry - network providers, application developers, and others - to act reasonably and responsibly and to cooperate with one another in issues surrounding network management. Likewise, all players must act in a transparent manner. Consumers must have meaningful information that allows them to select between competing broadband providers, and also make informed decisions about the applications and online services that they use. Informed consumers and vigorous competition remove any need for intrusive regulation which would undermine policymakers' preeminent goals of encouraging broadband investment and deployment.

Accessibility: Assisting People With Disabilities Through Broadband

People with disabilities are the largest minority in America. At more than 55 million, they represent a sizable population of potential customers and employees. Their number will rise dramatically with the baby-boom generation now reaching retirement age. According to projections, in just two years there will be 34 million people in the U.S. between the ages of 65 and 84. In 10 years, the number rises to 47 million.

Along with disability, age is becoming a factor in the adoption and accessibility of technology-the most telling example is in the use of cell phones. Among some age segments-those between the ages of 20 and 40, for instance-almost 90 percent have cell phones. But among seniors (those older than 65), only about 50 percent have them today, according to research done by the Pew Trust. While today's seniors are more familiar with technology, they are facing challenges in the use of it such as the onset of hearing problems, weaker eyesight and arthritis among other things.

What We Are Doing

Verizon is committed to making technology accessible to everyone, and we've been working toward that goal for 15 years through our two Verizon Centers for Customers with Disabilities in Marlboro, Massachusetts and Oxnard, California. The centers, which handled nearly 800,000 calls last year and created more than $55 million in sales, provide telecommunications services for people with hearing, vision, mobility, speech and cognitive limitations.

This past year the Center expanded its videophone customer service option so that customers whose first language is American Sign Language can communicate one-on-one with our customer service representatives.

In addition, the Verizon Foundation delivered a $1.5 million grant to the American Foundation for the Blind to fund and expand the organization's Web site. The site (www.afb.org/seniorsite) is geared to help aging adults with low vision lead independent and comfortable lives. Among the materials on the site are:

• A nationwide database of services for seniors with low vision, which shows them where to find large print or audio books, where to receive computer training and provides comprehensive listings of counseling centers.
• A library of video material providing demonstrations on everything from meal preparation and instruction on using adaptive devices to video testimonials from other aging adults.

We have also launched a mobile phone dubbed the "Coupe." The Coupe is lightweight with a large display and has buttons with larger numbers with a dedicated key for calls to 911, as well as programmable "In Case of Emergency" numbers. It also offers an easy-to-use voice-dialing feature and color-coded keys for specific features-a white key for volume control, red for the battery-charging port and blue for the headset port.

Based on the success of this handset and feedback from older American users, Verizon followed up the Coupe with the Knack in 2008 and Verizon designed a cell-phone service plan for older Americans called "America's Choice 65 Plus." It's inexpensive-$20 a month with a two-year service plan-and simple, with lots of "anytime" minutes and even more night and weekend minutes.

What Else Can Be Done

Innovations such as the above are made possible by robust broadband networks.

Government can take a leadership role by streamlining old-style regulation that slows broadband deployment. This will encourage the deployment of broadband networks needed to carry high resolution signals. Government can also resist attaching costly regulations to such networks which makes them less profitable to build and maintain, thus limiting the reach of next-generation broadband networks while sending investment dollars to other places. Policymakers can take a leadership role by encouraging industry to establish standards to the use of technology by people with disabilities, providing incentives to encourage companies to develop and deploy technologies that promote access for people with disabilities, and using advanced technology in its own programs for persons with disabilities.

As a means to ensure that we can continue to promote innovation and deploy technology while balancing the legitimate need for accessibility, we have worked closely with the Coalition of Organizations for Accessible Technology (COAT) on draft legislation that is planned to be introduced in 2009 to expand the accessibility requirements in the current Communications Act to account for communications over the Internet, via wireless and video offerings as well. COAT's leadership includes all of the major national disability organizations and they have welcomed Verizon's participation in this process.

The Bottom Line

Keeping the telecommunications markets open and competitive will yield the kind of innovations that will allow disabled individuals to take control of their communications needs with ease and efficiency.

Discriminatory Taxes on Telecommunications Services

What It Is

Communications is not a luxury. Rather, it has become part of the basic fabric of our social and economic life. The growth of the technologies on which communications ride represents one of the few robust industries in the U.S., and such growth should be encouraged, and not taxed unfairly. With increasing competition, a weakened national economy, and technological change, industry-specific taxes and fees (i.e. taxes in excess of general business levels) on telecommunications services and property are discriminatory, regressive and antiquated. Given the continued expansion of wireless innovation and features, it is estimated that one in five United States households will be wireless-only by the end of 2008. Increased service areas and unlimited calling plans are allowing households to eliminate landline phones in favor of the flexibility and convenience of mobile devices. Wireless-only households tend to be smaller, have lower incomes, and frequently move or change jobs. Americans are being hit hard with rising costs for gas, health care and food, and need to know that their cell phone bills will not be the next cost to spiral out of control. Keeping our telecom infrastructure cutting-edge keeps our economy moving, and helps the millions of Americans and businesses that depend on affordable wireless services.

