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In New York, Ethernet goes electric

Energy company Con Edison is diversifying its networks, making Ethernet services available through the city's electrical conduits. But analysts say the market may be tough to crack.

New York businesses can now get Ethernet services through the city's electrical conduits, as Con Edison is moving into the tough business of providing the services in metro areas.

The move is part of a bigger strategy by the energy company to diversify its networks used for high-speed Internet access in New York.

The company began offering the service Wednesday through its telecom subsidiary, Con Edison Communications (CEC). The service, dubbed PowerLan Ethernet, will provide a high-bandwidth, low-cost alternative to current networks. It will also give New York a backup network by providing the only alternative to Verizon Communications' conduits.

Currently, companies like AT&T and WorldCom use something called the Empire City Subway conduit, which is owned by Verizon. Companies have to either lease the "last mile" connections into office buildings from Verizon or lay the lines themselves.

CEC is targeting business customers and telecommunications carriers with its PowerLan Ethernet services as part of a larger strategy to become the premier provider of high-bandwidth transport services for New York. The company announced the strategy, called Smart Alternatives, on April 30.

"Our diverse network backbone truly makes CEC a 'smart alternative' to incumbent carriers in New York," Chief Executive Peter Rust said in a release. CEC already offers T1 and T3 services (private connections for high-speed Internet access) over its conduits and said it has 100 buildings on its network.

This isn't the first time a utility company has gotten in on the Internet business. Railroad companies used their land rights to an advantage as companies laid out fiber for broadband networks in 2000.

But getting into the metro Ethernet business may prove more of a challenge. Most small companies that went into the business--such as Yipes Communications, which has filed for bankruptcy protection--have struggled to survive, leaving the business to inter-exchange carriers and regional Bell operating companies. Analysts had predicted that the tough competition would keep new players out of the market.

"It will be three or more years, if ever, before another start-up provider attempts to build a national, next-generation network to compete directly with the established players," Nicholas Maynard, an analyst with research firm The Yankee Group, said in a recent report.

But CEC said its business is unique. The company's services are built on a set of network routes through the electrical conduit system in Manhattan. All other services use the Empire City Subway conduits, leaving the city vulnerable in the event of a fiber cut or disruption.

CEC emphasized that it operates its own network, while many start-ups have relied on leasing the connection that links larger networks to office buildings. It also said the trusted Con Edison name helps it gain access to businesses' networks.

"Digging a trench and laying cable is no different from digging a trench and laying electric lines. The synergy here is, once you get access to an end user customer, you get many other options," said Paul Fremont, an analyst with equity research firm Jefferies & Co.

CEC's services are compliant with the commonly used IEEE 802.3 Ethernet standard and feature variable speeds of between 10 megabits per second and 1 gigabit per second, as well as traffic prioritization capabilities.