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CED Person of the Year - Tom Rutledge: Taking care of business

Thu, 12/31/2009 - 7:40pm
Brian Santo, Editor-in-Chief

CED’s 2010 Person of the Year: Tom RutledgeNew York City is where all of the major broadcast networks are headquartered. It’s home to two of the country’s three biggest newspapers. Headline-sucking media titans such as Rupert Murdoch and Sumner Redstone hold court there. All of which is why a low-key guy like Tom Rutledge, CED’s 2010 Person of the Year, can quietly engineer one of the most impressive runs in media history in the single-largest media market in the U.S. and yet largely duck notice outside of cable circles.

In just the past two years, Cablevision has initiated one of the more ambitious interactive advertising campaigns running, begun blanketing its region with a mesh Wi-Fi network, rolled out DOCSIS 3.0, gone all-digital, and initiated and won a court case that is nominally about network DVRs, but is essentially about copyright rights; that court case will be part of the legal foundation not just for one Cablevision product, but for the entire communications services industry to keep evolving toward ever-more intelligent networks and migrate to cloud computing services.

As chief operating officer of Cablevision, Rutledge is in charge not only of the company’s cable operations, but also of some of the company’s other disparate operations, including the Rainbow Media subsidiary, which owns AMC, Sundance Channel, the Independent Film Channel and WE tv.

He was also given responsibility for Cablevision’s 2008 acquisition, Newsday, which last year ranked as the country’s 11th-largest paper. Even there, Cablevision under Rutledge has been innovative, forging links between the classified advertising section of the paper and classified ad channels on TV and online.

In the seven years since Rutledge joined the company from Time Warner Cable, he has made sure that Cablevision is at the forefront of cable business services with the creation of an optical network that provides the platform for Optimum Lightpath. Cablevision was also among the first MSOs to embrace VoIP, and to push digital television during that stretch, as well.

During his tenure, Cablevision was also the biggest U.S. MSO to break from the Motorola/Scientific Atlanta (Cisco) duopoly in conditional access technology, choosing NDS instead. That was accompanied by an experiment with set-top boxes from a mainline consumer electronics company (Sony).

Rutledge is also the current chairman of the NCTA, spending no small amount of time jaunting down to D.C. to provide congressional testimony and discuss communications issues with members of Congress and the FCC.

He also served as co-chair of the 26th Annual Walter Kaitz Foundation Fundraising Dinner held last October (along with Abbe Raven, president and CEO of A&E Television Networks).

There may be other media executives who have managed as many innovations in the same time frame, but no one comes to mind who has accomplished more.

Rutledge may have escaped the notice of the world at large, but in cable circles, everyone knows precisely how much he’s contributed. The industry inducted him into the Cable Hall of Fame in October.

Rutledge’s educational pedigree may be in management, but he is one of those cable executives who has actually climbed poles for a cable company, working summers during college for American Television & Communications (ATC), a forerunner of what is now Time Warner Cable.

Once out of college, equipped with a sharp intellect and the practical experience of working on cable plant out in the field, Rutledge quickly began to distinguish himself as someone with a knack for overseeing system extensions and upgrades. Eventually he was given entire systems to manage, among them Austin, Texas, and Portland, Maine – both of which TWC would occasionally use as testbeds for new products and services.

RISING STAR
“He was clearly a rising star at Time Warner,” said Jim Chiddix, TWC’s CTO for much of the time Rutledge worked at that company, and now a board member of several companies, including Arris, Symmetricom and Virgin Media. “He was a good manager and a good operations guy.”

Rutledge is credited by those who know him with superb technical acumen. “He is very, very sharp,” Chiddix said, an opinion echoed by literally everyone CED talked to for this article. “He gets things quickly. He understood the value of hybrid fiber/coax immediately, what it could mean for the industry. With anything technical, he understood it essentially instantly.”

“There’s nothing he hasn’t done,” concurred Jim Blackley, Cablevision’s senior vice president of corporate engineering and technology. “He doesn’t do my job, but if he needs to dive into details, he’s certainly capable of getting there.”

“Without a doubt one of the smartest people in the industry, especially from a technical standpoint,” said CableLabs President and CEO Paul Liao.

Rutledge ultimately rose to president of Time Warner Cable, promoted in 2001 to that post in the wake of Glenn Britt, who was named chairman.

Rutledge held that position for about three months. At that point, TWC was proposing additional management changes. Cablevision made Rutledge an offer, and he accepted it.

Cablevision was hiring him to implement a plan to consolidate dozens of systems into what would functionally be a single system that ideally could achieve better economies of scale and improved operational efficiency.

“It was not easy,” Rutledge said. “One of the first things I did when I came to Cablevision was complete a process of consolidating what was originally 58 cable systems into a single cable company.”

