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KENT FUCHS: It's a great honor and pleasure and privilege to welcome Cornell's 32nd Robert S. Hatfield fellow in Economic Education, Lowell McAdam. Lowell as one of today's most visionary and innovative leaders in the communications industry.
For over three decades, the Robert S. Hatfield Fund for Economic Education has brought the most influential corporate leaders to Cornell to serve as Hatfield fellows. The Hatfield fund is dedicated to two goals, enhancing the economic education of undergraduates and supporting the Hatfield address, which serves as a platform for the exchange of ideas between the academic and corporate communities. Selection as a Hatfield fellow is the highest distinction that Cornell bestows on a corporate leader.
The fund was established in 1980 by the Continental Group Foundation to honor the group's president, chair, and CEO, the late Robert S. Hatfield. And Mr. Hatfield was a member of the Cornell class of 1937, and also a university trustee. We're delighted to have with us today Mr. Hatfield's three daughters, Suzanne Hatfield, Roberta Williamson, and Molly DuPre. Would you all stand for a moment so we can recognize you?
[APPLAUSE]
Our speaker, Lowell McAdam, has played a vital role in the success of industry giants Verizon Wireless and Verizon Communications. As the current Chair and CEO of Verizon Communications, he has responsibility for all the business units and staff functions. He's also chair of the Verizon Wireless Board of Representatives.
Mr. McAdam has held several key executive positions with Verizon and Verizon Wireless. He joined Verizon Wireless at its inception in 2000, and he built it into the industry's leading wireless provider. Verizon Wireless was originally jointly owned by Verizon, 55%, and Vodafone with 45%. Recently, Verizon announced that it is buying Vodafone's share $130 billion, the largest merger since 2000, and I believe the third largest on corporate record.
Verizon recently startled the bond markets by racing $49 billion in investment-grade corporate debt at one time to help finance this acquisition. Under Mr. McAdam's leadership, Verizon has championed responsible energy management and also the use of technology to advance health care and education. He's personally committed to education, serving as director of the National Academy Foundation, which supports the preparation of students for college and careers.
Mr. McAdam was recently named as the 2013 winner of the David Packard Medal, which is a medal from the US technology trade association TechAmerica, and the Packard Medal recognizes significant contributions to the advancement of the high tech industry and distinguished service to the community, the industry, and humankind.
A 1976 graduate of Cornell with a bachelor's degree in mechanical engineering, Mr. McAdam went on to earn an MBA at the University of San Diego. He has been and continues to be an astute advisor for Cornell, serving for several years as a member of the Cornell College of Engineering Advisory Council, and he joined the University Board of Trustees in 2012, where he currently serves also on the Trustee Task Force for Cornell Tech. We are very fortunate today to have this opportunity to hear his thoughts on the future of communications technology, and I ask you to join me in please welcoming Lowell McAdam.
[APPLAUSE]
LOWELL MCADAM: Thank you, Provost Fuchs. Thank you all for coming this afternoon. I'm especially honored that the Hatfield daughters would be here today, so I appreciate the travel that you all went through. When David Skorton asked me about this award, I literally turned around, because I assumed he must be talking to someone that was standing behind me versus me. It is such an honor to be here, and I realize this is as much about Verizon-- more so about Verizon than it is Lowell McAdam, so I do appreciate you all being here.
As I wandered around the campus today, I had a friend and a colleague with me who hadn't been to Cornell before. And I said, the weather was just as I remembered it.
[LAUGHTER]
The blue sky, the green grass. the only thing missing from my days here was the soft glow of the fluorescent lights from Uris Library as I looked out the window and saw these days instead of participating outside with them. So it really has been terrific to be back here.
As you know, I spent about 20 years between being overseas and on the West Coast. When we came back in 2000, we got much more involved in the university, and I couldn't be prouder to be part of this community.
So earlier today, I had the chance to visit the new Bill and Melinda Gates Center, which will house, among other things, the Verizon Innovation Lab for study of the human-computer interaction. And you see, I'm part of the lab or rendering of the lab here. It's very exciting to me to see how Cornell is marshaling the engineering and computer prowess to find ways to tackle some of the biggest issues facing our planet. As very respected writer Margaret Heffernan says, "The job of scientists and engineers is to find a hard problem and solve it."
