Tilting Toward Telephony: How Electric and Gas Companies Can Leverage Their Systems for a Changing Market
consumers. Entergy's network was first installed to monitor company operations and provide preliminary links for demand-side management (DSM). Since DSM uses only about 5 percent of any system's capacity, Entergy began to explore other services that could be provided over its network. With a fiber-optic network nearing 1,100 miles in its Arkansas, Mississippi, Louisiana, and Texas service areas, its system could easily double as a commercial communications network. Thus, Entergy began its "Customer Control 2000 Project" in Chenel Valley, AK. This system, provided over a single coaxial cable, offers consumers a wide array of services, including pay-per-view movies, Sprint long distance, and Southwestern Bell local telephone services.
The Role for PCS
Utilities are also exploring the potential benefits of offering PCS over their wireless networks. Most utility communication systems currently occupy frequencies below 3 GHz, the only frequencies allotted for PCS. The Federal Communications Commission requires a PCS license winner to relocate an incumbent user's microwave system to a higher frequency and gives parties three years to negotiate this relocation. By forming joint ventures with utility companies, potential PCS providers can decrease costs, eliminate the burdensome relocation process, and enhance their competitive positions.
Some bidders have already begun to approach utility companies. Most recently, Potomac Electric Power Co. (PEPCO) joined with Metrocom, Inc. to build a wireless communications network that would enable customers to send and receive electronic mail and tap into commercial online services. Aimed at a potential market of 4 million residential customers, businesses, and government agencies, the system would consist of a series of small radios attached to street lamps, power lines, and buildings. The wireless network will be PEPCO's first foray into competitive communications.
BellSouth Personal Communications, Inc., a subsidiary of BellSouth Corp., bid $70.9 million for the right to build a PCS network covering parts of North and South Carolina. BellSouth plans to transfer this license to a consortium it has formed with DukeNet Communications, Inc.; CaroNet, a subsidiary of Carolina Power & Light; and 32 other independent telecommunications companies. The consortium plans to begin constructing digital systems this
summer, so that service can begin by the middle of 1996.
The Southern Company has created a subsidiary, Southern Communications, Inc., to market excess capacity from its 800-MHz digital packet radio system. Southern currently owns major utilities in Alabama, Georgia, Florida, and Mississippi. By pooling resources from these operations and using Motorola's Integrated Radio System technology, Southern will be able to offer digital dispatch, paging, data, and telephone interconnect service in a wide-area seamless network.
Regulation Won't Go Away
Congressional efforts at deregulation may eventually eliminate many of the barriers utilities now face in attempting to leverage their systems for telecommunications. Still, regulations to prevent cross-subsidization and self-dealing are likely to continue. Separate subsidiary requirements may also be implemented, depending on the type of utility and degree of interaction between utility and nonutility operations. Moreover, issues will arise concerning the division of network costs between utility and nonutility businesses for the purpose of rate base regulation. These concerns become even more important in a competitive environment.