Cablevision, he explained, “had historic systems and relationships with communities, we had management in different jobs than they would ultimately end up in, we had call centers that had to be consolidated. There were personnel issues. There were a lot of technical issues. There were hundreds, if not thousands, of different rate codes and different regulatory structures.

“There are still 409 regulatory authorities in Cablevision,” Rutledge said, “so it is quite complex to put it together and make it operate as a single unit.”

HARD CHOICES
“He did something really hard when he first showed up there,” Chiddix said of Rutledge’s arrival at Cablevision. “I gather the organization was a bit ponderous and mired in process and structure. He trimmed that structure. It was painful, I’m sure, for everyone that was involved. But he made that organization very nimble at the administrative level. He trimmed overhead substantially, and often that’s very healthy for an organization. Obviously Cablevision is doing very well.”

Cablevision is now managed as a single entity, Rutledge said. “From a legal and regulatory structure, we still have multiple entities and different channel lineups, but as we go to market and look at the marketplace and make marketing and pricing and product decisions, those are all done as a single entity,” he said.

The process required Rutledge to execute a philosophical 180. “I’d spent 24 years at Time Warner Cable, and Time Warner led the managerial move to decentralization in the ’80s, which I strongly embraced and strongly believed in, so my bias was that way when I came to Cablevision.”

The movement to digitizing video, to a broadband network and to a voice network, he said, “changes the level at which systems come together, so in order to have a more systemic approach, and a better managerial approach, the technology evolution of the business has driven the managerial evolution and forced more centralization into the business. When I came to Cablevision, all those forces were in play, and I went with them.

“When I was at Time Warner, the philosophy was right for the moment. Yeah, I changed my view, but the facts changed, too,” he added.

It was an element of the pragmatism many credit him with. “We always let reality intrude on our dreams,” he said.

Decentralization and centralization may be diametrically opposed, but oddly enough, the impetus for both was actually the same: encouraging localism.

Cable is a local business, Rutledge explained: “It always has been. Go back to decentralization – the purpose of decentralization was to serve the community with effective management locally.”

LOCAL FOCUS
Technology makes it easier and more efficient to create a unified network architecture, he said, “but you can’t forget what you’re doing. What you’re doing is building a community communication system that serves the individual residences of every community you have a franchise for. We have a geographically driven business, and the geography of cable is the local community, and it makes sense for us to support content at that level because we’re really the only people that can do that effectively.”

Localism isn’t a subject that comes up that often anymore these days, when service providers frequently have to have national scale (e.g., AT&T, Verizon, DirecTV), aim for national scale (e.g., Clearwire, and maybe consider Comcast), or create the functional equivalent of national scale (e.g., Canoe Ventures). These days, localism is occasionally dusted off for inclusion on a list of competitive advantages that cable may have over its rivals.

But it is, in fact, a competitive advantage. Rutledge keeps it top of mind as a key element of Cablevision’s strategy.

Dick Green, the longtime leader of CableLabs who only recently retired, said of Rutledge: “He’s the epitome of localism. A cable company is at the center of community life. Cablevision ties it together with news channels and a newspaper, ties those elements together for the community. That’s important for cable’s future.”

Buying Newsday was a maneuver that continues to confound some analysts, but buying it was an element of that larger strategy of localism, Rutledge said.

“It’s a historic industry, but it has a deep penetration in the Long Island part of our operation, which is about 20 percent of our cable footprint … It is a real solid, community-oriented paper. We bought it because we’re a solid, community-oriented company. We think that that localism that Newsday expresses works in our business, and that as an electronic distributor of information we can take that legacy paper, and hopefully run it well as a paper, but also take the content the paper creates and create unique local content for our electronic consumers attached to our cable system.”

Like almost every other major newspaper in the country, Newsday is losing readers. Can a shrinking business be integrated with Cablevision’s other businesses?

“It’s not easy,” Rutledge said. “We have to run the legacy business, and it’s under a lot of stress. On the other hand, we’re uniquely situated with a high penetration of broadband, voice and video in our community. We’ve been investing in localism for years.”

The word synergy is habitually used to justify acquisitions, but it rarely actually manifests. Rutledge is actually eking out some synergy with a newspaper in the mix.

Cablevision recently made Newsday available online only by subscription; the only other major paper that readers must pay for online access to is The Wall Street Journal. It’s a risky strategy, but it’s made easier for Cablevision because the op also offers free access to Newsday online to its broadband subscribers. Classified ads for cars and houses are in both.

Some may think that Cablevision can afford to highlight localism because of the geographic concentration of its footprint, but the people who think that have never been there. Visit the South Shore of Long Island, the Bronx, Westchester County and Hoboken, N.J., and let us know what, if anything, they have in common beyond geographical proximity.