Now if you look back in history, for the builders of the Transcontinental Railroad in the 1800s, that hard problem was how to unite the east and the west coast of an enormous country with all of the markets in between. The result was a tidal wave of growth and a creation of a new economic empire on the world stage. For the builders of the Bell System back in the 1900s, the hard problem was connecting the world to a brand new technology called the telephone, a quest that led to the vacuum tube, the transistor, fiber optics, and, thanks for all of us, cellular technology.
The economic impacts of the communications explosion are still being felt across the world today. Research shows that for every 10% increase in mobile and broadband penetration, GDP of that country increases by 1%.
Now for those of us that are engaged in building the world of the 21st century, the hard question now is, what innovations can we deliver over those billions of connections that will improve the lives of people around the world? And that's what I'd like to talk about today.
The foundational technologies of the information age were just being developed when I was at Cornell in the '70s. As you see on this chart, in 1970, Corning, not far from here, introduced the first fiber optic cable. In 1972, the government first demonstrated ARPANET, which, as you know, was the forerunner to the internet. Xerox introduced the ethernet, and Bell Labs invented Unix, both of which languages are still in use today. 1973 saw the world's first cell phone call from Motorola to Bell Labs. And in 1976, Apple sold its very first computer, the Apple I.
So of course back then, there wasn't much evidence all of these technical miracles, what they would deliver in the marketplace. It wouldn't be until 1983 that you could actually buy a cell phone, but DynaTAC from Motorola, for a mere $3,900. So I'd ask you to listen to this video. And you'll pick up the number of illegal things going on, by the way, and the difference in the view of what the market would become versus what it's become today. Take a look.
[VIDEO PLAYBACK]
- Those who think getting a car phone is not for them, whatever the reason, haven't kept up with the booming industry of cellular radio telephones. Scenes like this are becoming commonplace in US cities where cellular is available today. This revolution in communications could make it possible for more and more people to have a phone in their car, or even one that travels with you, like this unique cellular portable, made by Motorola, which weighs only 30 ounces.
Right now, business men and women are major users of radio telephones where cellular is in service. But more people will take advantage of cellular as its benefits become apparent.
Eventually, seeing people using cellular phones may seem as commonplace as someone checking time on an electronic watch, figuring on an electronic calculator, or programming on an electronic computer. Industry watchers say there are only a few thousand cellular phones in use right now, but that number is expected to grow considerably within the next few years during the cellular revolution.
[END PLAYBACK]
OK. So you picked up on a few of those. The iPhone that many of you have in your pocket today weighs seven ounces. So anybody want to trade in for a 31 ouncer?
[LAUGHTER]
And it was very interesting. And as I joined the Bell System in 1983, they were arguing over who had to take the mobile licenses, because no one thought mobile was going to be anything more than a million or two customers. Today, Verizon has over 100 million customers all on their own. So someone didn't have quite the vision there, Kent, that they probably needed.
Anyway, today when you look at it, it's astonishing how fast technology is moving from the lab to the market. In this century alone, we've gone from 350 million to 2.7 billion internet users, almost 40% of the world's population. Wireless has grown from 750 million to 6.8 billion subscriptions, an astounding 96% worldwide penetration.
In the brand new market of mobile broadband, we've gone from basically zero to 2.1 billion subscribers, an annual growth rate of 40%. So these numbers testify to the most powerful characteristics of communications technology, how fast they scale.
The second thing that's changed the game in the 21 century is the rapid emergence of social networks with all of these companies being founded in the last decade, as you see up here. Friedman calls this the great inflection, the point at which people go from being connected to being hyper connected. Meaning we're never more than a click away from being part of the global community of billions of users.
Finally, what separates this revolution from previous technology disruptions is the inherent property of information technology to evolve at an exponential rate. This is best expressed in an axiom known as Moore's law, which says that the number of transistors on a chip doubles every 18 months.
So what does that mean in practical terms? Well, for one thing, you'll pay half as much a year and a half from now as you do today for the same amount of power and capacity, meaning that information technology transforms the economics of literally everything it touches.
The real challenge, though, is to our imaginations. For example, think about how information technology is beginning to transform the science of biology. A researcher at Scripps Clinic in San Diego has modified a Deskjet 500 printer from the 1990s to make knee cartilage using living cells. Soon we'll be able to print organs, blood vessels, bone, and skin.
