Editor’s Letter: Telco Reality Check

By John P. Ourand

Before the cable industry loses its collective head over the pending video threat from the telcos, it's a good idea to look at just who is leading the telcos' charge. The leadership is not as impressive--or cable-centric--as some press coverage would have it appear. Let's have a reality check.

At SBC, there's Lea Ann Champion and Jeff Weber, longtime SBC execs with tons of telco--and only telco--experience. Then there's SBC's cable guy--Dan York, an executive who made his name on the programmer side of the business. Nobody's been on the distributor side during negotiations.

Verizon picked cable guy Terry Denson to cut its programming deals. A likable and capable executive, he wasn't even the deal maker when he worked for the country's ninth-biggest cable operator, Insight. As part of a program-sharing arrangement, Comcast's Matt Bond negotiated most of those programming deals for Insight, not Denson.

The word is that these executives are knowledgeable about the business. But they collectively have shockingly little experience cutting programming deals. Even seasoned negotiators like Time Warner Cable's Fred Dressler, for example, would have trouble trying to cut deals with no subs and a history of stopping and starting in the video business. (Well, Fred would probably disagree, but that's what I think.)

"It's amazingly peculiar that the individuals running the video divisions come from the phone side," one network executive told me. "It's pretty thin over there."

This reminds me a little bit of the British cable industry's plans to dethrone Rupert Murdoch's BSkyB. While I was covering the European cable scene in the late 1990s, U.K. cable was a distant second to Murdoch. Cable had superior technology. It cut a couple of impressive deals. And it promised to cut into satellite's market share.

But the dysfunctional British cable industry never found capable leaders who could take the industry to the next level. Cable's nadir in Britain occurred when the biggest MSO, Telewest, picked Tony Illsley to lead it. Illsley was poached from Britain's biggest potato chip company.

That's right: potato chips. He actually convinced his bosses that the diversity of crisps (as the Brits call potato chips) made him a natural person to oversee the diversity of cable television offerings.

It would be foolish to ignore the telcos' moves into video, considering that Verizon and SBC have committed $10 billion to their video plans over the next several years.

By all accounts, cable's headhunters are receiving a lot of interest from VP-level cable executives looking into the telcos. But the telcos have shown surprisingly little interest in cable guys who actually know how to run a system. And there's a roster of all-stars out there who are--or could be--available this year: from Carl Vogel to Bill Schleyer to Ron Cooper.