“We have seven news channels branded as News 12,” Rutledge said, one for each different geographical community, “and we just launched a local high school academic and sports service called MSG Varsity. We have a traffic and weather product that’s highly local. Newsday fits into that strategy of creating highly valuable local content and distributing it on various electronic platforms that we serve various customers with.”

MASTER STRATEGIST
That ability to handle tactics, like integrating Newsday, with strategic goals is a hallmark of Rutledge’s approach, according to those who’ve worked with him.

Green volunteered about Rutledge: “I think he’s a first-rate strategist. Two years ago at the CES show, I was walking around with him. There were a couple of 3-D displays on the floor, and not high-profile exhibits, either. He said, ‘I’m really interested in this.’ That conversation got CableLabs looking into 3-D. This year, 3-D will be everywhere. He’s got prescience.”

Green added, “He figures out the right strategy, puts together the right plan and gets it done.”

Rutledge holds biweekly meetings at the corporate level to discuss product strategy. Implementation in the cable business, he said, is handled by president of cable and communications John Bickham and his group.

“They do a weekly meeting where every piece of software, any change to any billing practice, any customer-facing product, billing arrangement, rate, change in business rules is discussed and approved consensually among a fairly large group of operating people,” Rutledge said.

That level of thoroughness and attention to detail extends into a standing organization dedicated to evaluating products and readying them for implementation.

“We have a small corporate group that does advanced R&D; they are not part of the operational part of the business. We have both corporate labs, which are relatively small, and operational labs, which are used to put products together so we can go to market with them, make sure they work on our plant,” Rutledge explained. “We don’t have a huge staff here, but we do work at the corporate level on product development combined with the product development group in the cable system.”

And it’s all in service to the overall strategy. Blackley said: “He asks me to create a three- to five-year vision of what the network would look like, in the home, business and wireless space. I keep that updated, and I know he does that at the strategic level. We meet a lot so that I’m not going off doing science experiments and the product group isn’t asking for things we can’t do.”

Jim Blackley & Tom Rutledge

To get a sense of how many steps ahead the company tries to think, the centralization he accomplished upon arriving was a strategic move unto itself, but was also an element of a larger strategy to achieve the scale necessary to progress to subsequent products.

“Part of our network DVR strategy is a scale strategy,” Rutledge said. “Mass storage housed in just a few centralized facilities is far more efficient than distributing storage in individual consumer devices.” Doing so, Rutledge said, “gives you scale, and consistency, good economics and good customer service.”

The concept is called by a number of names: network digital video recorder or personal video recorder (nDVR or nPVR), or remote storage DVR (RS-DVR). The idea is to stop putting storage devices in people’s homes that are expensive, prone to failure, and have storage levels that quickly become inadequate as storage density increases and memory price decreases. It’s simpler to store content in centralized servers, managed by the service provider, which can ship people’s content to them essentially on-demand.

The problem was that the approach might have been illegal under copyright law. That was the argument many content-owning companies made when Cablevision floated the idea of actually implementing such a system five years ago. Cablevision disagreed and was willing to take the issue to court. “We have good lawyers,” Rutledge noted. “We also interact with our lawyers. We had our technical people, our operating people and our lawyers all on the same team, working for the same purpose, which is to advance the business, and to advance the technology and the business together in the best way for the consumer. We do work as an integrated team. We have quality people. And we thought we could design a DVR in the network space that would pass muster legally.”

MSOs are fairly progressive about making sure engineering and marketing talk to each other. But adding lawyers to the mix appears to be a little more rare.

Including legal and regulatory in the mix is critical, Rutledge said. “When you think of the cable business – any communications business – there are three parts that are significant. There’s the technology, there’s the customer service and product infrastructure, and the legal regulatory structure – the three legs of the stool. They’re all equally important, and they’re all integrated.”

And the integrated team went to court to argue its view on copyright.

“We tried to think of every argument we could, pro and con, tested it, got comfortable with our arguments and promptly lost the first case that we brought,” Rutledge said, “and won it on appeal. While we were right, it wasn’t a slam dunk case, there was some risk in it, but we were willing to take that risk because the stakes are so high. We think it’s the right solution for both content and distribution.”

And, typically, Cablevision does not view the fight for approval of the RS-DVR as an end unto itself. The issue has far more significance than that.

“It’s actually a lot more than one product,” Rutledge said. “RS-DVR, as a legal concept, what we were fighting over was copyright. Why was a DVR in a house legal, and why would a centralized DVR not be legal? The technology of a centralized DVR is more elegant than a set-top DVR. It’s more economic, it’s more capable and flexible in terms of change and upgrading, and actually, in our view, more in the interest of content owners because it allows the content storage to be visible to the owners of the content, and it allows the owners of the content to improve their content either by changing the advertising or refreshing anything that might be anachronistic in the content and having it available for replay."

