Utilities poised to be telecom players

Executives from the country's gas and electric utilities see a window of opportunity in today's slumping telecommunications market and are poised to take advantage.

More than 60 investor-owned utilities operate telecommunications-focused subsidiaries, according to Beth Griffiths, research director of the United Telecom Council (UTC), an organization created more than 50 years ago to represent the interests of utilities, gas pipelines and other telecommunications-dependent industries.

If the turnout at the UTC's Telecom 2001 conference, "Revving Up for Telecom Success," is any indication, more utilities will soon follow. Hundreds of utility executives and industry professionals were in Milwaukee last week to learn about taking advantage of the telecommunications infrastructure and large customer base they already have in place.

Utilities have long had robust internal communications networks to maintain contact with field technicians when outages occur. The Telecommunications Act of 1996 opened the door for utilities to enter the competitive telecommunications business. Since then, a steady stream of utilities has entered the market, creating unregulated subsidiaries that have focused on the wholesale "carrier's carrier" market, offering dark fiber and bandwidth to established telephone companies reluctant to shell out the capital needed to build infrastructure.

Increasingly, these telecommunications subsidiaries aim to provide metropolitan-area connections, for example, to large corporate campuses, hospitals and universities.

In addition, the plan to use power lines to deliver high-speed voice and data transmissions has been successful in Europe and is becoming reality in the U.S.

Rick Rumbarger, CEO of Powerline Technologies in Reston, Va., says his company has three trials under way.

"Powerline technologies are a reality in North America," he says. In February, Powerline announced it had completed field trials over a live power grid using both overhead and underground power lines "providing the viability of its 'last mile' broadband solution."

To underscore the importance of this emerging technology, the UTC created a subcommittee of its technical division devoted solely to power line communications.

With telephone companies facing tough times, financially stable utilities are positioned to bring broadband and other telecommunications services to the communities they've served for decades, says Stephen Carrico, director of communications business development at Wisconsin Public Service and UTC's chairman of the board.

"As utility telecommunications professionals, we have the right skills at the right time . . . to really help and change things for the better," he says. "There are tons of opportunities [for utilities]. Don't let them pass you by."

One area where utilities may be particularly strong is serving metropolitan areas, where network bottlenecks have emerged because bandwidth demands are outpacing infrastructure capacity. Florida Power & Light's telecom subsidiary, FPL FiberNet, last year decided to invest $350 million to expand its intracity, metropolitan networks using up to 432-count cable.

The company has about 750 route miles of fiber in Miami, Fort Lauderdale and Tampa and expects to have hundreds more in St. Petersburg, Jacksonville, West Palm Beach and Boca Raton in the next month or so, says Neil Flynn, FPL FiberNet's president. In total, FPL FiberNet has "well over a quarter of a million fiber miles," Flynn says.

FPL FiberNet has a long list of customers from long-distance providers such as Bell South and SBC, to Web hosting companies and ISPs such as Genuity. What's more, FiberNet is making money, Flynn says.

Companies can cash in on utilities' foray into this type of networking because utilities will be looking for "anchor tenants" to justify a telecom expansion. Businesses can get good deals by being the first customer to use a utility telecommunications network, UTC's Griffiths says.

Griffiths and Carrico stressed the importance of partnerships as utilities move further into telecommunications. In addition to infrastructure, utilities selling telecommunications services need technical and customer service support.

Acquiring a competitive local exchange carrier is one route, but CLECs have been seen as too expensive.

"Well, they're not expensive anymore," Griffiths says. "There are a lot of assets out there."

Mary Regan, an analyst with The Yankee Group, says IT managers should keep their eyes on what's happening with utilities in regard to telecommunications services because it offers an alternative to incumbent local exchange carriers and regional Bell operating companies that sometimes can be tough negotiators.

"It's worth watching in terms of identifying more attractive deals," she says.

Contact Senior Writer Jennifer Mears

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