GTE CEO talks about business in a networked world

Charles Lee, right, CEO of GTE and a 1961 Cornell alumnus, talks with Johnson Graduate School of Management Park Leadership Fellows, from left, Kendra Armer '01 and Christina Tunnah '01 during a luncheon with Park Fellows and GTE Fellows in Sage Hall, Sept. 23. Robert Barker/University Photography

By Linda Myers

Charles Lee apologized for not even mentioning the word "Internet" when he last made predictions to a Cornell audience, as the Durland speaker in 1993.

But the net was very much on his mind when Lee, Cornell Class of '61, delivered this year's Hatfield address to a packed house in Rockefeller Hall's Schwartz Auditorium Thursday, Sept. 23. "A hundred million computers today are tied to the Internet," he asserted. "I predict we'll see that rise to one billion networked computers by 2005, and one in two people will have a cellular phone by then," he told the crowd. "That's not just talk. There is real change going on today."

Lee ought to know. GTE, the company he has led since 1992, has just become the major force in the drive to wire the world. Now in the process of merging with Bell Atlantic, GTE announced on Sept. 22 that Vodafone Airtouch, Britain's largest wireless phone company, would also be part of the package. The three-way merger will give GTE and Bell an entry into the competitive cellular phone industry and establish the combined firms as a telecommunications titan, the largest in the United States, with an estimated worth of $70 billion and 20 million customers worldwide.

While the move also is likely to make Lee one of the world's top business leaders, his manner at Cornell was genuinely "regular guy," not power player in the drive for the number-one slot in telecommunications. But his leading thesis -- that the success of the technology- driven telecommunications industry has turned upside down some of our most cherished economic principles -- was indicative of the sophisticated thinking behind his disarming manner.

"In Economics 101 terms, we all know that when supply goes up, demand goes down and vice versa," he recounted. "But in Networking Economics 101, when supply goes up, so does demand." He used the hypothetical example of the world's first fax machine to explain the phenomenon. "Alone, it was useless," he said, but as more people acquired fax machines and networked them to one another, more faxes were sent, leading to more people acquiring machines ... and on and on.

Another shattered principle: lower unemployment leads to inflation. "Today we have one of the lowest inflation rates ever and a booming economy in the United States," he said. "Why? It's the networked economy," where once again, growth leads to growth, as more people are networked. It's that kind of phenomenon that accounts for the 90 percent drop in the cost of a phone call from 1957 to the present, while the cost of consumer goods like the Hershey bar have increased twelvefold and more.

Lee also asserted that telephone wires, not television cable, would continue to be the pipeline of choice for high-speed information in the coming decade, despite people's fears that the familiar twisted copper wires inside telephones wouldn't be able to carry heavier loads of information. He based his prediction on a technological breakthrough -- the development of the ADSL connection, a new high-band-width channel that makes communication using telephone wires 50 times faster than what's standard today.

Lee noted that GTE is providing this new technology to select communities like Redmond, Wash., a suburb of Seattle populated by Microsoft executives. "Our service to them at home is better than their network at the office," Lee said.

Lee's most significant claim took a question-and-answer form: "What does the networked economy mean as a social force? I believe it has a liberating and enabling capability that unites all of us as one race -- the human race," he said. "Telecommunications is the great equalizer because it makes information available to everyone." While democracies flourish in such an environment, dictatorships and rigidly authoritative governments can't withstand that full sharing of information for long, he asserted.

The last piece of advice on Lee's list, "don't be left out," is more likely to be heeded in developed countries than underdeveloped ones. According to Lee, as many as 3 billion people, half the world's population, have never made a phone call. "We will never rise as a species, if someone at the bottom is left out," he warned. But while Lee believes that universal, uniform access to what he calls "the unfettered voice" ought to be a worldwide goal, he observed: "We have a long way to go."

The Hatfield talk is sponsored by the Robert S. Hatfield Fund for Economic Education, established in 1980 by the Continental Group Foundation. Robert Hatfield, the program's benefactor, was in attendance at the talk, as was President Hunter Rawlings, who introduced Lee.

Lee is the 20th Hatfield speaker, following such corporate leaders as John Reed of Citigroup, Edwin Artzt of Procter and Gamble Co. and David Kearns of Xerox Corp. During his visit, Lee also spoke and met with students in Strategic Management, an undergraduate course in the Department of Agricultural, Resource and Managerial Economics taught by Associate Professor Bruce Anderson, and International Competitive Strategy, a course in the Johnson Graduate School of Management taught by lecturer Jan Katz. He also lunched with Johnson School students and met informally with School of Industrial and Labor Relations Dean Edward Lawler and students in the school's Center for Advanced Human Resource Studies. But his most encouraging link with students came early in the morning when, on his way to class in Warren Hall, he spotted a student chatting away on a cell phone with a friend in London. "What were you talking about?" he asked. "Business" was the reply.

"We're all doing business over networks now," thanks to the telecommunications revolution, said Lee.