Telco TV

Crash Course To Success: Verizon’s O’Connell Defies FiOS Odds

1/26/2007 7:00 PM Eastern

For Marilyn O’Connell, the last three years have been a crash course in the TV business.

In leading the team that built Verizon Communications’ 300-plus-channel FiOS TV service from scratch, the company’s senior vice president of video solutions had to learn about everything from carriage agreements to video-provider franchises, and from local ad sales to engineering.

“For me, the challenge was taking on all these things I hadn’t done before and getting them done,” said O’Connell, 51, who has spent much of her 22 years in the telecom industry in marketing roles.

Skeptics doubted Verizon could concoct a really compelling video service. “There was just a whole group of people saying, 'No, you can’t do it in a way that’s smart,’” she said. “My challenge was to take that on and say, 'I’m going to prove all these people wrong.’” At stake are the billions of dollars the telco is sinking into the fiber-optic FiOS network, which is supposed to pass 18 million homes by 2010.

The early results: About a year after its initial commercial rollout, FiOS TV had 118,000 subscribers as of Sept. 30 and was on track to have more than 175,000 customers in eight states by the end of 2006.

Yes, that’s just a fraction of the customers served by the biggest cable operators. But Verizon is sticking to an aggressive build-out plan, expecting to pass 3 million homes with FiOS by the end of this year. “For the most part, we’ll have video everywhere we have data soon after the end of 2007,” O’Connell said, adding, “It takes years — decades sometimes — to deploy a network and get your return back.”

Areas tagged for TV expansion include New York, Pennsylvania and Verizon’s corporate backyard of New Jersey. If the telco hits its 10% uptake goal, which it has in initial markets, that’s 300,000 subscribers.

Some of the heavy lifting on FiOS is done. In August 2004, O’Connell hired Terry Denson, vice president of programming and marketing for FiOS TV, who managed to get 300 channels under contract in a year. On a parallel track, Verizon worked to sign local video franchises.

Looking back, the company’s riskiest assumption was that it could land content deals on the accelerated timeline it set, O’Connell said. And, she acknowledged, “when you’re negotiating quickly, that removes leverage.” FiOS TV also was bargaining from a position of zero subscribers.

O’Connell and her team pursued a strategy of inking “over-comprehensive” deals with programmers. “We had capacity,” she said — Verizon, for one thing, has a relatively small 40-channel analog tier that goes to just 1% of subscribers.

“Everybody else [in the cable industry] is running out of gas without incremental investment. So we went to the table and we said, 'We’ll carry all 14 of your channels.’” That, she theorized, would also result in a more attractive consumer offering: “For $40 you’ll get 200 channels, not 75.”

But moving quickly also proved tough in negotiating with cities and states for video franchise rights. “If we agreed to everything a franchiser wanted us to do, it wouldn’t be an economically sustainable business,” O’Connell said.

The Federal Communications Commission ruled last month that local governments must respond within 90 days to cable-franchise applications, a change Verizon had lobbied for. O’Connell said that should help, if only to “light a fire” and move up a meeting on an official’s calendar.

Previously, O’Connell headed the company’s Broadband Solutions group, which encompassed data and video products delivered over the fiber-to-the-premises FiOS network. But as Verizon entered the TV phase in 2004, O’Connell said, it became obvious that the video business required full-time attention.

“There were just so many things to manage,” she said. “As we were scaling up from a staffing perspective, it made sense to split off [responsibilities].” John Wimsatt now heads up the data side of the house. He and O’Connell report to Bob Ingalls, chief marketing officer of the Verizon Telecom business unit.

What’s surprised her the most about the television world? Mainly, she said, it’s how close-knit the cable industry is.

The cooperation exemplified by CableLabs has been admirable, she said, in forcing vendors to make interoperable cable modems. O’Connell conceded that telcos, lacking a CableLabs-like organization, probably came to market with TV offerings “a couple years later than we could have.”

It may be too late for an “IPTV Labs,” she added. Even though telcos work together on setting technical standards in a number of forums, their approaches in assembling a TV service have been divergent. “Until somebody determines a very standard path, you have vendors working on a one-off solution, and then it’s hard for them to generate revenue from that solution,” O’Connell said.

Verizon has taken a hybrid approach to the equipment powering FiOS TV. To speed time to market, it picked conventional digital cable headends and set-tops to distribute linear channels. But it’s piping video-on-demand content over Internet Protocol networking gear. “We’re getting the best of both worlds,” O’Connell said. “We get the efficiencies of broadcast and the flexibility of IP for video on demand.”

A pure IPTV network may be in the offing down the road. But O’Connell said what’s important is that “we haven’t taken a path that would require a forklift upgrade.”

O’Connell, who works at Verizon’s central campus in Basking Ridge, N.J., moved to the state in 2005 after several years in exurban Connecticut.

“It’s more of a full-time feeling of being in the ’burbs, but it’s nice being 10 minutes away from work,” O’Connell said.

It wasn’t exactly her childhood dream to become an expert in telecommunications marketing. She studied journalism at the University of Kansas, and after graduating moved to New York to find a job in publishing.

She didn’t. Instead, she landed a gig in the marketing department of an insurance trade organization, which in 1984 led to a marketing position in California at GTE (later acquired by Verizon).

These days at Verizon, there’s no typical day for her. She might focus on a specific contract negotiation, franchising issue, vendor evaluation, whatever needs attention.

“That’s why the job is such a great job—it has great variety to it,” O’Connell said. “This has really been the best experience of my career, being able to take on a challenge like this and getting a lot of latitude to bring on the team to do it.”

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