[BETA] Fortnightly

IS IT A FAD OR BUSINESS? According to a recent SmartMoney %n1%n article, about 3 million customers traded $120 million in securities on the Internet last year, generating $700 million in commissions for online trading firms.

While this sum marks just 5 percent of total commissions for securities trading, it accounts for a healthy 30 percent of commissions for discount brokerage. Online trading firms, nonexistent several years ago, now total more than 50. Evidence for this explosion can be seen in the recent advertising campaign for DLJ Direct and in the growth of Discover Brokerage Direct, both offshoots of full-service brokerage houses. All the same, in some businesses it can appear difficult to figure out how the new online ventures are planning to make money.

Consider telecommunications, for example, which has seen a certain degree of deregulation. Why have local and long-distance telephone carriers acted so slowly in utilizing the Internet? Given the nature of the customer base, technology and in-house capability common to a telecommunications carrier, one would have expected that sector to lead the way in capitalizing the power of the "information super highway."

This reluctance shows that until we see meaningful levels of customer acceptance, large companies will feel hard-pressed to commit much capital or resources to the Internet. Perhaps this reason also explains why, in the energy business, early forays in Internet commerce have come from smaller companies and entrepreneurs.

Moreover, energy firms doing business online face several additional questions: (1) What products and services will customers find appealing? (2) Which products and services should they bundle or aggregate? and (3) How will the Internet tip the balance on that age-old question (em is it cheaper to "purchase" customers via a merger and acquisition, or simply to form a marketing organization to rob them from others?

Households: 26 Million and Growing

According to the Yankee Group, the number of U.S. households using the World Wide Web will grow to 26 million by the end of 1998, up from 20 million in 1997. Others estimate total "Web-friendly" households at more than 40 million.

Price Waterhouse, in its Technology Survey, discovered that many people are turning to the Web as a substitute for traditional media. Of the households surveyed, two-thirds use the Web instead of watching TV or reading.

But are people spending money online? Based on Forrester Research data %n2%N, 1997 web sales were about $2.4 billion and are projected to approach $12 billion by 2000.

So we have a business expected to grow to $12 billion over the next several years. It's driving markets. It's spawning hundreds of start-up businesses. Yet when we discuss the Internet and utility opportunities, many people yawn. This reaction is hard to understand considering annual energy sales top $250 billion and opportunities to cross-sell customers abound.

Major outsourcing companies, local and long-distance telephone companies and many Internet providers are now beginning to focus on customer systems and sales opportunities. It seems obvious utilities should shadow developments in this sector. Enron's recent foray into the retail energy market, the backing of RCN Corp. by