Energy-Telecom Convergence in Future?

Looking ahead for 2005, Robert Shively, Partner at Enerdynamics LLC, predicts a convergence between traditional energy utilities and telecommunications:

You might be surprised to learn these technologies aren't just some engineer’s lab project, rather, they are being rolled out successfully in the field right now. What are they? They are technologies called Broadband over Powerline (BPL) and Fiber-in-Gas (FIG) that have the potential to allow energy utilities to provide last mile broadband Internet connectivity to houses and businesses through the utilities’ existing energy distribution facilities. To learn more, read on.

History of the "Energy/Telecom" Convergence
Energy companies originally became active in telecom for a solid business reason. Back in the early growth years of the Internet (the distant 1990's!), pipelines and electric utility companies often already had fiber laid alongside their facilities for their own internal uses. And access to rights-of-way that could easily be used to install fiber. Thus the development of backbone fiber was a natural. However, some energy companies wanted to diversify and tried to also offer services that were competitive to the telecom industry. There they met up with well-financed, aggressive and industry savvy competitors such as Level 3, Qwest, WorldCom, and AT&T. And when the telecom business came crashing down in the Dot.com bust, those energy companies who invested heavily in telecom crashed with them.

The New Opportunity
One result of the Dot.com bust is a wealth of cheap, underutilized backbone fiber. Unfortunately, this fiber isn’t useful until connections can be made to the ultimate consumer (the so-called "last mile"). And it is the last mile where new opportunities lie. Currently, about 91% of American zip codes have at least one option for high-speed Internet connections. Yet only about 15% of possible consumers have chosen to subscribe. Contrast this to a country such as South Korea where it is estimated that 60 to 70% of homes are connected to broadband services. In fact, the U.S. languishes at 11th in the world in number of broadband connections per inhabitant. This may be because service costs are also higher in the U.S., where broadband connections generally cost greater than $40/month. Many of the countries with higher penetration rates have services that range from $22 to $35/month. Industry observers believe that both access to broadband service and lack of perceived value versus subscription costs are holding down penetration rates in the U.S. Yet in a rapidly globalizing world where even white collar jobs are moving to international locations, failure to join the broadband revolution has the potential to disadvantage many Americans.

This may help the most in rural areas where repeated attempts at deregulating telecom services to make it easier to build the newer infrastructure for that "last mile", such as the Tauzin-Dingell bill, have failed.