A University of Illinois researcher is working on a technology called bio-bots, microscopic machines powered by live muscle cells which may one day be implanted in patients to deliver medicine or detect cancers. A Stanford bioengineer is figuring out how to program the control systems inside cells to switch disease processes off just as you'd program a computer. So as I spoke with Laurie Glimcher of Weill Cornell Medical Center, we've got all that stuff beat here at Cornell.
So what does this combination of scale, connectivity, and exponential change really mean? Well, to put it simply, the future impact on the information revolution will be bigger, faster, and more far reaching than anything we've seen to date. The evolution of communications networks has been a key enabler of this information revolution.
Verizon has invested $80 billion in infrastructure over the last just five years to create a powerful distribution platform for this innovation. It's estimated that by 2017, mobile devices will originate more internet traffic than wired devices, with mobile data growing at 66% a year. Verizon helped usher in this mobile broadband era with our 4G LTE wireless network, which has catalyzed growth and innovation across the entire tech industry.
Internet video is expected to make up almost 70% of all consumer internet traffic by 2017, and video-on-demand traffic will triple. We've upgraded our residential network with fiber optics to not only handle this explosion of video traffic, but also prepare for the home of the future that will accommodate high bandwidth services like telework, telehealth, and security.
Global IP traffic has quadrupled over the last five years, and continues to grow at more than 20% a year. A huge amount of this global IP traffic is transported on Verizon's high-speed internet cables. We're pushing 100 gigabit speeds into the vital 21st century trade routes in Europe and the US, and just recently upgraded all of our fiber in our central offices in lower Manhattan that were damaged by Hurricane Sandy.
About half of all business data and a growing amount of consumer information are stored in the cloud, giant network services that can hold anything that can be digitized. Verizon has an extensive network of data centers around the world that can store and safeguard this vital data, and offers specialized services such as mobile, commerce, security, health care, and telematics.
By 2017, there will be nearly three network devices for every person on Earth. Much of this is due to the growing field of machine-to-machine communications, or what's called the internet of things, wherein wireless internet connections are embedded into electronics, machines, buildings, and even transportation systems.
In short, we now have the ecosystem for spreading innovation on a worldwide scale at speeds we could only imagine a few short years ago. All of this makes Verizon's network a central piece of the innovation machine for the 21st century.
As you see on this slide, McKinsey has come up with a list of 12 technologies that will have the biggest impact on the world economy by 2025. And as you can see, communications technology is integral to just about all of them.
These fantastic new tools in our toolbox give us the ability to address hard problems on a worldwide scale in ways we never dreamed of before. Verizon is working with partners across the economy to tackle some of the hardest problems of all. We're focused on three specific areas in particular-- health care, energy, and education-- where we believe technology and innovation can change the game, creating value for both business and society.
In 2000 alone, we spent, as a country, $2.8 trillion on health care. We think technology has the potential to drive down costs and improve outcomes for patients, and we're working to give doctors and patients the technology tools they need to take charge of their health.
Sometimes all it takes is to help people make better use of the technology they already have in their pocket. For example, we're working with one program that's using smartphones to help TB patients follow their protocol taking their medication, which has increased the compliance rate by 70%. In another case, we're working with a hospital in Washington, DC that uses text messaging, simple technology, to communicate with the parents of kids with asthma, which has improved the quality of care and reduced the number of trips to the emergency room.
But the real opportunity will come from accelerating the next generation of health care solutions. Developers are using our 4G LTE and cloud networks to connect a new class of biometric devices and apps that allow patients to track vitals, monitor blood pressure or glucose levels, and send the data to the cloud where it can be analyzed and where doctors can keep track of it without an office visit.
This depends on a secure cloud infrastructure that can protect patient data and ensure confidentiality. Verizon was the first to receive an FDA HIPAA-compliant approval for our mHealth and cloud solutions, which will solve the unique security issues that have held back innovation in this area for years.
As a result, a number of new models for health care are emerging. Let's take a look at this video we recently created with some of our partners in the health care industry.
[VIDEO PLAYBACK]
- We've been talking about it for 30 years, the sharing of medical information on a large scale. Now we have a platform that allows for instance data sharing and analytics via web portal, text messaging, video, enabled email, and mobile apps.
