Energy — Telecom’s Next Big Thing
If you followed telecom industry news over the last month, you may have noticed a pair of signature events: In separate initiatives, Verizon and PAETEC expanded their presence in the energy sector. Over the long term their actions could have a strong impact on two naturally kindred markets — communications and energy.
To recap:
- Verizon made a “Smart Grid” deal. The former Baby Bell partnered with The Current Group to offer energy companies a simplified, integrated networking solution packaged with expertise in intelligent sensing devices.
- PAETEC acquired independent power operator U.S. Energy, growing its footprint in western New York state to provide both communications and energy services.
The pair of initiatives are as different as two market plays can be. The Verizon deal targets big public utilities that need help transitioning from century-old analog grids to modern networking infrastructures with built-in intelligence. PAETEC’s acquisition is a step toward creating a combined telecom/energy powerhouse as an alternative to dominant providers in both segments.
Why does energy suddenly look so attractive to telecom operators? For a lot of reasons, depending on the provider.
For incumbents — Energy companies could prove to be ready customers. A new Microsoft study finds that carrier networks could open up big savings for utilities reluctant to invest in their own Smart Grid communications infrastructures.
For competitive providers — Why not add one more service to their arsenal, particularly one that makes them a single source provider for energy and communications? One very intriguing aspect of the PAETEC deal: their interest in targeting data centers, a large, fast-growing niche with a pronounced appetite for bandwidth and wattage.
For both types of suitor, the gas and electric utility markets’ combined $307 billion value makes energy a natural and most enticing business spouse.
Granted, some skeptics might object that they’ve already attended this wedding and had their present returned. A decade past, many energy companies pursued their own gambit in communications offering combined energy and telecom services. . .until the movement fizzled out. Will a remarriage fare any better? We believe it will. Smart Grid and rising competition will help escort the happy couple down the aisle.
The biggest hurdle will be managing public perception. Many customers feel that energy and telecommunications costs have risen substantially over the last decade. Providers may debate that point, citing flat energy revenues on the one hand, and the convenience and savings of bundled telecom services on the other. Even so, and particularly in the current economic environment, they may face a public that is skeptical of their motives.
Inking joint ventures and acquisitions is just the first step. More critical to the successful union of telecom and energy will be the right positioning to ensure they win customers’ trust and confidence.
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