Verizon Takes to the Battlefield

• Meet the new disrupter.

It’s not a Silicon Valley upstart like Uber or Airbnb, or even a “veteran” change agent like Netflix or Facebook. It’s an enormous company with East Coast establishment roots that traces its history to the first telephone call, in 1876: Verizon Communications. Verizon’s deal to buy AOL for $4.4 billion barely registers on Verizon’s balance sheet, and in purely financial terms it’s nothing compared with Verizon’s paying $130 billion last year to acquire all of Verizon Wireless. But its AOL purchase may be a signature transaction for Verizon, the deal that vanquishes lingering perceptions of the company as a stodgy utility. And the acquisition is just the latest and most visible in a series of bold steps that have transformed Verizon into a formidable competitive threat across the ever-converging telecommunications, technology and media industries.

•   “There’s been an earthquake,” said Jeff Kagan, an independent wireless and telecommunications analyst. “Everything that was rock solid is up in the air.”

Everything is also up for grabs, and Verizon appears to be going for it all. The company says it will use AOL’s digital ad platforms to target a $600 billion global advertising market, an audacious move since that market is currently dominated by Google and Facebook. Last month, Verizon said it would abandon the traditional cable package of 180-plus channels and offer consumers so-called “skinny bundles” tailored to their interests — a move so disruptive that ESPN filed a lawsuit to stop it.

• It paid $1 billion to acquire the mobile rights to N.F.L. games, and signed a multiyear deal with the YouTube programmer Awesomeness TV for 200 hours of original programming. And its FiOS service is routinely voted the best Internet provider in consumer polls, and has proved far more disruptive (and successful) than many skeptics at the time thought possible.
• “We have a history of seeing an opportunity and playing the insurgent role and doing it fairly well,” said Alberto Canal, a Verizon spokesman.

Verizon’s aggressive new posture was on display Wednesday at an industry conference, where its chief executive, Lowell McAdam, speaking about the AOL deal, said: “One of the challenges that big, incumbent companies have is inertia — the tendency to wait to be disrupted by new competitors, rather than being the disrupter. Strategically, we have taken a number of steps to shift our growth momentum and accelerate our move into new markets.” In the meantime, Verizon’s core businesses are under attack by Google. In what promises to be a spirited two-front fight, Google’s high-speed broadband service, Google Fiber, and its wireless offering, Project Fi, both take direct aim at the telecom giant. Executives at Verizon say they believe they can fend off competitors by focusing on customers. Under Mr. McAdam, a low-key industry veteran who succeeded Ivan Seidenberg in 2011, Verizon has made its customers the center of its strategic vision. “There’s been an epiphany here that we live in the age of the empowered consumer,” Mr. Canal said. Mr. McAdam, he added, “has been crystal clear that we have to change, and lead that change, or we won’t exist.”

• The cable and telecom industries have long paid lip service to the idea of customer satisfaction, all the while finding ways to steadily raise prices while dragging their feet on technological innovation and customer service. It’s no wonder they remain among the least popular businesses in consumer satisfaction polls. But there’s a growing sense that a new consumer-centric era has dawned, with far-reaching consequences only starting to be felt.

“This has been building for over a decade,” said Mr. Kagan, the analyst. “The customer just kept getting angrier. Now the cable bundle model is dead. It made everyone in the business a lot of money, but consumers didn’t want it. Now they’ve got choices. “Netflix and Amazon have been incredibly successful at delivering content over the Internet. There are a lot of public companies involved in this, and we’ll have to see which ones embrace change and lead and which ones don’t.” Craig Moffett of MoffettNathanson Research said that Verizon’s bet on AOL’s advertising technology platform “speaks to disruption.” He noted that wireless use had surged but Verizon’s wireless revenue growth had not kept pace. Getting advertisers to pay more to reach wireless customers would be a “sea change,” Mr. Moffett wrote in a blog post for clients this week. “Verizon is pointing to a future where advertisers, rather than users, carry a heavier burden.”

•  Mr. Moffett also said he was initially puzzled by Verizon’s move to unbundle cable channels, which created “gratuitous friction” with the very companies that will be critical partners in its wireless video venture. Consider the sports network ESPN, 80 percent of which is owned by Disney. It sued Verizon, one of Disney’s biggest customers. (Verizon insists that existing agreements allow the smaller bundles.)

“Perhaps the answer is relatively simple,” Mr. Moffett said. “Maybe they don’t care.”

• Or maybe the answer is that it doesn’t matter. Verizon, with a stock market value of $200 billion, more than 100 million wireless customers and nearly 20 million households with FiOS Internet or video connections, is so powerful that its partners have little choice but to adapt. They may be privately wringing their hands, but ESPN is the only one so far that has sued.

CBS didn’t protest Verizon’s slimmer bundles, and has unveiled its own Internet content platforms, including CBS All Access and a Showtime Internet option. The chief executive of a Verizon content supplier, who spoke on the condition of anonymity because of his business relationship with Verizon, said he recognized that Verizon was both a partner and a competitor.

• “They’re very aggressive on all fronts,” he said. “We just have to adapt to being on both sides of this.”

Where Verizon will ultimately go with AOL’s content business, like The Huffington Post, is unclear. Given Verizon’s video strategy and professed agnosticism about the source of programming, it’s hard to see where The Huffington Post fits into its strategy, but Mr. Canal, the Verizon spokesman, insisted it would not be an orphan among Verizon’s assets. And using AOL’s technology to take on Google and Facebook, given those companies’ dominance in mobile advertising, will be no small feat.

• But with these latest moves, Verizon has once again demonstrated that it is anything but complacent. “We’re not going to allow change to happen to us,” Mr. Canal said. “We’re going to be a part of that change.”