- In some of our systems, we have more than four million distinct patients' records. Our vision is to have information from all of our different electronic medical records, brought together to create one single comprehensive view of that patient. Decision support, drug interactions, dosing errors, allergies the patients may have, all of the laboratory testing, all the radiology testing. We're looking at the value in terms of improved quality, errors avoided, and lives saved.
- For 25 years, the Children's Health Fund has been delivering health care to homeless and medically underserved children across the US. Now we're pioneering an array of next generation mobile solutions in health care. Wireless diagnostics, real-time interaction with medical specialists, and virtual visits on mobile devices.
- Patients come to see me once a year. I have no idea what happens in the other 364 days. We're going to use connected technology to track our study participants' daily routines, their activities, and their medication compliance. How can we use technology to change eating habits? Can you really motivate people to exercise? And how do you best remind patients to take their medications?
- What happens when you bring this all together? The human genome has now created for us an amazing opportunity to find the right treatment at the right time at the right place. The amount of processing is impossible to do unless you have an infrastructure like Verizon and the data center such as Terremark and supercomputers.
So with Verizon, we're developing the Cancer Knowledge Action Network, where we'll be interconnecting every medical center, every cancer center so they could have access to this supercomputer at their point of care. Better quality, lower cost, and advanced decision support, all brought together by the convergence of biology, technology, and interconnectivity. That's the power of big data, a whole new way to look at health care.
- Because the world's biggest challenges deserve even bigger solutions.
[END PLAYBACK]
The last speaker was Dr. Patrick Soon-Shiong, who along with Muhtar Kent, the chairman and CEO of Coca-Cola and I are chairing a CEO council with the likes of Bank of America, the Mayo Clinic, the Cleveland Clinic, Aetna, UnitedHealthcare, because we see a tremendous opportunity in front of us. With the Affordable Health Care Act or Obamacare, whatever you want to call it, the technology is in place, and there will be a disruption as a result of this health care bill. And we are working very hard to make sure that these technologies are used to improve outcomes for people around the world. So it's a very, very exciting time in health care.
Now another industry being transformed by information technology is energy. According to one major study, technology solutions have the potential to reduce greenhouse gas emissions by 16.5%, create 29.5 million jobs, and save $1.9 trillion, all by the year 2020.
At Verizon, we're intensely interested in how we can use technology to cut the carbon footprint of our own networks and physical plant. We have an ambitious goal to cut our carbon intensity in half by 2020, and we're investing $100 million in solar and fuel cell projects at buildings and data centers across the state to accelerate this process. And by the way, one of our partners in this is Cornell and Jeff Tester in the sustainability organization.
More broadly, we're working to bring new technology solutions to what Business Week has called the largest machine in the world, the US electrical grid. Today there are some 200 million smart meters in use that connect the utility grid to the machine-to-machine and cloud platforms, and allow supply and demand of energy to be managed more efficiently.
We're also starting to use these technologies to connect vehicles first to one another, and then to the transportation infrastructure itself. Experts say that by integrating cars via smart transportation systems, we can reduce congestion, lower emissions, and achieve fuel efficiencies up to 30%. This fully connected world is a few years away, but already we're seeing how information technology can save energy just by bringing more transparency to the system.
Now we have a partnership with the city of Charlotte, and I know many of you are from the Carolinas, and where we're actually putting these technologies in use to improve energy efficiency. Let's take a look at this video.
[VIDEO PLAYBACK]
[MUSIC PLAYING]
- Envision Charlotte is a sustainability initiative. The goal of the program is to turn the urban core of Charlotte into the most sustainable urban core in the country.
- And it would not happen without the kind of partnership we have with Verizon.
- I think companies like Verizon have to lead the way for green usage and sustainability.
- The whole premise of Envision Charlotte is connectivity and measurement, because people need to see numbers to really believe that change is happening.
- We have an interactive kiosk installed in the lobby of each participating building. You can walk to the kiosk and see, real time, energy usage information.
- And it's the power of the Verizon network that allows us to provide information that's relevant to the users so that people know, this is what I can do, and this is the impact that it has.
- When you add up to 67,000 people who work in our central business district, that is a huge amount of energy savings. That would not be possible without the technology provided by Verizon.
[END PLAYBACK]
So our third focus area is education. That's also a sector ripe for technological innovation. Today, education consumes about 9% of GDP, but attracts less than 1% of venture capital for equity investments, far less than energy or health care.
