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News Analysis

Fortnightly Magazine - March 1 2000

notes, however, that the rapid change of technology might force a company to replace its dark fiber sooner than it had envisioned.

How far are energy companies taking their telecom activities? "There's no clear pattern," says Kraemer.

Strategic Alliances

Will Columbia, then, with its growing fiber infrastructure, take the next step and go into telecommunications services? "Nothing's off the table," says Hederman. He does say, however, that if his company were to go in that direction, "[I]t would involve strategic partnering."

Hederman's company would not be alone. Because the leap into the services side of telecommunications entails the greatest risk, the energy companies that have done so have acted through a partnership or through acquisition. As examples, Moroney highlights two separate alliances at Exelon - one with AT&T and another with Hyperion.

Energy companies "are certainly in line to partner with a telecom," agrees Kraemer. Also, Kraemer says, they would be eager either to partner or merge with another energy company ready to move into telecom, giving them an even greater portfolio of rights-of-way. But will telephone companies start merging with energy companies?

"I think partnering is the model we'll see," Moroney says, while half-joking that as soon as he makes such a prediction, some major energy company-telecom merger will be announced.

The services sector poses another key problem as well. The company that begins by leasing dark fiber and then offering services may find itself competing as a service provider against its own dark-fiber lessees.

"As you get into this [leasing] business, you have to look at the issue of 'do we think we'll go into services?' If you answer 'yes,' it could affect your own lease policy," says Kraemer. "[Diversifying] is not incremental. There's got to be some kind of end-game vision because what you do could affect your downstream activity."

Columbia, which has yet to offer telecom services, has at least considered the issue. "It certainly is a potential problem and it's something that we recognized [as Columbia Transmission Communications was developed,]" Hederman says. But, he points out, the issue is more complex than it might appear. In the interconnected, serpentine routes of telecommunications transmission, competitors inevitably end up using one anothers' rights-of-way. "You're going to end up swapping, anyway," Hederman says.

Still, he acknowledges, "It's something you have to think about."

Perfecting the Right-of-Way

"You have a partner that's the underlying landowner," Allen is quick to remind pipeline companies anxious to lease their rights-of-way. Before exploiting their rights-of-way for new sources of revenue, he says, pipelines need to examine carefully the multitude of easements that inevitably comprise one long-haul pipeline, since the language for a particular easement may allow for a pipeline, but not for fiber optic cable.

"These rights-of-way are highly specific. Just because someone has a right-of-way doesn't mean it's a clean enough title," Allen points out. "Yeah," he continues, "this is a great source for some additional [revenue], but you better have what they need."

When the business of multi-use rights-of-way really started taking off, some companies presumed that they had a right-of-way for whatever