Eric Schmidt & Ivan Seidenberg – US Zeitgeist 2010

pressure of time, I think what we’ll do is, we’ll just combine
our session and then you can help me give my final speech. IVAN SEIDENBERG: Sure– ERIC SCHMIDT: Since we sort of
agree on everything, don’t we? IVAN SEIDENBERG: That we do. We do. ERIC SCHMIDT: You see! Let’s start with– IVAN SEIDENBERG: Yes, sir. Yes, sir. ERIC SCHMIDT: Let’s start
with– what I like about Ivan is he’s a very
straightforward guy. He started off as literally
a lineman– a splicer. IVAN SEIDENBERG: Right. ERIC SCHMIDT: –and has risen
to run one of the most important companies
in the world. And certainly a company that
is crucial to everything we’re trying to achieve. And I know it would be
interesting to tell first a little bit how I met Ivan. Ivan decided to visit Google. And he just shows up by himself
wandering through the building. “Interesting, oh,
this is interesting. Oh, this is interesting.”
Very curious man. And at the time, there was
tremendous tension between my side of the world
and the TELCOs. We had a nice meeting– we were
fairly– I was fairly skeptical of some of the things that he
said– and especially about openness and so forth. And then a set of his
executives, including Lowell McAdam, actually decided to
announce commitments openness. And I said, “Like, this is it
not really going to happen, is it?” And they did
and they delivered. And then a while later, it
turns out that they got very interested in Android, and they
said, “You know, not only are we going to adopt Android, but
we’re going to put a lot of marketing money behind it. I said, “We’ll see.” I finally
now believe the central essence of Verizon is that
they actually do what they’re going to do. Which I suspect is your
leadership style. IVAN SEIDENBERG:
Well, thank you. We try. ERIC SCHMIDT: When– to start
with, can you talk a little bit about what is the
scale of Verizon? How many people? What’s the revenue? Where’s the revenue come from? There’s a stereotype that
somehow all your revenue comes from the old business,
not the new business. What of this is true? What’s false? IVAN SEIDENBERG: OK, so the
quick elevator speech is we’re a $110 billion. About $80 is wireless. About $15 to $20 is the
former MCI that we acquired. So in hindsight the old
TELCO that you all maybe remember is 10% or 15%. ERIC SCHMIDT: That small? And I assume it’s
getting smaller? IVAN SEIDENBERG: Yeah, it
represents a bigger part of our cost structure, but in
terms of revenue, it’s– ERIC SCHMIDT: So you have high
cost, declining revenue there. So don’t you have a problem
getting– dealing with all those people and trying
to get them over? IVAN SEIDENBERG: Yeah. So we’re 220,000 people. ERIC SCHMIDT: Could
you repeat that? IVAN SEIDENBERG: 220,000 ERIC SCHMIDT:
220,000 employees. IVAN SEIDENBERG: Right. ERIC SCHMIDT: And they were
formed, of course, from the union of all these RBOCs. IVAN SEIDENBERG: Correct. ERIC SCHMIDT: Ane those of you
who are not familiar with the storied history of the TELCOs–
all these executives worked for AT&T. Then Judge Green broke up
AT&T into seven RBOCs, and left AT&T around. Eventually the RBOCs swallowed
up each other, leading to largely successor ones. And one of them swallowed up
AT&T and renamed itself. Is that a rough summary
of your history? IVAN SEIDENBERG: That’s good. I think for this audience,
there’s one or two little facts that you might
be interested in. Probably 50% of our company
has worked for us for less than seven years. So we’re basically
a new business. So we have– we’re a legacy
corporate structure. We renamed ourselves 10 years
ago, but I think the issue is we have a very new workforce. And probably 60% to 70% of
all our revenues have been generated in the last
three or four years. Wireless was zero
revenues 20 years ago. In 2001, it was about $8 or
$9 billion and now it’s $80. We consider ourselves much more
of a new age business than probably people would
categorize us as. ERIC SCHMIDT: And I’m shocked
because next generation doesn’t seem to have home phones, they
seem to actually just have cellphones. IVAN SEIDENBERG: 25% percent
of people cut the cord on their home line. ERIC SCHMIDT:
Amazing statistic. How many of those people are
now moving to what we would think of is smart phones and
powerful wireless data plans and so forth? IVAN SEIDENBERG: Well, if you
look at smart phones right now, 60% of every sale– all the
sales we make today are smart phones. If you look at our base, we’re
about 20%– a little over 20% of our base is smart phones. AT&T’s base– about 40% of
their base is smart phones, because of their
iPhone success. So the issue is– our view–
70% of people will have a smart phone within
three or four years. ERIC SCHMIDT: That’s very soon. Why did you make the decision
to become open– open standards, all of that
when nobody else did? IVAN SEIDENBERG: You asked me. ERIC SCHMIDT: That’s
very kind of you. I suspect there were
good reasons as well. IVAN SEIDENBERG: Want
the real reason? ERIC SCHMIDT: Yes,
the real reason. IVAN SEIDENBERG: No,
it’s very simple. I think when you– our
job is to find growth. And so when you think about
growth– you know, we inject a lot of our capital into
building networks that have more reach, more bandwidth,
more scope, more functionality. And, I think, you globalize
and openness creates growth. So I think that people tend to
look at existing institutions as if openness becomes
sort of a detractor to generating growth. But it’s just the opposite. And so as the system gets
bigger, as software develops, as applications develop, as the
consumer changes, the only way you can sort of keep yourself
growing with the market is you’ve got to change
some things. So for us it’s investment
in three things. It’s investment in
our core network. Because at heart we’re all, of
course, sort of engineers. We like to be engineers. Second is our brand. We spend a lot of
money on our brand. And the third thing
is our distribution. So– ERIC SCHMIDT: Like
one of the stores– IVAN SEIDENBERG: We’re one
