Utility powers up Net access
Electric company Boston Edison and telecom provider C-Tec hope to use a proposed joint venture to tap an emerging multibillion-dollar market for bundled phone, cable, and Internet service.
The deal, announced today, is the power industry's latest attempt to provide "one-stop" shopping for these services, made possible by deregulation.
In this case, Boston Edison hopes to let consumers monitor their energy consumption on the Net, while C-Tec provides phone, Net access, and cable TV services. It all could be bundled into a single bill, possibly starting next year.
The Massachusetts electric company that keeps the lights on for 650,000 customers in the Boston area is preparing for state-mandated deregulation in early 1998. With more than 200 miles of fiber-optic cables in the state, Edison hopes to cash in on its massive infrastructure and give itself a higher profile before its customers begin shopping for electric companies.
"Pursuing bundled services that work for customers is pretty much our focus," said Phil Lembo, Boston Edison spokesman for the $300 million venture that will take three to five years to roll out. "We see it as a strategy that can be successful, especially in a changing environment."
Meanwhile, C-Tec, a telecommunications company based in Princeton, New Jersey, wants to become a major player in the emerging market for telephone, cable TV, and Internet access service, which analysts estimate to be a market worth a total of $200 billion. Through its subsidiary, RCN, the company already offers bundled telecom services in New York City and several Pennsylvania communities, according to Chairman David C. McCourt.
McCourt also disclosed that C-Tec is talking to utility companies operating between Boston and Washington, D.C., where the telecommunications market is valued at more than $50 billion, he added.
"We are jumping in with both feet. This is not just an experiment," McCourt said, dismissing lackluster results and sluggish consumer interest of a similar trial by Pacific Gas & Electric, Tele-Communications Incorporated, and Microsoft that is under way in the San Francisco Bay Area. As reported by CNET, PG&E, Microsoft, and TCI may soon pull the plug on the trial.
Yet Eric Paulak, an analyst with the Gartner Group, said power companies face an uphill battle.
"They first have to learn to compete," he said of power companies about to lose their monopolies, such as Boston Edison. "It is going to be difficult for [them] to compete in both markets and confront the challenges of deregulation."
He said power companies that team up with telcos are going to have to do three things well if they are to survive in an increasingly competitive market. "They first must protect their current market, then pursue each other's markets, and only then get into new industries," Paulak said. "There is a lot of talk," he added, but online offerings are likely to be scant until the market matures several years from now.
Similar ventures are under way in other regions. In addition to the PG&E trial, KN Energy recently began offering one bill for a range of energy, cable television, Internet access, and long distance services.
"The issue is 'what package do you put together for each customer and market segment?'" said Jim Penhune, an analyst with the Yankee Group, a Boston consulting firm. "That is the name of the game in the new post-deregulation telecommunications market."
While not stellar, power companies often have a better reputation for customer service than cable operators, who are gearing up for competition themselves.
In a survey of 2,000 U.S. households last year, Penhune found that many consumers would be willing to switch to another company to get a better price or service. About 19 percent those surveyed said they would switch local phone companies and 37 percent would switch cable companies if they were offered bundled services at the same price.
If changing would also net them a 10 to 15 percent discount, 70 percent said they would switch local phone companies and 96 percent said they would switch cable companies, according to the consumer survey.