Fierce Telecom: You mentioned IBM and integrators. What advantage does Verizon have over those companies?
Shammo: They are a competitor to us. As I like to say, I think I have a strategic strength. That strength is if I go into bid for a managed network service I say to the customer ‘would you rather have someone manage a network who owns, builds and secures it or have a third-party that doesn't really own anything and has to interface with a third-party?' To me, [the network] is a strategic difference.
Fierce Telecom: Let's talk about the network for a minute. What are the some of the major events that Verizon has undertaken on its network this year?
Shammo: We continue to invest in the network. During the last three years, we have invested $1 billion per year in our global network, and we'll continue to invest at that level. We are expanding the network and picking country by country. One country high on our list is India, which represents triple digit-percentage growth for us.
The other thing I would mention is we are dedicating a lot of investment in mesh and ROADM technology. Instead of it taking 24-48 hours to repair something or divert traffic because of a cable cut, it can now happen in milliseconds. This is with all of our undersea cables. We developed that technology in the Pacific, and we're completing it in the Atlantic this year. If you look at one of the most recent disasters where a ship dragged anchor and cut 21 undersea cables in the Mediterranean, Verizon was the only one that did not go down because of our network diversity.
Fierce Telecom: In many of the Q2 earnings reports of U.S. and European service providers, the biggest challenge cited was the slowdown in business service spending. Is that having an impact at all on Verizon Business?
Shammo: I think we see it in three ways.
One is the economy. If you look at last 6-8 months, companies have had layoffs here in the states and slowing but still 300,000 to 400,000 a month. When that happens there's a decrease in volume because each of those people that leaves would use conferencing, LD, and voice. If you look at Verizon, 60 percent of my revenue stream is still core voice and legacy data services (private line, frame relay, ATM, etc).
Second, we have not seen too many companies issuing renewals. What we have seen is a slowdown in what CIOs spend on new hardware. Even within the government space, we have seen them push orders out. If the order was coming in February, they pushed it out to July or August.
Then, the third thing, which is actually helping us, is the economy is stimulated CIOs to say: ‘I have to figure out how to cut my costs here so if we go out to Verizon and ask if I turn over my shop to you, how much money can you save me?' We're seeing a lot of big opportunities when we save them money if they outsource their IT shop to us or outsource the management of their network to us. The economy is having some impact on volume and hardware, but it has opened up doors on the other side where we can show them how to save 15-20 percent off their cost structure.
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