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Look Twice Before Diversifying into Telephony

Fortnightly Magazine - March 1 1995

data transport makes up only a small portion of the larger service concept. The customer is buying information and efficiency (em not just transportation. Furthermore, the utility is combining two unique strengths that will help to create a defensible market position.

While the concept of bundling information and energy is not new, it represents one possibility for competitive advantage and differentiation in an era of increasing competition. The challenge facing utilities is to create new sources of value and capture them with new services. Given that customers rely increasingly on information and technology, utilities ought to be able to create and capture value through diversification into carefully selected telecommunication markets. Nevertheless, many other sophisticated and aggressive players lie in wait in this market. Don't take the challenge lightly.

Which Technology?

A number of different technologies can support a wide range of potential service offerings to help electric utilities ease into telecommunications. Most commonly considered technologies include fiber optics, trunked radio systems, and other wireless technologies like microwave and personal communications services (PCS). To assess which are most attractive, the utility must analyze the potential risks and rewards associated with each.

Exhibit 1 presents the generally available switching and transmission alternatives for creating any telecommunications network. Circuit-switching establishes a dedicated connection for the duration of the call. Packet-switching segments data into small units (packets), which include "headers" and "trailers" that define the start and end of each packet. A newer packet technology called "asynchronous transfer mode" (ATM) messages are broken into fixed-size cells. Packets or cells are then reassembled in the correct order at point of receipt. Packet-switching is generally useful for short, "bursty" data exchanges.

Radio (wireless) transmission avoids the need for deploying wire-based facilities. Radio transmission combined with packet-switching forms "packet radio," which can transmit low-speed data to locations not already wired for traditional wireline packet services. As noted above, a packet radio network offers a good technology mix for electric utilities to use to develop a niche telecommunications service to help customers monitor electricity use.

A packet radio system features three essential component technologies: radio transmission, packet switching, and software.

Radio Transmission. Although the fundamentals of radio transmission have been well understood for most of this century, spread spectrum transmission was developed in the 1960s. This technology comes in two varieties: frequency-hopping and direct sequence. Frequency-hopping requires the transmitter and receiver to change carrier frequency at short intervals according to some predetermined pattern. Direct sequence uses low-power transmitters to send digitally encoded data by "spreading" each bit with a predetermined key.

In either case, the benefits of spread spectrum are the same. The signal exhibits a high resistance to noise and multipath rejection. The probability of

transmission interception is minimal because the low-power

transmission makes the signal appear as background noise. The frequencies may also be used by other transmitters and, thus, do not require special licensing at very low power.

Nevertheless, spread-spectrum technology does pose certain difficulties. First, such transmission requires high-performance, wideband radios. Second, the transmitter and receiver must establish and maintain synchronization. Transmissions may prove difficult to