Yet as we look to the future, technology will be a vital tool in preparing our young people for that future. Consider this. The technology content of every business in every job is rising, yet our universities produce only half of the computer-literate graduates required by our economy alone. McKinsey estimates that 65% of children in grade school will hold jobs that don't exist today.
Young people are eager for technology solutions. Some 95% of teens are online. 2/3 are mobile, and 32% already take at least one course online. So this is an exciting and experimental time in the history of education, with new technology-driven models emerging everywhere you look.
Cornell and other major universities are experimenting with these massive open online courses, or MOOCs, which extend traditional bricks-and-mortar model into the home. Innovations such as the Khan Academy are introducing the idea of the flipped classroom, with students watching instructional videos online at their own pace and location, and then using classroom time to get coaching from teachers and engage with peers.
At Verizon, as Kent said in the introduction, we're working with the National Academy Foundation, funded by Cornell grad, board member, and philanthropist Sandy Weill, to establish specialized academies within public schools to prepare students for STEM careers. This public-private partnership has a proven track record of success, with 97% of the seniors graduating, 84% of them going on to college, and its alumni out-earning their peers by 11%.
We've also launched the first national program for integrated mobile technology into the classroom to improve education for underserved students. These Verizon innovation learning schools train teachers to use mobile technology to improve learning outcomes. In early results, we've found that 37% of the students improved in their STEM subjects.
The opportunities to change the world are immense. The solutions I previewed for you today barely scratch the surface of what will be possible when we apply technology to the big issues of our society. Verizon's role in this world is to catalyze innovation and to help create an ecosystem of developers, manufacturers, and inventors and engineers who can collaborate to solve the world's biggest problems.
The picture you see on this slide is of our Innovation Center in Waltham, Massachusetts, one of two technology laboratories where we work with entrepreneurs and developers on next-generation technologies that leverage our 4G LTE network. We've also created our Powerful Answers Award, which we announced at this year's Consumer Electronics Show. We will award a total of $10 million in prize money to stimulate innovative applications in health care, education, and energy, with our award winners to be announced at CES in January 2014. I hope there's a Cornelian among them.
We're collaborating with universities as well, obviously, most notably with Cornell. Has nothing to do with me being an alumni.
[LAUGHTER]
Here's a look at how we're working together on the issue of sustainability.
[VIDEO PLAYBACK]
[MUSIC PLAYING]
- In 2009, we began this collaboration with Verizon, decided to do some projects, and the Verizon Foundation supported this concept of working on sustainability. Verizon was able to open up their doors to us to allow us to work on projects. How better to cool their cell towers or ways of running their fleet and data centers that are more sustainable. What we've benefited from is the relationship with Verizon, because there's been a commitment on the Verizon side to engage with us on these projects, to make available to our faculty and students a whole set of resources they wouldn't have otherwise have.
- Verizon has shown a large interest in sustainability. You have to kind of walk the talk in this area, and Verizon's doing that. And I think that makes a lasting impression on both faculty and students that are involved with the project.
- It's a really unique opportunity for students and faculty to focus on the specifics of a real situation with all of the resources of the Verizon team. It's a real partnership.
[END PLAYBACK]
In many ways, I would say that we're in the golden age of innovation, with the tools for technology transformation more affordable and more powerful than any time in our history. With the internet and high-speed communications, we have the capacity to leverage the knowledge base of the whole world, not just our own neighborhood.
But for all the progress we've made, there's a long way to go. 60% of the world's population is not connected to the internet. 80% of the world's population lives in poverty on less than $10 a day. Nearly a billion people are unable to read a book or to sign their names.
I think back to the beginning of the speech. I think the good news is there are still plenty of hard problems left to solve if you're an engineering or an IT person coming out of school here today. The tricky part is that with technology changing at an exponential rate, the world 10 years out or even five years out will be fundamentally different from the one that we see today. That's why keeping up with the pace of change is not just a technical challenge. It's a creative challenge, one that requires imagination, expertise, and the kind of breadth of vision that you're all getting here at Cornell.
