The rollout of smart grid communications and a demand for increased profitability has led many utilities around the world to offer high-speed data, voice and video in addition to their normal utility offerings. The UTelco market has been steadily building for more than a decade, and the case for utilities to offer such services has never been stronger.
The Electric Power Board of Chattanooga, Tennessee is a good example why. The municipality-owned utility has deployed a 1Gbps fiber to the home (FTTH) network that “passes every residence and business in its service area as part of its overall smart grid project,” according to Lynn Hunt, global VP of utilities business development for Alcatel-Lucent (News - Alert), in a recent GridTalk article, Tapping into UTelco business opportunities.
The UTelco offering has generated $40 million of telcom revenue, along with $12 million in energy savings and $300 million in projected benefits over the next 10 years, according to Hunt.
The regulatory environment plays a huge role when it comes to UTelcos.
“Finding that optimal match depends on several different factors, with regulation being a key one,” Hunt noted in the GridTalk blog. “In about one-third of the States it is prohibited or quite difficult for municipal utilities to enter this space.”
If the regulatory environment is there, utilities then need to decide whether to use a wholesale or retail model for their UTelco offering.
The retail model provides more revenue, noted Hunt, “but it also means the utility needs to be prepared to operate a service provider business in addition to operating the grid.” So a wholesale model might be better for some utilities. If the right partner is chosen, that is.
“Success with wholesale models involves partnering with experienced third parties in order to deliver the actual services,” according to Hunt.
Utilities must gauge the market, too; it often is harder to compete in urban markets because competition already is fierce. The fruit of UTelco is much easier to pluck in underserved areas such as the area in Georgia covered by Dalton Utilities.
“A regional telecom study here in northwest Georgia indicated that we were sort of in a no-man’s land of connectivity,” noted Dalton senior VP of utility services, Hank Blackwood, in an issue of GridTalk article, Dalton Utilities empowers its community with broadband telecom.
So Dalton rolled out OptiLink, the area’s only high-speed, 100 percent fiber-based Internet, phone and television offering. It currently serves more than 12,000 customers in five counties, according to GridTalk. Roughly $19 million of the utility’s annual $200 million in revenue comes from OptiLink, which the utility runs as a separate business.
It is up to each utility to make a judgment on what size market it can easily access, according to Peter Moray, head of Mott MacDonald’s energy and utilities telecoms business and director at the European Utilities Telecom Council (EUTC), highlighted that the opportunity is global in nature stating in, UTelcos offer unprecedented potential for utilities and regional economies, another GridTalk posting, that: “I think that the growth in broadband around the world is going to create great opportunities for utilities at relatively low risk in the wholesale market to generate substantial revenues.”
Edited by Peter Bernstein