Discriminatory taxes fail to reflect the changing face of technology and hinder innovation and consumer adoption of new and exciting technologies. With wireless services, for example, tremendous competition has brought lower prices to consumers, access to affordable and innovative devices, constantly improving service quality and a variety of service plans that can be tailored to an individual consumer's needs and wants. This competition extends to other sectors of the communications and entertainment industry as competition expands with ISPs, entertainment services providers, VOIP providers and wireline providers. The benefit to consumers of this competition is the availability of innovative new services that are made possible by the tremendous amount of capital that carriers have invested. These capital expenditures enable the United States to continue to be a leader in technology, and will continue to fuel the growth of small businesses participating in the digital economy. In the wireless sector in particular, growth is increasingly compromised by excessive taxation, which is considerably higher for the telecommunications industry than other sectors of the economy. The methods and policy reasons for levying and collecting these taxes have failed to keep pace with marketplace changes. This failure has created an unacceptable outcome - multiple taxes on the same product or service and, in some cases, no taxation on similar or substitute products or services. In short, given the highly competitive nature of the industry, telecommunications services should be taxed like any other competitive businesses.

This problem of discriminatory taxes has resulted in higher bills for the typical communications consumer and will likely take years to reverse. For example, the Federal Excise Tax - a 3% federal excise tax on telecommunications enacted to fund the Spanish-American War in 1898 - is still levied on basic local-only service even though, as a result of litigation losses, Treasury and IRS in 2006 eliminated its application to long distance and bundled services, as well as all wireless and VOIP services. The typical wireline consumer faces a 17.23 % total state and local tax on wireline service. This excessive and discriminatory tax situation exists at all levels of government and for all communications services. For the more than 255 million wireless phone service subscribers in the United States, state, local and federal taxes add an average of 15.2 percent to their monthly bills, versus an average rate of 7.07 percent for most goods and services. Wireless service, considered by many Americans to be among modern life's necessities, is taxed more like "vices" such as tobacco and alcohol. Ironically, expanding regressive, monopoly era telephone taxes that are imposed at "vice" levels to the still developing digital economy will have a comparable impact on new products and services, services that should be encouraged rather than inhibited.

Some positive steps were taken in the 110th Congress to address this problem. For instance, over 140 lawmakers on Capitol Hill sought to put the brakes on what industry experts say are "discriminatory" wireless taxes; i.e. ones that focus solely on the wireless or communications industry and do not affect other kinds of products and services. Legislation in the House (H.R. 5793) and Senate (S. 3249) called for a five-year moratorium on state and local governments' authority to levy new taxes on wireless service, providers and property at rates greater than other businesses (e.g., discriminatory taxes). The bills would need to be re-introduced to enact the moratorium in 2009.

In a related area, the U.S. House of Representatives and the Senate recently passed legislation that would extend the ban on state and local taxes on Internet access by seven years. Further, the House and Senate considered the Modernize Our Bookkeeping In the Law for Employee's (MOBILE) Cell Phone Act of 2008 (S. 2668). The companion bill in the House was H.R. 5450. The bills would amend the Internal Revenue Service code to prevent employer provided cellular phones from being taxed as perks or fringe benefits. The current tax code provision stems from a time when cellular phones were rare and expensive. Now, cellular phones are common in the workplace and are instrumental in job performance in virtually every industry. Currently, the tax code calls for employees with company-provided cell phones to keep logs of their personal and work-related calls for tax purposes, a requirement whose time commitment is a drain on productivity. And the IRS is starting to audit employees' use of company-issued cell phones on a spot-check basis.

Where We Stand

Verizon Communications supports a modern tax system that does not discriminate based on the type of technology competitors use to deliver communications services and results in the taxation of communications and entertainment property and services at rates no higher than other competitive, commercial businesses.

Most importantly, ending regressive taxation on telecom services will benefit consumers. This is because these discriminatory taxes are typically reflected as a tax or surcharge on the customers' monthly bill which substantially increases consumer costs.

