Seidenberg Shows That Cash Cows Die Hard
By Mike Masnick, Tue Apr 19 01:45:00 GMT 2005

The telco world is buzzing over some bizarrely dismissive comments from Verizon's CEO concerning the service level customers expect from their mobile phones. However, it serves to highlight the difficulty companies have in cannibalizing their cash cows.

Ivan Seidenberg's comments were only surprising in the level of vitriol, rather than what he was trying to accomplish. Seidenberg, like many CEOs is trying to weaken the competition and pump up his core business. When it came to municipal Wi-Fi, his comments really weren't all that different than things he's said before. Clearly, the telcos don't like the idea of municipalities competing with them in offering service -- not just because it represents "competition," but because that competition is coming from local governments who those same telcos approach for tax relief at other times. So, to then say that municipal Wi-Fi "could be one of the dumbest ideas I've ever heard,'' is just a typical CEO overstatement, trying to plead his case and protect his company's monopoly business in certain locations.

The statement that is really turning heads, however, was his angry statements concerning what subscribers expect from their mobile phones: "Why in the world would you think your (cell) phone would work in your house? The customer has come to expect so much. They want it to work in the elevator; they want it to work in the basement." Of course, you could easily place a good part of the blame for those expectations on Verizon's own co-owned subsidiary, Verizon Wireless, whose entire advertising campaign is based on the idea that subscribers should expect to use their handsets anywhere and everywhere.

However, what becomes obvious in looking at these statements is that the conflicts a company has in trying to deal with disruptive technologies often causes them to create more problems. It's the typical response a large company has when faced with a disruptive technology. Rather than embrace the disruptive technology and use it to cannibalize their own cash cows, executives continue to talk down about the new technology and how it doesn't compare to their existing (cash cow) technology. That is, despite the large investment in Verizon Wireless and the effort to offer wireless broadband, the company still views wired phone service as it's core offering.

This is supported by two other recent moves by the company outside the wireless space. Despite promising to do so for many months, Verizon has refused to offer DSL without bundling in local phone service -- until today. That this comes just weeks after opening up its VoIP service comes as no surprise. Verizon didn't want to give up any opportunity to keep users subscribed to local service at all. If users wanted DSL and VoIP, they were still going to have to buy Verizon local phone service -- until now, when they can also buy Verizon VoIP.

Despite all of the evidence that people want better, faster, cheaper services that give them more flexibility, when the mobile operator is owned or controlled by a wireline telco, there's always going to be that conflict -- leading the telcos to effectively hold back the mobile operators in an attempt to prop up an existing wireline business. Eventually, these telcos will recognize the need to change, but it's going to come with them kicking and screaming. For the more innovative services, it's looking like the mobile operators without a landline connection (or, in cases of MVNOs, without a network at all) are still going to be able to run much faster and create more innovative offerings. Verizon Wireless has done a good job leading the pack in the US when it comes to mobile broadband -- but statements like Seidenberg's suggest the company is going to bump up against its own parent's desire to protect a cash cow -- opening up opportunities for companies like Sprint (who have fully embraced a mobile future) and MVNOs like SK-Earthlink who are completely unencumbered by legacy network issues.