of the few companies that actually owns all our stores. So we pride ourselves on
having 2,200 stores. And you can go into our stores. There’s an experience
that goes with this. So those three things, and
than, Eric, what you do is you take with that
mentality of openness. Machine-to-machine
connections– you know, component parts to
component parts. You know all the rest. Everybody here
understands that. But services and applications–
you win, we win. ERIC SCHMIDT: The only time
I’ve ever seen you get mad is when I mentioned
Title I regulation. IVAN SEIDENBERG: You
want me to get mad now? ERIC SCHMIDT: I just want you
to explain what it means, and why you said it was
a nuclear issue. You use stronger
words than that. IVAN SEIDENBERG: You know,
in a nutshell, here’s the kind of way we see it. So– ERIC SCHMIDT: You’ve
been regulated. IVAN SEIDENBERG: Well, but, you
know, we have spent close to $100 billion of investor
capital to change our company and yet we have people in
Washington that want to hold on to us as if we look the same
as we did 25 years ago. To some of that, we thought
Google felt that way us. And so we used to have
very heated discussions. But it’s pretty simple to us,
we are completely on the side of the public internet
should be open. We’ve never behaved
any differently. We’ve never viewed the issue
any differently than that. But for us to invest money into
4G networks and 5G networks, for us to invest in fiber
optics to the home, there has to be a component of that
network that is open to innovation. That way you can create
different packages and– ERIC SCHMIDT: And you’re
concerned that the FCC now is going to regulate? IVAN SEIDENBERG: Well, the
FCC– just put it into effect– would take Title II– is their
label for old-style utility regulation. So what they wanted to do is
because they lost the case on the BitTorrent with Comcast–
you’re all familiar with that? I assume you are. OK, so what happened there very
quickly is that Comcast sort of slowed down the bits because
they didn’t have enough capacity, and that turned
out to be a big thing. And the FCC tried to sue them. And they lost in court because
they didn’t have jurisdiction. So the solution to that was
to direct everybody into an old-style regulation. Our view is when you do that
rich capital goes someplace else, you end up with rules you
don’t need, and you basically create a situation where you
try to take a network asset like ours–an infrastructure
piece– and turn it into a public asset or a
public utility. And what will happen is what
happens in every other country the world when the government
runs the postal office or runs the telecommunications system–
you are always going to be behind the curve. So the bottom line is we’ve
said, well, you need enforcement, you need
rules– we’re there. We don’t want people
managing our risk capital. ERIC SCHMIDT: Changing the
subject for a second– most people believe your
network is the fastest. At least, certainly the
broadest, fastest in America. You’ve certainly not had
the problems that AT&T has had on your network. And you have 4G LTE coming. Take us through that. My understanding is that that
is an immense amount of capital which is it very much at risk. You’re depending
upon applications. When does it come out? What are– how committed
are you to this? How fundamental is it? IVAN SEIDENBERG: OK. So here’s the story. So really quickly so you get a
sense of sort of our mindset. Ten years ago, everybody said
the network is a commedity. Anybody can build a network. We don’t believe that. So the first execution of
what we try to do different was, Can you hear me now? Right? Everybody remembers that. It was our way of saying, wait,
the network is not a commedity. So we then went from
1G to 2G to 3G. Every time you go from one
generation to the next, you get better compression, you
basically increase speeds by about 30% to 35%. So here we are with the 3G
network– nationwide 3G network– CDMA-based,
as you know. You’re getting one and
a half megabits– 1.8 megabits per second. And then the 4G
technology comes along. It’s 8 to 10 megabits
per second. So here we are saying with 8 to
10 megabits per second, we can transmit high-definition video. So we made the decision that we
would stop building out our 3G network and convert all
of that capital 4G. We were criticized for
that because the device manufacturers– the whole
system was geared toward GSM– the European standard– and it
was geared to a 3G model. So we have to get out in front
of the market by saying we would build a 4G network, and
we needed to find a couple of partners that would
take a risk with us. This is where Eric and Google
were very visionary about this. They didn’t sort of agree with
our business plan, but they said, if this works, this is a
way for Google to jump start. Because, remember, to
be honest about it. Apple owned the
smart phone market. AT&T did an exclusive deal. We held our own all this time
but now 4G changes the game. ERIC SCHMIDT: And define 4G
for this audience again. IVAN SEIDENBERG: 4G is just a,
sort of, a carrier’s model. It’s fourth generation. It just an overlay network
on top of the existing tower structures. ERIC SCHMIDT: Everything
still works? IVAN SEIDENBERG:
Everything still works. Everything’s backward
compatible. So when you– when we cut over
4G, if you buy a new 4G device it’ll be backward compatible
with the existing network. Now from an infrestructure
guy, here’s some interesting tidbits. So the speed is almost eight
times 3G on the throughput– average throughput basis. Latency is four times what
it is on 3G– meaning delay IS four times better. Cost is four to six
times better for us. We could not figure out why
everybody didn’t do this. And what happened was, we
announced, everybody said, it’s not going to work, it’s going
to take too long to do it. Everybody’s now announced. So we’ll be in the market. So where we, are Eric, is– if
you can keep a secret, I’ll tell you the dates– you know. Somehow in the fourth quarter
