UPDATE 2-Verizon CEO criticizes net neutrality proposal

Wed Oct 21, 2009 1:31pm EDT

* Says net neutrality debate "extremely troubling"

* Cites WorldCom as example of regulations gone wrong

* Eyes 4th-gen hi-speed wireless for 25-30 markets in 2010

* Says FiOS to pass 17 mln homes/businesses by end 2010 (Adds quotes from Seidenberg, CenturyLink, background)

By Sinead Carew

CHICAGO, Oct 21 (Reuters) - Verizon Communications Inc (VZ.N) Chief Executive Ivan Seidenberg said on Wednesday the current debate about net neutrality is "extremely troubling" and risks halting progress in U.S. broadband development.

Speaking at the Supercomm technology trade show, Seidenberg cited the downfall of WorldCom earlier this decade as an example of how misguided regulations could have risky consequences.

Like AT&T Inc (T.N), Verizon has spoken out against Federal Communications Commission Chairman Julius Genachowski's proposed rules that would require telecom operators to open their networks to any legitimate Internet content provider or service without discrimination.

"If we can't earn a return on the investment we make in broadband our progress will be delayed," Seidenberg said.

Seidenberg said the new rules should not penalize telecom companies in favor of Internet companies like Google Inc (GOOG.O) and Amazon.com (AMZN.O), referring to the idea of regulating telcos and Internet companies differently as "analog ideas in a digital age."

Seidenberg was speaking the day before the FCC was due to release its formal proposal for the new rules, which would not likely become law before spring of 2010.

He said that "rather than impose rigid structural rules," the FCC should help create conditions for growth.

For example, it would do better to work on increasing the availability of spectrum and streamlining the process for approval of sites for cell broadcast towers, Seidenberg said.

He also called for an overhaul of "the outdated subsidy system supporting universal service," which requires carriers to contribute to a fund to support services in remote areas.

However, a top executive from rural provider CenturyLink, formed this year by CenturyTel's (CTL.N) acquisition of Embarq, said that subsidies were a requirement.

"Broadband for America isn't going to happen if there isn't a public-private partnership," said CenturyLink's Executive Vice Chairman Tom Gerke, formerly chief executive of Embarq. "An unfunded mandate just doesn't work."

He noted that broadband investment was also crucial to the broader economy, saying that 500,000 new jobs are created for every "$10 billion increase in digital investment."

Seidenberg said that Verizon, which along with Vodafone Group Plc (VOD.L) owns No. 1 U.S. mobile service Verizon Wireless, expects to launch fourth-generation high-speed wireless services in 25 to 30 markets next year.

He said the company sees wireless data traffic more than doubling every year and that in four or five years, video could account for more than 60 percent of all mobile traffic.

The company is also expanding its FiOS Internet and broadband service to 17 million homes by the end of 2010. (Reporting by Sinead Carew; Editing by Maureen Bavdek, Phil Berlowitz)

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