Telecommunications carriers and their consumers face a greater tax burden than virtually any other U.S. business sector. Federal tax policy should be technology-neutral, competitively-neutral, nondiscriminatory and pro-investment. Discriminatory state and local transaction taxes that now discourage consumption of innovative telecom and broadband technologies must be eliminated and made fair. It is unfair to subject telecom consumers to regressive taxes that are double and triple the amount of general sales taxes. Nondiscriminatory and competitively-neutral tax policies encourage a robust investment in and the rapid deployment of broadband technologies for consumers and small businesses. Taxes on telecom services should not be comparable to "sin" taxes imposed on products such as tobacco and liquor, with tax rates reaching 15% or more. Further, a tax moratorium will not boost the bottom line for providers but merely allow wireless consumers to keep more money in their pockets.

Ending these discriminatory taxes will boost the U.S. economy and stimulate investment and innovation at a time when it is much needed. Specifically, Congress should:

• repeal the archaic and regressive Federal Excise Tax remaining on local-only service;
• enact a wireless moratorium to stop the expansion of "legacy" discriminatory telephone taxes to new innovative wireless services and property;
• encourage states and localities to reform their laws to levy only fair and non-regressive taxes on communications services and property.
• Repeal outdated discriminatory business taxation rules on wireless phones used by employees.

What Others Are Saying

The National Governors Association and the National Conference of State Legislators have advocated for state and federal reforms to streamline, modernize and reform tax rates on communications services and property, so that they are no different than the tax burden imposed on other businesses and their products and services. The Advisory Commission on Electronic Commerce (ACEC), created by Congress, recognized that existing state and local communications taxes were discriminatory and excessively burdensome to providers and consumers.

The Bottom Line

Excessive taxes hurt consumers and impede U.S. economic growth, as well as slow broadband investment and technological innovation. The current tax systems applicable to communications service are remnants of a bygone era when there were monopolies in the telecommunications industry and not the fierce competition for customers that we see today. Congress should update the law to reflect more accurately our modern telecommunications needs, and enact legislation that will benefit consumers and businesses by expanding access to new technology, by streamlining and reducing discriminatory taxes, and by promoting American global competitiveness.

Intellectual Property

What It Is

"Intellectual property" is a term referring to a class of innovations, creative works, and names subject to different forms of protection including patent, trademark and copyrights. Copyrights can include books, music, software, artistic works, motion pictures, and other tangible items that are the product of someone's creative expression. Intellectual property rights can be licensed, purchased and sold, just as other forms of property can be transferred from one owner to another.

Patent and copyright laws grant the owner a bundle of exclusive rights for a fixed time, which the owner of the work is entitled to exploit. Trademark rights can last potentially forever, for as long as the mark continues to be used on goods or services in commerce.

Copyright law attempts to balance the interests of the owner who is rewarded for his or her creation, with the interests of society in the dissemination of the work (for the expansion of knowledge and ideas, and other important societal goals). By giving copyright owners exclusive rights to their works for a limited period of time, the law attempts to encourage those creators to make their works available to the public and to create an incentive for others to create, thereby advancing the public good.

Copyright law has been lagging behind technological developments for years. The advent of the digital age, which facilitates e-commerce through digital copying, has heightened the concerns of intellectual property owners who wish to protect their works, as well as consumers who want to make reasonable uses of those works in order to maximize the utility of the digital devices they own. In the digital age, copyright laws must balance the interests of content owners, consumers, intermediaries and technology companies. Several bills were introduced in the last Congress that would have impaired the ability to roll out new electronic devices and services for consumers.

Where We Stand

Verizon owns a variety of intellectual property, including patents, trademarks, copyrights and trade secrets. Our networks are used to transmit intellectual property owned by other creators, as well. The protections built in to our FiOS network and mobile devices are good examples of Verizon's commitment to protecting copyrights over our secure networks. Verizon has also made clear that that we don't condone the theft of intellectual property.

At the same time, when Verizon is acting as a mere conduit in its role as an Internet service provider on behalf of our customers, copyright and privacy laws make clear that it is neither appropriate not technologically feasible for Verizon to act as the "traffic cop" monitoring third party content and activities. Verizon has historically been a leader in developing creative legislative solutions to intellectual property issues appropriate to contemporary technology such as in the Digital Millennium Copyright Act of 1998. Verizon will continue to seek to work with both providers and carriers of valuable intellectual property to assure that balanced solutions to digital issues are not compromised.

What Others Are Saying

Some rights owners favor greater technical limits on the uses to which their works can be put or greater liabilities for the manufacturers of goods or service providers who produce or transmit copyright works. Some rights owners see benefits in technically locking up access to their copyrights while others seek broader distribution without restricted access. Another perspective is taken by consumer electronics manufacturers and related service providers, who want to maximize the uses to which their devices can be put. Multiple uses can drive the sales of electronic devices, and limits on the uses of intellectual property can reduce demand and dampen sales. There are other perspectives as well. Libraries favor the widespread dissemination of content, and tend to oppose limits on use. That same perspective is frequently shared by public interest organizations, as well.