this year our network is already up and working. It’s working in 100 million
population locations. 32 major markets. 50 or so major airports
around the country. It;s working right now. We’re doing all of the
testing, the protocol. When we cut over network, we
don’t cut over one tower and say we’re in business,
we wait until– ERIC SCHMIDT: Are you telling
me that it’s already there and you just haven’t turned it on? IVAN SEIDENBERG: Yeah, you’re
got to get rid of that Blackberry you’re using because
you’d find out how much good [UNINTELLIGIBLE] but the issue is, it’s working. So what will happen is when we
announce it’s up and running, that’s what people we will
be able to buy 4G devices. OK, and so the first set of
things that will come out, we hope will be some tablets. And you probably heard from
Sanjay and some others that there are some companies
that are focusing on 4G tablets– amazingly
robust and interesting– ERIC SCHMIDT: So this is
a tablet that’s got 10 megabits going through it. With video and everything. IVAN SEIDENBERG: It’s
got a lot of stuff. I mean, I carry a tablet in
my bag and it’s got some amazing things on it. And there’s lots of
applications, it’s not just entertainment, it’s just so
many interesting things. Then the other thing is
there’ll be some aircards, obviously people use that
for their applications. And what we’ll start to see is
some devices being rolled out. So you’ll see a slow build up. By the time you get to the end
of the first quarter, the middle of next year, you’ll
start to see a choice of devices and then all the
carries will start to move. And then what we hope will
be is that the world will move to the 4G standard. Why is this important to us? You know, 70% of the
world is on GSM. So we have done as well as
we’re going to do with our wireless business, so growth
said we wanted to reach the whole world, and so we had them
move to a global standard, which is now 4G. And one of the things behind
the scenes, Eric, that we’ve always worked on is– like you
do this– our people didn’t just roll out 4G, but we worked
hard at all the standards bodies to make sure that we had
consistency across the board– ERIC SCHMIDT: So basically, at
the end of this year, we’re going to have a network which
is eight times faster, four times better latency, and costs
you less to run and build. Sounds like a pretty good deal. IVAN SEIDENBERG: You might have
to move to one of those 32 cities but the other cities– ERIC SCHMIDT: Well, like
which– what’s the list of cities? IVAN SEIDENBERG: Yeah, I know. I’ll tell you that if you want. You can figure it out. But no, let me just
talk about that, so– ERIC SCHMIDT: Let’s start with
New York, San Francisco, LA– IVAN SEIDENBERG: Yeah, right,
you can figure those out. But here’s what
we’re going to do. But here’s where we are though. So we cut over 32. And then the day we cut over,
24 months later, we’re in 90% of the country. So we will deploy– every month
there will be a cut over someplace in the country. ERIC SCHMIDT: In that
of 34 months we will be 94% or 95% deployed in 4G
around the country. So we think that’s a huge deal. So for all of you who sort
of work with Google. Write applications. You’ve got to think differently
about the kind of applications and consumer demand that will
take advantage of what this kind of capability offers. ERIC SCHMIDT: I want to come
back to that in a second. Let me ask you my
last question. Because we’re compressing
things, but I’m not going to do is also give my comments, and
Ivan again can help a little bit. But I have one final
question for you. Your quite on the record
about your view of this administration and their
business policies. I think people would be
interested in your criticisms and what you would
do differently. My observation is that the
government is now stuck until January so it doesn’t matter
what you and I say because nothing’s going to happen. What do you really
think is going on? IVAN SEIDENBERG: Well, look, I,
for those of you who don’t know, I serve as the chairman
of the Business Roundtable– so the Business Roundtable is– ERIC SCHMIDT: Which is the
biggest collection of business executives– IVAN SEIDENBERG: Right, so
it’s a CEO/principals-only organization. 200 companies. So I get more probably
visibility than I should get. With that, everything I
say carries with it dual capabilities on this. But here’s what I would say. I think that the issue to us in
the businesses community is that the administration’s– not
the President– it’s the entire government’s ability to
operationalize the ideas that were the foundation of this
president getting elected, and converting them into things
that need to work every day. So it’s not a disagreement that
we want to spread the wealth. It’s not a disagreement. We want people have healthcare. It’s not a disagreement
that the banks need to be restructured. In my judgment, what’s happened
is that the President and the White House have good ideas. When the organs of government,
like the Congress and all of the cabinet agencies, start
writing laws, they write the laws that they used to
think were good in 1980. And they have forgotten
that the world is going forward from 2010. This is a really difficult
issues because it gets political, it gets personal,
and so we’re very frustrated. So let me give you an example. Just one example– so this
financial regulatory bill that was just written, OK? I don’t know how many of
you know this– the bill is 2,400 pages long. There are a thousand
regulations. Now, OK, we needed
some controls. Nobody disagrees. We work with the administration
on those things. But when the staffs and the
bureaucracies and the vested interests got a hold of it–
there’s going to be 150 proceedings that won’t get
resolved for another two or three years. So the business community is
really concerned about the imbedded costs that are getting
put into doing business in the U.S. that are not necessary. So am I criticizing
the President? No. But the organs of government