I spent an hour or so this afternoon with a group of soon-to-be graduates, and it was very invigorating for me when I thought about what the world looked like when I graduated in 1976, and what it does today, to think what those folks will do when hopefully they come back and get a Hatfield award when they're a bit older. So I thank you very much. Again, we're very honored to be here with you all today. Again, thank you to the Hatfield sisters for being here this evening. And I think we'll take some questions, right, Provost?
KENT FUCHS: Yes.
LOWELL MCADAM: OK.
[APPLAUSE]
KENT FUCHS: So now it's your opportunity to participate. And we have two good-looking gentleman here who have the microphones. And if you raise your hand, they will do their best to come to you. And then I'm going to alternate between the two men. But I'm going to start. I get one chance here, because the rest of you will--
LOWELL MCADAM: As provost, you get the final say?
KENT FUCHS: I get the first say. I get the first say. And then we'll take questions and our speaker will address them. Lowell, you concluded by mentioning the world outside of the US and some staggering numbers about needs worldwide from literacy to economic needs. How is Verizon and you personally thinking about the world outside of the US, whether it's a market perspective or the impact that communications technology can have on the world, broadly speaking?
LOWELL MCADAM: Well, I think there's tremendous impact. If you go to most places in India or Africa, they are leaping over what we have done in the US. They're going almost exclusively to mobile technology. There's tremendous capacity to take the innovations that we have within the US and apply them throughout the rest of the world. So that's really our focus.
Today, we're in 150 countries around the world. People don't think about that for Verizon. If you know wireless, you think we're a national player. If you're more of a wireline person, you think East Coast.
But we are going to be using the things that we develop in the US and get them out there. We don't control networks as much over there, but we have the IP backbone capability. So tremendous potential. But for us as a company, we have to make sure that our culture, our capabilities match up with the environment that we go into. So we're very selective about how we do it, but we will definitely be expanding.
KENT FUCHS: Thank you. So I think-- was it over here? Who has the first question? Yep?
AUDIENCE: So-- I'm a Verizon subscriber, by the way.
[LAUGHTER]
Following Edward Snowden's leak to the NSA, Verizon's been in the middle of a lot of controversy. It's already been the subject of several lawsuits. And yesterday, your Global Enterprise President, John Stratton, he shot down the efforts of Google and Microsoft and Yahoo to sue the government over its gag order and fight the 215 order of the Patriot Act to seize the communication information of these companies, basically.
But Verizon and AT&T have refused to sign on with these efforts. And John Stratton dismissed these efforts as pure grandstanding for publicity. So basically my question is, why has Verizon been so reluctant to challenge the NSA on its collection of data, and doesn't this constitute an extreme invasion of privacy?
KENT FUCHS: So we're starting with the softball questions.
LOWELL MCADAM: Yeah.
[LAUGHTER]
I want to shake your hand afterwards for standing up and asking that question. Good for you, OK? So I think, look. The first issue is when you're in a business like we are, you have licenses from the government to provide service. And part of their right under the legislative system is to subpoena whatever records they want, and you have no choice but to comply with those, so that's what we've done.
We are the largest telecommunications provider to the United States government, and you have to do what your customer tells. So is it my personal desire to turn that sort of information over? No. But I will also tell you that every country-- those 150 countries that I mentioned-- every country does the same thing.
So I think the only piece about this and I find ironic is that some of the other countries point their finger at us, and we've been pulled into their chancellor's office to explain ourselves. And when we share with them that they are doing exactly the same thing, the meeting becomes very short, and they say, thank you very much.
So now the issue of Google and the comments made by John Stratton, the thing you find that when you have an organization as large as Verizon, you don't get to control everything that everybody says. That may be news for you, but that is true. You probably have that problem once in a while, Kent.
KENT FUCHS: I am the problem.
[LAUGHTER]
LOWELL MCADAM: But I think there's only one way that you deal with getting this law changed, and that's with going into the government, working with the Justice Department, working with the NSA, and getting them to change the law. There are certainly plenty of public pressure on this, and to hold it out in the media and try to make a big issue out of it I don't think will be as effective as working behind the scenes. That's the route we've chosen to take.
KENT FUCHS: Thank you. Over here.
AUDIENCE: Hi. My name's [INAUDIBLE]. And I was hoping you could comment on the open versus closed philosophy that you can take towards broadband, where in the United States, we have a closed broadband network, and in countries like South Korea, Japan, and Europe, they have a more open approach. So other countries can hop on Verizon's infrastructure and try to compete with them, and that has led to cheaper and faster internet service. So I was hoping that you could comment on that.
