There are opportunities for utilities despite the telecom market correction of 2001 and 2002.
Robert H. Picchi is senior vice president of Utilities International, a Chicago-based consulting firm dedicated to the utilities industry and the creation of value and competitive advantage for their clients.
The benefits gained when electric and gas utilities enter the world of commercial telecommunications services are obvious. Telecommunications services allow utilities to leverage many core competencies, assets, and human capital. Additionally, new entrants enjoy some competitive advantage over operators of older networks; just 70 pounds of fiber optic cable can transmit as many messages as one ton of copper wire and with only 5 percent of the energy needed. Market demand is making possible new revenues from video, data, and wireless services, not to mention such bandwidth-intensive applications as Internet access and application services. Yet the risks for utilities entering telecommunications are real and ever present. A thoughtful strategy of building upon established competencies and achieving incremental advances is the soundest path to manage risks and climb the telecom value curve. From elementary right-of-way (ROW) transactions to complex application hosting, the difference between success and failure in the fast-breaking world of telecommunications technology lies in understanding and mastering each progression in a five-stage continuum.
Naturally, just because a pulp mill is good at producing paper, that is no indication it will succeed in the newspaper business. Yes, it can be done, but it would be essential to develop and match core competencies to support more complex tasks. Similarly, many utilities enjoy a sustainable competitive advantage in managing physical assets such as poles, ducts, and right-of-ways, paving their way for entry into telecommunications. However, success in entering telecommunications services comes from working through incremental advances—building as you go.