need a little adult supervision on this issue
so we can fix this. OK? And I’ve told this to the White
House, so it’s not that we don’t– we get into
these discussions. And I– we have examples
after examples. But is their head in
the right place? Sure. I mean we want to
help fix that. Now, last thing. So why is there so much– if
you look at the economy– last point– the macro
numbers look terrible. You know, unemployment,
demand, that kind of thing. The micro numbers
don’t look as bad. Your company is strong, our
company is strong, a lot of companies are strong. So what’s happening is
there’s a huge resistance to deploying risk capital. And that is because of all the
uncertainty that’s buried inside of the economy. And I think we
need to fix that. America needs tp take
the lead on that. OK, so I think it’s
a healthy debate. I think the business community
is obligated to speak out. We become targets of the
media– the press, you know. The answer is “So be it.” ERIC SCHMIDT: Comes
with the job? IVAN SEIDENBERG: Yeah, I think
our employees– I know this. You take my company 220,000
people, average salary of $60,000– $65,000. Guaranteed our company’s
overwhelmingly Democratic. But when they come into town
hall meetings, and they talk to me about what’s the
gap– they get it. They get it because they know
we’re going to create the jobs. Business is going to create
the jobs, not the government. So I think the issue we have to
figure out is how to take the policies of the administration
and operationalize them so that it creates real organic
wealth for the country. ERIC SCHMIDT: Thank you. Thank you for that. What I’d like to do is to talk
for a few minutes about what I think, and Ivan’s comments I
think are a perfectly good step up to this point– and maybe a
couple questions and finish up. I’ve been looking at what does
all of this mean for all of us, and Ivan said some sort
of amazing things. He said that basically by
roughly the end of this year 32 cities– which you’re going to
give me the precise list fairly soon– are going to have 10
megabits as you guys are walking around, and all you
need to do is buy a new card for your computer, or a new
iPad, or what have you. And this is a phenomenal
achievement on their part. And the neat thing is, it’s
good business for them– lower costs, better use
of capital, and so forth. It’s a win-win. This is what technology means. So what’s the bigger picture? I’ve been thinking about that
for a while, and let me offer you a model which I’m going
to call augmented humanity, for lack of a better term. The notion that people are good
at some set of things, and computers are good some things
of things, and we’re now actually getting to the point
where computers would be very good at the things that
we’re no good at. We’re very good at the things
that they’re no good at. And it’s the sum of the two
when we interact with each other– then very, very
interesting things are going to happen, making us all, sort
of, smarter and quicker. I think of these computers–
and I mean it’s in the broadest sense of computing– as a
new set of digital senses. We’ve always been defined
by our use of tools. As a– as citizens,
right, as humans. So let me offer you a basic
theory that I’ll call the Google happiness theory that
computers are there to serve us, not the other way around. I know this is a shock, but the
fact of that matter is that computers are supposed
to just work. Right? And all that fiddling that you
do– we really need to get to the point where they
just know what to do. And from my perspective, Google
equals search becomes Google equals information that you
need to know– information that makes your life better. And information here means
more than just facts, right? Entertainment, we project
things, we can instrument the world in some ways
that are very powerful. And so it’s interesting is the
combination of the vision that Ivan outlined and what Google
is doing is sort of a pervasive model of information
everywhere. And, you know, Bill Gates
talked about this a long time ago– 1990– he talked about
all the world’s information at your fingertips. It’s taken 20 years to get to
this point with different technologies, but it’s
the correct thing. What killed– and think of
it as what to look for? How to spend my time? And what’s interesting is you
sit there and you go, isn’t that kind of obvious? But think about it. There’s an explosion
of data, right? It gives you a headache. You can’t figure
out what to do. You’re going to be better off
if tools are built that can actually help you decide how
to spend your time on the information that matters,
because the information overload will give
you a headache. At the rate at which this is
going, and with his network, and all the people who are
publishing new information– I don’t think there is going
to be any other way we’re going to be able to cope. And the other thing, the other
implication it has, has to do with the way devices work. So a music player going forward
will be connected to the cloud. Because historically, music
players had stored music, but now they’ll have not only the
stored music, but they also have the local music
as you move along. It makes sense that all of a
sudden every one of them will be able to query both the local
environment, as well as whatever they were
programed with. And search– we may be able to
get to the point, or we hope to, where the query, you know,
what is the weather in my hometown? The real query you were asking
is, should I wear my raincoat? Or do I need to
water the plants? That’s what you meant. And artificial intelligence
technology that is being invented by companies like
Google and others will allow us to get at least somewhere to
that point– knowing a little bit more about you, again,
with your permission. What’s happening is the
underlying technology trends– which again you outliined so
well– are fundamentally about mobile first. I will tell you the smartest
and most capable engineers in the world are now working
