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Commentary: Tech is easy part for utilities on "telecom express"

"Old-world" companies trying to remake themselves into communications carriers face numerous hurdles, including their own management.

By David Neil, Gartner Analyst

Utilities and other types of "old-world" companies do have certain advantages in entering the communications carrier business.

For starters, a utility such as Union Pacific, one of the largest railroad company in the United States, already has rights of way--that is, legal permission to use land for its routes or power lines. With that head start, utility companies can more easily build their network backbones or expand existing ones.

Without such an advantage, a company

See news story:
Railroads look to tap broadband boom
must go through an often competitive and time-consuming process of applying to regulatory bodies for such use of land.

Yet even with such advantages, utility companies trying to branch out into telecommunications don't always succeed. In Gartner's opinion, the cases in which such efforts have fallen short resulted directly from the decision to appoint in-house senior management to lead the foray.

For example, the wholesale telecommunications industry seemed to be the natural next step for electric companies. But reality proved otherwise. Long a regulated industry, the expertise needed to run the business model was unfamiliar to the utility industry, and most attempts in the United States have been abandoned.

On the other side of the coin (and of the Atlantic), Energis moved into the retail telecom market in the early 1990s and has created real competition for British Telecommunications. Qwest Communications and Level 3 Communications are two additional examples of companies that have come from an old-world background and done well in telecommunications. What these companies have in common is that they brought in management with extensive experience in the telecommunications industry.

What has separated the winners from the losers is not necessarily superior technology; it is more an issue of knowing the environment, the culture and the important points of focus, such as customer service.

Having an extensive telecommunications network does not guarantee a utility company success as a telecom carrier. Providing internal service is not the same as providing quality service to external customers in a highly competitive market.

(For related commentary on that helps demystify telecom jargon, see TechRepublic.com--free registration required.)

Entire contents, Copyright © 2000 Gartner Group, Inc. All rights reserved. The information contained herein represents Gartner's initial commentary and analysis and has been obtained from sources believed to be reliable. Positions taken are subject to change as more information becomes available and further analysis is undertaken. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of the information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof.