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Breaking the Voice Barrier: Does Dial Tone Mix with Kilowatt-Hours?Sim Hall

Fortnightly Magazine - December 1996

What electrics should know about consumer

preference before diving into telecommunications.Electric utilities would enjoy a strong measure of credibility with consumers should they decide to enter the telephone business.

That finding comes from a recent nationwide survey of more than 1,000 households, drawn from counties with a population of at least 85,000 (see box for details).

All in all, at least one in every three metropolitan households claims to be either "somewhat" or "very" likely to buy local phone service from its local electric utility (em even without a price discount (see Chart). Moreover, the number of likely buyers increases sharply when modest price discounts are introduced. Though a larger proportion of consumers appears willing to buy local phone service from long-distance companies, electric utilities fare better than do cable TV operators or cellular carriers.

When asked, most energy consumers claimed to be "satisfied" with their electric service. To that extent, the proportion of residential customers who say they are somewhat or very satisfied with their electric utility appears comparable to the same cohort of telephone customers at local and long-distance phone companies. However, the telephone carriers may harbor a hidden advantage: Significantly more customers say they are "very satisfied" with their local and long-distance phone companies than make the same claim for electric service. Nevertheless, the level of customer satisfaction with electric utilities substantially exceeds that of cable TV operators.

Consumer preference is nothing to sneeze at. The Telecommunications Act of 1996 (em which enables electric power and cable TV companies (as well as local exchange, long-distance, and wireless carriers) to compete directly for the $200-billion, U.S. voice-services market (em imparts a new urgency to the conduct and understanding of market research at electric and telephone companies. Under the new law, registered public utility holding companies can set up separate subsidiaries to provide telecom services. Several have already done so (see article on page 33).

Although electric utilities entering the voice services business face considerable challenges, a large, satisfied customer base gives them an important competitive advantage. Electric utilities also enjoy substantial financial resources and experience managing large internal telecom networks. Finally, much of electric

utility infrastructure (em including fiber and microwave routes, tower sites, extensive rights-of-way, billing systems, and customer service organizations (em already stands poised to support a telecom business.

Electric utilities enjoy many options, ranging from passively leasing infrastructure to actively operating a full-service telecom company. Many electric utilities already lease rights-of-way, towers, and pole space to telecom companies. Some provide fiber routes to competitive-access providers and long-distance phone companies. Several are conducting trials of energy-management systems that require two-way communications. A few electric utilities have made modest telecom investments, and Boston Edison (BE) recently announced a more substantial

partnership that may become a model for utility participation in the telecom business (see story on page 15).

Of course, electric utilities need not spend millions developing high-capacity networks to capture a share of the huge telecom revenue stream. Resale of local and long-distance phone service offers a promising alternative. With modest investments in marketing, customer service, and billing

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