on these powerful devices. And by the way, when you get
your LTE network done, can you imagine how exciting it is to
have 10 megabits reliably to these– both tablets and
phones, tablets and phones to start with, and then
desktops eventually. Lots and lots of TELCOs, by the
way, Ivan, will be giving out free devices because it makes
sense– they’ll sign up for contracts. And you actually be able to
change the entire computing model, so people can go to your
store– you know, what have you– get this thing,
and it just works. The network computing
[UNINTELLIGIBLE] that you’ve outlined is really
phenomenal– the scale at which it– And it has all
sorts of implications. If your children are awake,
they’re probably online– frightening thought– this
technology is to the point where we can stream live video
now to pretty much any device in most of the western world. We’ve worked through the
complexity in the pricing and the other issues through the
good engineering that people have done. And more importantly,
in the back, we have these Supercomputers
Google builds them. Others do as well, too. An example would be last week
we did a demonstration of the following: pick up your Nexis
One Android phone, somebody spoke to it in English, and
then the answer came back in German. Now I have talked in 20 years
that this would be possible. Technically, how did this work? Well, the phone simply collects
your voice, digitizes it, sends it to the servers– which are
somewhere in the cloud probably, not in the country,
somewhere else– that voice is turned into text, the text is
translated into the other language– in this case English
to German– and then the answer comes back in German. It’s converted back into the
other language, goes to text, and so forth– that’s done by
1,000 computers that you never knew were doing it, and it’s
done in a half a second which we view as a very long time. To me, that is the ultimate
statement of something that people can’t do that computers
will be able to do en masse. And there are many,
many such examples. So if you think about it, our
goal is to let people understand things very, very
quickly and understand them– just be fast. Google Instant, which
people here are well aware of, why do we do that? It’s faster. It ultimately leads to more
queries we think, but we finally know that you get your
answer just that much faster. And you go, Come on, are you
telling me that it’s that much faster because I didn’t have
to type as many characters? Yeah. Yeah, that extra typing took
time, and when you got a billion people, you add up
all that extra typing, it’s a lot of people’s time. And time– people–
time matters. So what I want is information
that is both accurate and timely– fast and easy to
consume– and across all the devices in uniform way,
and we’re building all of that technology. The technical aspects are:
personalization, AI sharing, local information, identity,
deep indexing, ad system targeting, automatic
translation, voice and photo recognition. We have all sorts of
platform plays which you’ve heard about, et cetera. We’re thinking a lot about
what does this mean. So let me end my hopefully
brief comments, by talking about– well, in the first
place, before I finish that I want to say, this does not come
without a cost and, Google, I think today is seen very
much as a disruptor. We’re not exactly excited about
that, but the fact of the matter is it is true. We’re a disruptor fundamentally
because we do things that are technologically challenging,
that really do change assumptions. We do them at scale, in the
same way that you do thm at scale, which I think is an
important aspect– it’s hard to do things at scale. And the third is that we play
in the information markets, and people have a lot of
opinions about information. People disagree
over information. People fight over what the
rules are about that. So if I were to give you a sort
of new view of the future, I would offer something. You never get lost. Interesting. Have you been lost recently? Not if you have one of
these digital devices– you’re never lost. Very strange. I used to get lost. I never get lost anymore. We can position you down to the
foot, even eventually the inch. Your car should
be self-driving. It’s clearly going to drive
better than you are. You want to have a button to
disconnect it, if there’s a software bug, but if you
think about it, cars kill 30,000 people a year. It’s a pretty serious issue,
especially when you’re drunk. Wouldn’t it be better if the
car just drove, and it had a button “take me home” because
I’m not really quite sure where I am? I’m not trying to joke about
something very serious, but the fact of the matter is it’s
crazy that we let humans drive these dangerous vehicles. A computer should do it. We have the technology to do
that, it’s clearly coming, and certainly in our lifetimes. And this explosion of real-time
telemetry and data feeds has a lot of implications. You and your friends
know where you are. So does the government
by the way, which is a separate discussion. Google Earth, Google
Maps, all of that. People who love the Earth–
which I hope is all of us– can love it even more. You can find out what’s
really going on. As I said, all the world
information is at your fingertips. Everybody speaks your language. You can know what people are
doing, thinking, feeling, and people can remember. And this explosion in real-time
information is in fact a search problem– which, of course,
is what we’re good at. But the question we want to ask
is, what exactly among all this incredible amount of
information we’re getting should I pay attention
to right now? Now you’re never
lonely or alone. If you’re lonely, you have
this device that will connect you to your friends. And if you’re bored, you have
this infinite amount of information, learning. It’s like going to a bookstore
and realizing you can never read all the books, except it’s
so much more infinitely large– larger than a bookstore. And, you know, television
because of things like Google TV. And you guys are
looking at this all. Everybody is trying to figure
what to do with this merger of television and the internet. Lots of very interesting ideas. it’s interesting the television
has largely been replaced by the internet as the world’s
greatest time waster. What do you think people
are doing on the internet? Their wasting their time just
like they did on television. We’re proud to be part of that. You know, but it’s
fundamentally happening. And trust me there’s a lot
more to waste your time about– entertainment
of games and movies. [? YouTube ?] video is ubiquitous– we
suggest [? the newton ?] next video. I was shocked that YouTube
has more than two billion plays a day. 24 hours of YouTube videos
uploaded every minute. I mean, this is been
very disturbing. Think about the amount of
time we’re consuming. And, of course, that number
is growing quite rapidly. Your friends are always around
you, they’re always online, there is always somebody
for you to speak with. Your friends may
Google better, right? Because the computer learns. The computer is better because
the humans teach it, in the same way that the humans
are better because the computer remembers. What I like about this– and
it’s true of the things you talked about– is that this
is not about the elite. When I was growing up the
information markets were fundamentally about the elite–
a small group people who have a lot of power, a lot of
money, a lot of control. These technologies are
fundamentally democratic, and I mean that in the broadest
possible sense of access. There’re roughly 800 million
smart phones, on the order of. One billion smart phones plus
then coming fairly quickly. Your numbers would say, if I do
it in my head, even faster. And I want you to be right. Of course, connected to the
super computer, and this notion of these new applications– and
I think the iPad has really shown us a very good model. These applications that just
work, I think, show us the path for all these new devices. And of course, that will be
true of everybody else as well. So ultimately what happens is
computers become– they do what we’re not good at. They make lists, remember
everything, they keep memories of what we do. And what we do is we help you
take that information and try to figure out what
you want to do. And in this model– again, this
is all with your permission and so forth– we can really help
you live a much fuller life. And you really can both enjoy
yourself and feel like you are really at the center
of the world. What I like about this is that
we can suggest where you should go for dinner. We can even suggest what
you should worry about. There’s lots of information
that we have now. So the context for this– just
to finish– is for you to think about computers and humans
working together to solve problems that neither can solve
alone– which I think is the most profound way of saying it. It’s not about not doing evil. It’s about being committed
to doing good, right? Using this technology to,
in fact, improve the lot of everybody. There is a quote from William
Gibson in the New York Times last week, Google has made of
us a sort of coral reef of human minds and their
products– the stuff of poetry, I thought. People want more time for
their friends, for their lives, and so forth. And I think we can make a
significant contribution to that if we get
the products right. So thank you. Thank you all for that. What I wanted to do just to
finish this is to say thank you for the teams that put this
event together, Lorraine and her whole team. Can we have a round of
applause for all of them? [APPLAUSE] ERIC SCHMIDT: Based on the
hallway feedback, the feedback from dinner last night, this
tone of optimism– with the exception of a number of our
friendly economists– all worked very well. I think the call to action
about education– let’s just say the unique
humor of Ted Turner. The sum of all of
this, I think, was an extraordinary event. I think the sense– the
feedback from you all is that we should do this again, and
so I’m looking forward to doing this in the future. Are there comments or questions
for Ivan and me for a few minutes before we finish up? We have a few minutes. Go ahead. AUDIENCE: Can we ask the iPhone
on Verizon question yet? ERIC SCHMIDT: The iPhone
on Verizon question! Ivan, when will you have
the iPhone on Verizon? AUDIENCE: [UNINTELLIGIBLE] ERIC SCHMIDT: He’s a Verizon
user, and he cannot have an iPhone. IVAN SEIDENBERG: So what
I would say is this. I think that it shouldn’t
surprise anybody to think that all the manufacturers are
gearing themselves up to develop a 4G smart phone. I think that’s where
I would be on it. Anything else that Apple does–
you know they don’t tell anybody– so I think at this
point though we’re excited that we will have a full range
of devices on 4G now. The point I would make though
is that I think this network is not conducive to just
doing what you always did. I think people will have to
make a quantum leap and find brand new applications for it,
so I’m thinking is Google– you’re going to find Motorola,
you’re going to find all these companies are going to make
Apple work at their game just as hard. I think I’m excited about it. So I think 4G is going to
break that, that logjam that you talked about. ERIC SCHMIDT: And I would–
let me just also answer the question you didn’t ask. I think the competition
that you’re seeing now is phenomenally good because
the competition ultimately produces multiple winners. Because it’s creating this
very, very, very large market. And applications– people are
coming, and the model that I’m talking about– will get
built out and proven. He will be forced to, in fact
he chooses to, put massive amounts of capital into
building up the infrastructure. We’ll work very hard to respond
to the Apple product line with our own, and it’s
good for consumers. Go ahead. AUDIENCE: Actually, that
was a great lead in to the question that I had. At lunch you– apparently at a
press briefing– were talking about competition in the U.S.