Some analysts have urged Congressional action to address additional protections for copyrighted works, while others believe that due to the speed with which technology changes, legislative solutions, including federal law, may no longer be appropriate. Many argue that the marketplace is a preferable alternative to government regulation, which can stifle technological innovation.

Recently, some content owners have sought, outside the scope of existing law, to force ISPs to use filtering in their networks to police for copyright infringement or automatically terminate the Internet connections of subscribers who are alleged to be infringers of copyright. Network filtering and automatic termination of subscribers raises serious privacy and due process concerns that many believe must be considered before overhauling the balance in existing copyright laws.

The Bottom Line

The legitimate interests of those who create intellectual property need to be balanced continually with the benefits to consumers and intermediaries to access content and distribute it. Convergence will continue to occur as screens and browsers become smaller and more mobile, and as the manner in which people receive and use the content they receive changes accordingly.

Global Communications Services

Communications services provided in the U.S. are global in nature. Consumers and businesses need international phone and Internet services that are reliable and competitively priced. International facilities, such as submarine cable systems, are critical infrastructure. Verizon carries a significant volume of international voice and data traffic and serves enterprise customers in more than 150 countries, all over one of the world's largest global networks.

What It Is

Our economy relies on global competitiveness, which in turn requires the ability for U.S. communications providers to enter foreign markets easily, to use global services where economically efficient, and to rely on a stable and secure Internet. Many public policy issues affect these aspects of the business environment, and the U.S. Government plays a central role in this policy arena. The Department of State's Office of Communications and Information Policy leads the work on telecommunications in international organizations including the United Nations International Telecom Union (ITU), Asia-Pacific Economic Cooperation (APEC), Organization of American States (OAS) CITEL (Inter-American Telecommunication Commission), the Organization for Economic Cooperation and Development (OECD), and Internet Governance Forum (IGF), and uses bilateral dialogues with important markets such as China, India, and Mexico. At the Department of Commerce, National Telecommunications and Information Administration (NTIA) has led work on the Internet Corporation for Assigned Names and Numbers (ICANN) and other Internet governance issues, and both the International Trade Administration (ITA) and NTIA within the Department of Commerce have been key to various market access initiatives. The Internet governance issue will be high profile during 2009 given the expiration of the Joint Project Agreement (JPA) between the Department of Commerce and ICANN and the need for a decision as to next steps. The U.S. Trade Representative (USTR) has made major breakthroughs around issues such as elimination of limits on foreign investment in telecom licenses (for example, in India and Korea - if the Korea-U.S. Free Trade Agreement is approved), and support for regulatory reforms in foreign markets.

The strained relationships between the U.S. and other governments over the past period have been felt in these global venues for communications policy. Today, other governments that are active around communications policy issues have high hopes that U.S. policymakers will be more open to engagement around issues of mutual interest. It will be important to demonstrate early that these positive expectations are warranted.

Another opportunity to expand global competitiveness and enhance critical infrastructure security is for the United States to ratify the Law of the Sea Convention, which will strengthen international legal protections for U.S. submarine cable systems. Ratification has been supported by President Bush, the Department of State, the Department of Defense, and numerous industry sectors. The Senate Foreign Relations Committee reported the Convention favorably in 2004 and 2007, but the Senate took no further action.

Where We Stand

Verizon supports the following.

• Ensure that the Department of State office of Communications and Information Policy continues to be pro-active in engaging with the ITU and in various international venues in close consultation with U.S. industry. Through energetic leadership and cross-agency collaboration, this office has been very effective in influencing global policy-making.
• Support the economic growth agenda by strengthening global competitiveness through engagement on market access initiatives using channels at USTR and the Department of Commerce, supported by the technical expertise of the FCC. Priorities should include promotion for flexibility to provide converged, innovative services and for the elimination of caps on foreign direct investment.
• Encourage bilateral and multilateral efforts to facilitate deployment of cross-border services. The ITA, OECD and Department of State have each worked to advance the message that national rules, such as those related to licensing, should be streamlined to minimums in order to further strengthen the global information economy through IP services availability.
• Develop a strategy for achieving a system of Internet governance that addresses the expiration of the ICANN JPA and results in a structure that preserves the stability and security of this resource on which so much of our economy relies.
• Provide Senate advice and consent to ratification of the Law of the Sea Convention at the earliest opportunity.