CLOUD COMPUTING
“So the network DVR physically is a better, scalable device than a distributed DVR. We think, ultimately, cable systems are going to become intelligent networks,” through which products will be served or unicast, to customers, Rutledge explained. “And networked DVRs would be a component of that. It was important to us to clarify that things that work as customer premises devices or consumer electronics devices that could be done better in the network should be legal, and that’s what our goal was.”

Cable operators are juggling any number of projects – Cablevision more than most. Meanwhile, an MSO has to respond to competitive pressures, and also deal with everything from natural disasters to acts of Congress. How does any company maintain its focus?

“The hardest thing to do is to keep your strategy in mind over the kinds of time frames it takes to implement them and not get distracted. There are a lot of daily distractions, competitive distractions, technological change, regulatory change,” Rutledge allowed. “But these are big infrastructure projects we manage in this business – there are a lot of people involved. In order to have very good customer service, you have to build an excellent plant, you have to maintain that plant, you have to have trained people – continually trained people – monitor your performance against your expectations, and it’s very fundamental work.

“And at the same time, you have to be considering new technologies, implementing those technologies, understanding the nature of your workforce and their ability to handle technology, and you have to hold all those thoughts in your head at the same time as you roll out products, and it’s very easy to become disoriented and disjointed. I think one of the things we do as a company pretty well is stick to our strategy and implement new technology and new products without losing sight of our strategy.”

Cablevision is a company ready and willing to go its own way. Rutledge fits right into that. “He doesn’t always follow the crowd,” Green observed. “He takes positions and pursues what he feels is right.”

Liao, Green’s successor, formulated the exact same opinion of Rutledge. Liao added: “He’s always out in front with innovative things. Wi-Fi? Some people thought, ‘This is crazy,’ but he made it work.”

Maybe that’s just the other side of the coin when you’re willing to get out in front of everyone else. If everyone else believes you’re heading in the right direction, then you’re an innovator. If there’s some disagreement on the point? Then it looks like you’re walking your own path.

Knowing the industry backwards and forwards gives him some license to blaze trails. “Because he understands so much about what we do,” Blackley said, “he is confident with his decisions, and he’s quick to evaluate the results. It takes a confident person to call a shot, and an even more confident one to say, ‘I was wrong,’ and correct his course.”

Cablevision isn’t notable for running with the pack, and Rutledge is considered quiet by his peers. Being chairman of the NCTA may not be an obvious role for someone in that position, but the fact is that he has earned a tremendous amount of respect from his peers.

“It’s not a glamorous job,” noted NCTA President and CEO Kyle McSlarrow. “The expectation is that as chairman, you must set aside the interests of your own company and think of the industry. He takes that seriously. But you have to be able to build consensus, and he’s also smart enough to figure out how to build consensus.”

Liao reached back to the old E.F. Hutton commercial in describing Rutledge’s status. So did McSlarrow. “When Tom speaks, everyone stops playing with their BlackBerrys and listens,” he said.

“He has a way of cutting through the crap,” Chiddix said. “He will sit there and not say a lot, but then he’ll say something that indicates he’s been listening, but shows he’s been thinking about it, and it will be a useful and succinct observation.”

WHAT’S THE SECRET TO HIS SUCCESS?
“I’ve been in the cable bus for over 30 years, and I’ve been all over the country operating cable systems, and ultimately running big cable companies. So I know the business inside out, and I know how it’s put together,” he said. “I’ve built a lot of cable systems, upgraded a lot of cable systems, and have now integrated them into single entities. I bring a vast reservoir of experience and judgment in the cable business of what works and what doesn’t work and how to organize oneself so you can assess whether your decisions are working or not. That managerial culture was implemented at Cablevision – successfully. A managerial culture married to an entrepreneurial culture gets great results.”

That may be so, but as Chiddix noted, “There are others who’ve been in this business for as long and haven’t accomplished nearly as much.”

But over and over again, those who know him agree with his assessment of himself: He knows the business backwards and forwards. But they’ll go a little further than Rutledge will himself.

Chiddix again: “He has a unique combination of intellect and common sense and pragmatism. Common sense is hard to define, but where others can get lost in process and studies, he could just cut through all of that and make a good decision, without getting analysts to generate 400 pages of PowerPoint. He’s taken on things with no background – he has Rainbow and Newsday – all that stuff he’s had to learn on the fly. He brings his intuitive, analytical gift to that, as well. He genuinely loves the business, and he keeps trying to make it better and better. And he’s a genuinely nice person.”

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