wireless market as being very, very competitive. And it’s– it was striking to
me because I was talking to some people from Finland
recently who were talking about how in their country when
somebody doesn’t have access to– like they can’t get cell
reception in their attic– that they called up the phone
company and the companies were competing to provide
that service. In America, we don’t have that
because of the differences as you were talking about
with CDMA verses GSM. And I think t’s actually to the
detriment of, particularly your company, because you do have
the best network and the best coverage. And so I’m wondering with the
transition to 4G– and you were talking about standards related
to that– is that also going to allow us to have better freedom
to move between networks– to make decisions based on, you
know, which network is providing us with
the best service. Like, even on a day-to-day
basis for those sorts of things. Is that part of the
promise of 4G? IVAN SEIDENBERG: The 4G
standard will allow for device manufacturers to design to a
common standard, so all you’ll have to do is take a sim card
out like you do in Europe and you’ll be able to move
from carrier to carrier. OK, so I think that–
that would be the plan– that you could see how
it would work out. ERIC SCHMIDT: But it also
sounds like you’ll be first with the broad LTE rollout. IVAN SEIDENBERG:
Well, that’s true. And the other point is that the
frequencies on which 4G operates is in the lower bands,
and therefore it penetrates walls a little bit better, so
you’ll see in-building coverage instantly a lot better. And then we’ll work on
deploying the other kinds of devices you need to deploy to
make in-building coverage. You know, it’s amazing we’ve
come from a point in time where people now expect the phone to
work in the fifth basement of– ERIC SCHMIDT: Well, 25% of them
don’t have lines anymore. IVAN SEIDENBERG: Exactly,
so the answer is it’s a good opportunity for us. I don’t view that as a problem. It’s something we need to do. ERIC SCHMIDT: You’ll remember
that you competed with us for $4 billion for the 700
hundred megahertz spectrum. Remember that fight? IVAN SEIDENBERG:
That was no fight. ERIC SCHMIDT: Well, you won. Go ahead. [LAUGHTER] IVAN SEIDENBERG: You were
never going to buy that. AUDIENCE: Does this 4G
make sort of land-based, high-bandwidth
connectivity obsolete? You know, even FIOS, as well as
other forms of high-bandwidth connectivity or do you sort of
forsee that people for whom connectivity is really
important will have– IVAN SEIDENBERG: So here’s the
way w would look at that. I think that Eric’s right. For mobility to get to 10
megabits to your person or to your device. We still think there’ll be a
huge market for wide-area, you know, wi-fi networks, or even
fiber optic networks, for that 100 megabit applications–
particularly for commercial and television. So I think what you’ll find is
the market will segment, but we think there’s still a lot of
room 400 megabits to a fixed location to do video
conferencing and things like that. Actually, you know, if you
don’t mind, this is kind of right up your alley. So last week was the
44th anniversary of Star Trek, right? You all knew that,
I know you did. So if you think of all the
things that Star Trek has done, it’s all come true. There’s only two
things left, right? Holographic capabilities,
which we’re now starting to play with, and then
teleporting, right? So we going to beam Eric
all over the world. So you now have all these
engineers working on quantum physics and how to take
photons and move them from here to there– ERIC SCHMIDT: So,
you first, Ivan. IVAN SEIDENBERG: So, no,
we’re going to do this. So you’re going to need–
you’re going to need 100 megabit networks into fixed
locations to teleport Eric all over the planet. AUDIENCE: Do you anticipate
that power users should be, sort of, in their own class,
but not on an all-you-can-eat plan for data? Sort of, I mean, at 30
megabit– if I, you know, if I watch videos 24 hours a day in
HD and I overtax the network, should I, sort of, not do
be allowed to do that? IVAN SEIDENBERG: This is a
highly charge question. I could tell. Here’s what I would say
I think there should be bundles and tiers. I don’t think there should be–
we don’t think they should be– Eric thinks everything should
be free, we don’t come from that class. But I think there shouldn’t
be some linear model. I don’t think that’s right. So there should be natural
bundles, and if you happen to use 900 megabits a month, you
might pay something for that bundle as opposed to somebody
who might only use 10 or 15 megabits a month. So, the market will
get that right. But we do believe there needs
to be some tiering of pricing. ERIC SCHMIDT: One of the
fundamental things to remember is that there’s essentially
infinate bandwidth in a strand of fiber and there’s very much
not infinate bandwidth in the current wireless allocation. So there are, in fact,
fundamental differences in the technology and those will
be true for a long time. Go ahead. AUDIENCE: So, a big part of my
wife’s job was calling up various cellphone providers
every month and going through the stacks and stacks of bills
where each line that her company dealt with was
on a different plan. And it seems like– I think she
actually said that Verizon was one of the better companies to
deal with– but the sense that I’ve gotten dealing with a lot
of the cellphone companies it’s the billing model works a lot
like the banks do, where they have kind of convoluted rules
that maximize their profits and make it completely impossible
to predict what’s going to happen with billing. Do you think that there’s hope
for having something where you can walk up to the person and
say, what will my bottom line price be and know that that’s
what you’re going to pay every month? IVAN SEIDENBERG: Now, if I may
answer that, but I want to be– I don’t want you take this
wrong way– that’s a rich person’s view of the world,
because the average person is very price-sensitive. And so what we have found, we
