Juicing the Infobahn With Powerful Fiber

America's electric utilities, rich with bandwidth, are poised to emerge as players if regulators give the OK

The infobahn may well be augmented by an energetic entrant.

While telecommunications and cable television companies hog the headlines with news of their latest fiber-to-the-wallet ventures, electric utilities are preparing to enter the fray as powerful information providers themselves.

While the initial foray by these utilities will be restricted to information regarding the consumption and conservation of electricity, if regulators give them a green light, electric companies could be a source of video as well as voltage.

"All the utilities are looking to leverage their infrastructures," said Jeffrey Saut, director of research with the brokerage firm of Ferris, Baker Watts Inc.

Unbeknownst to most, electric companies shadow their transmission wires with fiberoptic networks. Although installed to improve internal communications and monitor the current flow, more than a few utilities are using these networks to help customers become more energy efficient through direct digital links to programmable control boxes in the home.

New Orleans-based Entergy Corp. and the American Electric Power Co. of Columbus, Ohio, are but two major utilities with proven pilot programs that reduce residential usage and save the companies the cost of investing in additional power plants.

But the savings associated with conserving energy are a drop in the revenue stream when one considers the lucrative potential of telephone, video and other information services the utilities eventually hope to pump over their networks. However, it's an important first step that justifies the expense of laying additional fiber -- and lays the foundation for future services.

Consider this: The nearly 200 utilities belonging to the Edison Electric Institute, the industry's trade association, collectively own more than 100,000 miles of underutilized fiberoptic cable that's already been paid for by rate payers.

Even factoring in the personalized energy programming with existing communications and monitoring functions uses up only a minuscule portion of fiber's enormous carrying capacity, leaving scads of space for the transmission of voice, video and data. Add to that the fact the industry's annual revenues are projected to grow by only one or two percent annually, and you start to get the picture.

"Electric utilities have been interested in this for a long time," said John Castagna, spokesman for the Edison Electric Institute. In fact, the industry's research and development consortium, the Palo Alto, Calif.-based Electric Power Research Institute, is in the midst of preparing a major study on this very topic due out in August.

And while utilities are only doing energy management for the time being, some are quite vocal about their intentions to piggyback additional services over their fiber-optic networks.

"In essence, it is indeed our point of view that fiberoptic and the potential it offers could be an area that offers us a financial and investment opportunity we consider worth looking into," said Patrick Sweeney, spokesman for New Orleans-based Entergy Corp.

"The electricity aspect is only 5 percent of the available bandwidth, so what you then do in theory is market the other 95 percent to some vendor that wants to provide television, movies, banking or QVC," Sweeney said.

However, he added, the cost of running fiber to each home must be justified by the rate payer's energy usage, not the potential infobahn opportunities further down the pike. Which means affluent, energy-hungry communities are more likely to be fiberized, rather than low-rent residences.

Either way, it will not happen overnight. "We are looking at years rather than months, it's a slow and tedious evaluation process," said Sweeney.

Regulatory constraints must also be loosened before utilities branch out into other lines of business. Private, investor-owned utilities are regulated by the Public Utility Holding Act of 1935, which prevents them from using their wires for anything outside the business of juice generation.

While lobbying efforts by the industry have failed to loosen the act's constraints, some analysts believe regulatory restrictions on the electric utilities will loosen, as they have and continue to for the telecommunications utilities.

"There are lots of possibilities, and utilities want the choice to be able to lease their capacity to local carriers or cable operators or get into those businesses themselves if they so choose," said Castagna.

Are the utilities trying to have it both ways, acting like common carriers without being regulated? "If they are all common carriers, you face the risk of interrupting critical business communications," he said.

Pierette Chabot, director of telecommunications research for the Newton, Mass.-based Business Research Group, said utilities almost certainly will be allowed on the infobahn, and when they are, will be able to significantly undercut competitors.

"The utilities are in a fine position to resell to enhanced service providers," said Chabot. "Their fiber is paid for, and they have a guaranteed opportunity to get a return on their capital."


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