LOWELL MCADAM: Yeah, I'm not sure you have your facts straight there. Because-- so as long as we're having a candid dialogue, you've got us off on the right foot.
One of our biggest business units is wholesale. And so we wholesale off IP backbone capacity all over the world. Where we don't wholesale today is, for example, from the central office to someone's home. That Fios service is what we offer with the TV and the broadband. We don't do that. But virtually every other part of our network, we wholesale. Wireless wholesales, our internet backbone, wholesale. So maybe we can compare here. Unless I'm missing something in your question, I think we're doing what you say.
Now one of the things that Europe does is they force-- they highly regulate what we call mobile virtual network operators. The US doesn't require that. We have many MVNOs that we work with, but it's not heavily regulated. And I don't know. But I'm happy to follow up with you afterwards.
AUDIENCE: Hi. I just wanted to thank you for an excellent talk. And I know early on you mentioned how you anticipate broadband traffic and IP traffic tripling and increasing almost exponentially in the years to come. I was wondering what were your thoughts are on traffic shaping and things like network neutrality, and how that will affect the growth of technology and how it affects our day-to-day lives.
LOWELL MCADAM: Yeah. So you guys are all hitting the tough questions.
[LAUGHTER]
Net neutrality is one of those words that sounds very attractive until you get below the service and you understand what it really means. But our philosophy is-- and very consistent with what the players like Google and Apple and Microsoft want-- we will any data that comes our way, as long as it's lawful, and we will pass it on our network on a first come, first serve basis.
The ruling that was passed by the FCC allowed them the capability to come in and price regulate our broadband services, and the Telecom Act of 1996 made it very clear that the broadband network should be allowed to evolve in a competitive environment. What this rulemaking tried to do was focus on just the carriers. And our view is that an Apple, a Google, a Yahoo, a Microsoft, a Cisco, an Oracle is all involved in a very complicated ecosystem around the internet.
And to just single out the carriers for regulation, what that will do, in my opinion, all you have to do is take a look at what's gone on in Europe. Europe overregulated their telecommunications industry, and in 1999 or 2000, they were the class of the world in telecommunications. Tomorrow they're far behind the rest of the competition. So I think you have to be very, very careful of unintended consequences around regulation. Protect the consumer, then let people compete. And the winners will be the ones that take the best care of customers. There's one in the back over here.
KENT FUCHS: Over here.
LOWELL MCADAM: So as our provost pointed out, some of these questions are pretty softball, so I figured I'd throw you a curveball. What do you miss most about your time at Cornell University?
[LAUGHTER]
The Chapter House.
[LAUGHTER]
KENT FUCHS: I think we could arrange a visit.
LOWELL MCADAM: Yeah.
[LAUGHTER]
I hear it's a little different than it used to be. But you know, I was involved in a fraternity here, and I was involved in the Navy ROTC program. I still have friends, however many years it's been, since I graduated from those two institutions. So I loved the time studying, but I wasn't the smartest guy in the class. So that was a bit of a grind. But the social life, I would say, is probably the biggest thing.
KENT FUCHS: We heard that chairman and CEOs have a similar life. Is that true?
[LAUGH]
LOWELL MCADAM: Yeah, right. Yeah.
KENT FUCHS: Anybody here in the center? Yep? There's one here.
LOWELL MCADAM: And there's a couple, halfway up the aisle.
AUDIENCE: Hi. My name's Morgan. Google is having a very cool project called Google Fiber in Kansas City. Do you see them being a competitor of you in the near future? Also, can you briefly comment how much you like about the new iPhone 5s, and do you think it's going to sell? Thank you.
[LAUGHTER]
LOWELL MCADAM: OK. Well, those are two good topics. I know Larry Page pretty well, and Eric Schmidt even better. And I have to tell you, when they accounted Kansas City, I said, you guys are copying us. We started doing this 10 years ago. And they admit that we do. Our Fios service is fiber into the home, and that's why we can do 500 megabits, and the cable companies and the others are having difficulty with it.
I actually welcome this. I'm glad they're doing it in Kansas City. Their response to me was, you guys get it. We want to make sure the rest of the country gets it, because they want to see more broadband deployed.