have found in the process– yes, we’re complicated, and we
should simplify, I guarantee that, so I take that comment–
but the whole issue of bringing everything down to bottom-line,
one price, is it’s not the way people work. It’s not the way stereo
components got sold, it’s not they way almost anything is. So the struggle we have is how
you mass-customize, you give people enough information. Have we gone overboard? Sure. So I think issue of thinking
about nirvana being we’re going to simplfy it all into one
price, it’s going to be $69.99 a month. The day you do that, people
going to say itemize the bill for me. And this is what
the market does. So I think this is a sort
of a burden we have. We have to figure out– but– AUDIENCE: Particularly for the
poorer people where that extra $15 charge or $30 charge
because their kid was using texting– IVAN SEIDENBERG: Which
is 80% of the market– AUDIENCE: –pushes them over
there into overdrafts fees now that they get charged. IVAN SEIDENBERG: Oh, no
question, so the things we could do better– there’s no
question for that– but my comment though is what we’re
trying to figure out is how to give the customer as much
control over how much information they want,
as opposed to us itemizing everything. Now, of course, in our case,
not to complain, but you have state taxes, you’ve got local
taxes, so we’re the greatest tax collector ever. So you have to itemize
a lot of those things. This has been a– this is
a driving problem in our industry for a long time. Never quite ever
get this right. We’re getting better at. We just came out with our
newest, newest 100th version of the newest bill. And so we keep trying
to work this. Your comment’s well
taken, but I just– AUDIENCE: Thank you for trying. IVAN SEIDENBERG: I wouldn’t
want you to oversimplify it, to think it really gets
down to one price. That doesn’t work. AUDIENCE: Thank you. AUDIENCE: So I know you said
that with 4G, of course, people would have sim cars as they
have with GSM, but I wanted to ask you about something bolder
which is moving the United States away from the
subsidy-lock model as overseas they have done in a
number of countries. And T-Mobile in the United
States will let you have your phone for $20 ` month less if
you bring your own Nexis One that you bought directly,
for example, into them. Do you see Verizon and other
American carriers moving away from subsidy-locks and allowing
a lot more flexibility in how people buy handsets and how
they move from customer and so you win the customer every
month with good service rather than a contract? IVAN SEIDENBERG: Right. So, I guess you don’t have
an opinion about this. [LAUGHTER] AUDIENCE: I’m open
to all views. ERIC SCHMIDT: But
he has an opinion. IVAN SEIDENBERG: Yeah. Can I offer a couple of
facts as an answer to that? So average usage in Europe
of cell phones is about 200 minutes a month. Here it is 900 minutes a month. So the model that says you
bring your own device has actually created a lot
less utility out of the network and the service. The issue in the States has
been, because of the very questions the gentleman right
there just asked, that the entry barriers for people to
buy the service was such that if we didn’t subsidize
the handset, we couldn’t penetrate the market. Now, what we would like to do
is move more to the next generation of devices to be
more like the PC– so you buy your own, you get
your connection. What we have to make sure,
though, is that we don’t suppress demand because we
create an entry price so high the people can’t make it. That’s why you have contracts. Now people don’t
like contracts. But it has allowed us
to penetrate market with more devices. So we have in data in the U.S.
higher penetration of data, higher penetration of usage
than almost anywhere in the planet perhaps, except Japan. So the issue is we
need to migrate. Now, I think what you’ll find a
trying to do is testing– as we roll out 4G– different classes
of devices to see with those subsidy levels might be and
where we need to go with them. So your points not wrong, and
we got it, but it’s not as simple as giving the market a
cold turkey shower and saying from now on out you’re going to
spend– a tablet’s going to cost $500 or $600 dollars. And Eric will be the first
one to call me and say, well, give it away. ERIC SCHMIDT: Absolutely. You should be giving it away. We already had this
conversation. IVAN SEIDENBERG: Exactly. And the answer to that is it’s
a hard issue when you’ve spent $30 to $40 billion– ERIC SCHMIDT: But think of all
the money that you can make. All this downstream revenue,
oh, you know, upsell. We’ve had this conversation. IVAN SEIDENBERG: Yeah, we did
and because you make all the money, we don’t. You know– ERIC SCHMIDT: What’s
wrong with that? [LAUGHTER] IVAN SEIDENBERG: The
answer is we’ve got it. Check’s in the mail,
Eric, we got it. I hope that the answers
were sensitive point. We’ve got to transition to it,
and get there in a way that balances the business
model on these– AUDIENCE: By the way, I wasn’t
saying that you have to get rid of subsidies, but just that
T-Mobile’s model– which allows both to exist, I think, is
a good way to migrate. So, thanks. IVAN SEIDENBERG:
T-Mobile is not us. ERIC SCHMIDT: I want to
thank everybody again. Thank you Ivan for
everything you’ve done. We depend on you and
everybody else. You really did make it possible
for us to actually be here and talk the talk and so
forth and so on. And the future is really
enabled by this. I think Nikesh that maybe it’s
time for us to get off the stage and turn this whole
event over to you. NIKESH ARORA: Well, I
just want to say thank you very much, Ivan. Thank you, Eric. Let’s have a round of
applause for the gentlemen. [MUSIC PLAYING]

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2 thoughts on “Eric Schmidt & Ivan Seidenberg – US Zeitgeist 2010

  1. "Enhanced humanity", "computers and humans working together"? Look, I'm a believer in technology and progress, but this is one too far.

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