Verizon Chief Executive Calls for Updated TV Franchise Laws and Progressive Tax Policies to Spur Investment

Verizon Chief Executive Calls for Updated TV Franchise Laws and Progressive Tax Policies to Spur Investment

Current Practices and Potential New Tax Burdens Threaten Future Investment, Ivan Seidenberg Says

BOSTON, Sept. 20 /PRNewswire/ -- Verizon Chairman and CEO Ivan Seidenberg today called for a national growth agenda that encourages investment and innovation in modern communications.

In a speech to the Chief Executives Club of Boston, Seidenberg stressed that change is needed now. "It's time to implement a progressive economic agenda that would transform the Massachusetts business environment and position us for leadership in the global economy," he said.

Seidenberg called for an end to unnecessary barriers to capital investment, starting with video franchise reform, and for implementing a tax policy that promotes rather than discourages investment. He noted that "any new taxes -- such as the one being proposed in Boston that would impose more than $140 million a year on telecom companies -- would be a step in exactly the wrong direction."

To speed consumer choice for video services, Seidenberg said, the laws governing local franchising need to be updated on either a state or national level. Verizon is building an all-fiber network in parts of 15 states, or more than half the states it serves, including Massachusetts. In addition to faster Internet connections, this new FiOS network is capable of providing video.

Under state laws that date back to the earliest days of cable TV, a competitor must obtain a franchise in each local community before offering television service.

"We already have the network to provide voice and data," said Seidenberg. "Now we have to go through an additional process in each Massachusetts town just to provide video over the same pipe. It makes no sense."

Verizon is negotiating franchises in hundreds of communities across the country. In Massachusetts, Seidenberg said, the company is having discussions with about 30 municipalities.

Verizon has already obtained franchises in Texas, California, Florida and Virginia to offer FiOS TV to nearly a half-million households served by the company's FiOS network, and plans to unveil its first commercial offering soon.

"So we're making progress in getting the franchises we need," Seidenberg said. "But we think the whole process could go faster -- and the benefits of video competition could come quicker -- if we could find a state or even a national solution to this franchise issue."

Texas has already gotten ahead of this issue with a modern, streamlined franchise law, which clears the path to technology investment and video competition, he noted. "While there may be different solutions for different states, the point is clear: We need more investment-friendly policies like that to take down the 'do not enter' signs that keep capital and jobs from flowing into this region," he said.

The second item on Seidenberg's pro-investment agenda is reducing costs to U.S. businesses, allowing them to compete globally and keep more resources here at home. He focused on taxes, noting that in many parts of the country, communications services are taxed differently from any other type of business.

In many places telecommunications is taxed at a level greater than alcohol or tobacco, Seidenberg observed. "This puts us in the 'sin tax' bracket," he said.

The combined state and local tax rate for wireline telecommunications services averages almost 14 percent -- in some communities it's 30 percent. For wireless services, it's almost 11 percent. By comparison, the average rate for other goods and services is 6 percent.

"Clearly, we're working on a national level to reform the federal telecom taxes that discourage the very investments in technology that we should be trying to stimulate," Seidenberg said. "In places like Massachusetts, we're working to maintain pro-investment tax policies that encourage carriers to expand the deployment of broadband services."

Verizon invests $1 billion annually in New England, has 20,000 employees in the region, spends more than $500 million with Massachusetts vendors, donates more than $4 million a year to charities in the Commonwealth, and pays $75 million annually in taxes, he said.

"Massachusetts is a key state in the transformation of our communications network. With the right set of pro-investment policies, we could do even more, sooner," he said.

Seidenberg set the stage by outlining the "world is flat" syndrome. In book of the same title, New York Times columnist Thomas Friedman explores technologies and political events that converged in the late 1990s to level playing field for people and economies all over the world. One of the key "flatteners" Friedman writes about is communications technology.

Seidenberg said, "We need to make sure that, as the world gets flatter, Massachusetts gets stronger. And, if communications technology had a big role in creating the 'world is flat' challenge, it will play an even bigger part in equipping our citizens and our businesses to meet that challenge."

With more than $71 billion in annual revenues, Verizon Communications Inc. (NYSE:VZ) is one of the world's leading providers of communications services. Verizon has a diverse work force of more than 214,000 in four business units: Domestic Telecom provides customers based in 28 states with wireline and other telecommunications services, including broadband. Verizon Wireless owns and operates the nation's most reliable wireless network, serving 47.4 million voice and data customers across the United States. Information Services operates directory publishing businesses and provides electronic commerce services. International includes wireline and wireless operations and investments, primarily in the Americas and Europe. For more information, visit www.verizon.com.

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Source: Verizon

CONTACT: Jack Hoey, Verizon, +1-617-743-4760, john.p.hoey@verizon.com

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