The interesting challenge, and Dan and I have talked about this, we have all the Google engineers in the building where the new tech campus is temporarily housed. And we're now working with Google to get fiber from Fios into their engineers' homes. Because the challenge isn't so much building the infrastructure. It's having the applications that matter to people's lives that need that kind of bandwidth.
So I always-- this is one of my [INAUDIBLE]. He was the engineering dean, and I know I have to be careful. But I always say, technology is like a slinky, for those of you that are old enough to know what a slinky is. You know, they kind of-- it flops over, and the next thing flops over, and the next thing flops over. I mean, technology right now is ahead of applications. And I think the challenge for Verizon and for Google is to make those applications that change people's lives that need that kind of bandwidth, and that's what we're going to do.
So now to your second question. I was sitting with Tim Cook in his office a couple weeks ago. I go, Tim, tell me I'm going to love this iPhone 5s. And he goes, oh, you're going to love this iPhone 5.
[LAUGHTER]
Tell me why. I think the two things he pointed out to me is that the iOS 7 will make a significant difference in the performance of the device, in the clarity of the screen, and that sort of thing. So he said, that alone is a huge improvement. And then there's a few apps like this thumbprint that he thinks will be pretty cool. I pick mine up tomorrow morning, so I'll let you know.
KENT FUCHS: We're going to ask about your [INAUDIBLE]. Last one over here. This is our last question. [INAUDIBLE].
AUDIENCE: Thank you for coming and talking. Speaking of the Verizon-Vodafone deal, what kind of-- could you give some insight into the strategic reasons, or what kind of competitive edge do you think the deal will give you?
LOWELL MCADAM: That's much better question. Usually the media, when they talk to me, they want to know, what did you have for dinner when you were talking about this deal with Vittorio. And they really want the behind-the-scenes stuff.
You know, we look at merging the two companies together. I was actually a Vodafone employee for a while when they bought AirTouch. I helped do the startups in Spain and Italy and Portugal and the Netherlands. So Vittorio and I have worked together for years. We're good personal friends. We really tried to figure out a scheme to put the business together, because we thought the extra scale would be a great thing.
But when you look at the path the US market is on, and you look at the path that the European market is on with their regulation, et cetera, we're at very different places in the journey. I think it'll ebb and flow a little bit, but we're at very different places in the journey.
We couldn't make a case for our shareholders to put the businesses together that both sets of shareholders would win. We could put together a case that if we cashed him out of the Verizon Wireless venture, we would be able to better address these converged services that I talked about. Using video on mobile and using cloud and using security, things that you think of as more wireline.
We thought we'd have a growth spurt in front of us. He thought that if I had those dollars, he could go out and buy cable companies like he has with Kabel Deutschland now, or at least made an offer on, and he could grow his business. And we still preserved some of the linkages between the companies that we'd built over the last 15 years together.
So we really tried to have a win-win, and I think we've achieved a win-win. I really like the position we're in at Verizon, because I think we have the assets to make a huge difference for people, not only in the US, but outside. So that feels like a good reason to get out of bed every morning.
KENT FUCHS: Great place to end. Before we thank our speaker, I have a presentation. So let me give you a small gift, Lowell. It's our tradition. We have some Steuben glass that represents the Hatfield lecture, and I've been told that neither of us should drop it.
[LAUGHTER]
LOWELL MCADAM: [INAUDIBLE].
KENT FUCHS: Yeah. Yeah. So I just want to thank you for being our Hatfield lecturer, and for coming back to Cornell. Welcome back.
LOWELL MCADAM: Thank you.
[APPLAUSE]
Lowell C McAdam '76, chairman and CEO of Verizon Communications, spoke as the university's 32nd Hatfield Fellow in Economic Education, September 19, 2013 during Homecoming Weekend festivities.
The times they are a-changing, and communications technology is driving a lot of the change - but we have to work to keep up. "For all the progress we've made, we still have a long way to go," McAdam told a full house in Statler Auditorium.
McAdam became CEO of Verizon Communications in 2011 and chairman in 2012. He is also chairman of the Verizon Wireless Board of Representatives.
A member of the Cornell University Board of Trustees and a past member of the Dean's Advisory Council in the College of Engineering, McAdam spent six years in the U.S. Navy Civil Engineer Corps and became a licensed professional engineer in 1979.
