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UTC Telecom 2014: The Rise of the Utelco?

Jason Meyers
5/9/2014
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PHOENIX, Ariz. -- While many utilities are primarily focused on modernizing their internal communications networks, some of them also want to sell broadband services. To that end, some exhibitors at the Utilities Telecom Council Inc. 's Telecom 2014 event here are focused on equipping utilities to push high-speed connectivity to underserved regions. (See UTC Telecom 2014: More Power to You.)

"There's certainly potential for utilities to leverage these networks for multiple purposes," says Jens Erler, director of industry specific solutions for Ericsson AB (Nasdaq: ERIC).

Several US utilities are deploying fiber-to-the-home (FTTH) networks to provide broadband services. Kit Carson Electric Cooperative (KCEC), for example, recently tapped Fujitsu Network Communications Inc. to help it implement a network that will cover nearly 3000 miles in northern New Mexico, including Taos.

"We needed fiber for our electrical operations, and high-speed connectivity is lacking in our area," says Luis Reyes, CEO and general manager of KCEC. The utility secured $64 million in funding from the US Rural Utilities Service (RUS) , he says, to build a network that will pass 29,000 homes and businesses.

Municipally- and member-owned utilities are far more likely to become "utelcos" in underserved areas, both because of the government funds available to them and because they are less regulated than investor-owned utilities, said Mark Madden, regional vice president for North American utilities at Alcatel-Lucent (NYSE: ALU). Alcatel-Lucent supplied the infrastructure for the FTTH network that Chattanooga, Tenn. municipal utility EPB Fiber Optics launched in 2010.

"Any profit we make goes back to members in the form of lower electrical rates," says Reyes of KCEC.

In addition to connecting broadband users, Reyes says he hopes the deployment will stimulate the local economy by helping businesses be more competitive, particularly in tourist areas like Taos.

"Being able to provide high-speed bandwidth is an economic development enabler," says John Chowdhury, utility practice director for Fujitsu Network Communications.

— Jason Meyers, Contributing Editor, Light Reading

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mendyk
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mendyk,
User Rank: Light Sabre
5/12/2014 | 5:12:22 PM
Re: who bears the losses
Small utilities tend to be very risk-averse. Many of them will move into telecom services only after they secure some sort of government funding, and the ones most likely to do so are operating in areas that don't interest Tier 1 operators. But you're asking a fair question.
mfeastman
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mfeastman,
User Rank: Light Beer
5/12/2014 | 4:33:03 PM
who bears the losses
"Any profit we make goes back to members in the form of lower electrical rates," says Reyes of KCEC. -- What happens to the losses from this venture? Are the ratepayers protected from that? I doubt it.
R Clark
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R Clark,
User Rank: Blogger
5/12/2014 | 3:54:48 AM
Re: Competition
It seems like not a bad partnership opportunity for broadband players. They have all that expertise in selling and managing broadband services that utilities might not want to trouble themselves with.
mendyk
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mendyk,
User Rank: Light Sabre
5/10/2014 | 9:07:54 AM
Re: Competition
Calix also is pretty upbeat on this sector. A few other suppliers I spoke to at the show are still trying to determine what the real revenue opportunity is.
DOShea
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DOShea,
User Rank: Blogger
5/9/2014 | 10:42:50 PM
Competition
I wonder if some of these efforts will draw competitors into these markets. They haven't been there to begin with, of course, but if one company proves broadband can work, it seems logical others will follow in bids to steal that business.
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