The Southern Co., a registered holding company for five Southeastern utilities, plans to have the first domestic digital specialized mobile radio network operated by an end-user organization on the air early next year.
The network under construction includes 270 towers and provides coverage of Southern’s 120,000-square mile service area, encompassing all of Georgia and Alabama and most of Mississippi and Florida.
Primarily designed to connect voice dispatch communications across the company’s utilities-especially during storm recovery efforts-Motorola Inc.’s Integrated Radio System (MIRS) also addresses spectral efficiency issues. Southern intends to use SMR two-way data capabilities to link rural customer sites for energy management purposes-the first utility to do so. Excess digital capacity will be leased to public-safety and other organizations, with which the holding company already has considerable interaction.
“Although it’s not the primary purpose (of the technology) to provide an information connection to the home, in places we will use it at least until such time as a fiber optic/coaxial cable system is deployed,” says Walter R. Barron, president of Southern Communications. Like many utilities, Southern has a substantial fiber-optic backbone system originally installed for power plant control.
“In metropolitan areas, the deployment of this interline through a fiber/coax system would be more cost effective than the utilization of a wireless network,” Barron says. “But in areas where the wired infrastructure would not be practical or until it can become practical, this provides an opportunity to go ahead…(with) applications that shape the way customers use electricity to reduce (monthly) costs and allow us to reduce the cost of providing (power).”
Those applications allow customers to select lower-cost appliance operation options and permit utilities to collect data on system-wide energy usage patterns, read meters electronically, provide itemized bills and initiate or terminate service remotely.
“The system will allow for priority access and some other things specific to Southern’s needs,” says Dick Leicht, vice president and director of Motorola’s MIRS Infrastructure division. Leicht declined to provide further equipment details.
The lease plans put Southern in direct competition with Dial Call Inc., the SMR division of Dial Page Inc. Dial Call is installing MIRS cell sites in the Carolinas, Georgia, Alabama and Florida in the first phase of its network build-out plan. Nextel Communications Inc., an ESMR provider with plans to offer a nationwide network, has announced plans to acquire Dial Page.
Due to the dynamic nature of channel assignments within the MIRS system, Barron prefers not to estimate the amount of spectrum available to outside entities. However, he notes that Southern’s service offering will be substantially different from Dial Page’s because the former will provide customized personnel safety features. Barron expects Southern to compete directly with Dial Page in urban areas.
Under the 1935 Public Utility Holding Company Act, the Securities and Exchange Commission must approve Southern’s March 1993 request to establish a separate SMR subsidiary.
“We have had several other applications filed and approved on utility fiber-optic systems, but not SMR,” says Bob Wason, SEC chief financial analyst for public utility regulation. The SEC is “actively reviewing all the material” provided by Southern and Dial Page, which has intervened on cross-subsidization grounds, Wason said (RCR, June 6, 1994, p. 7). Dial Page also filed a complaint with the Georgia Public Service Commission.
Robert Foosaner, Nextel’s general counsel, says he is aware of Dial Page’s complaints, but does not anticipate Nextel will be involved in regulatory review of Southern’s application.
Southern and Motorola both declined comment on the size of the equipment contract they signed last December. In comparison, Dial Page’s financial statements indicate it has ordered $167 million of MIRS hardware from Motorola and has budgeted $900 million for network capital expenditures through 1997. Up to $350 million more will be needed for site costs through 2003.
Southern “plans to charge the cost of the system to their rate base,” charges Joel Friedman, vice president and general counsel of Dial Call.
Barron replies that Southern will finance the SMR venture from the stockholder side of its business; he contests Friedman’s statement. “Dial Page (representatives are) proposing very righteously that they are interested in generic and high-level concerns of interest to all consumers, yet it’s simply a thinly veiled ploy to provide competitive market advantage in addition to their anti-competitive accumulation of spectrum in principal market areas such as Atlanta for the purposes of being, according to their characterization, the dominant provider in the area.”
Liz Sachs, regulatory counsel for Dial Call, says, “I presume that the FCC and the Justice Department will decide” if anticompetitive activity has taken place. She maintains that Dial Call’s actions have been “entirely consistent with the FCC’s rules.”
“I think Southern wishes it had gotten in this game earlier,” Sachs adds.
Wason notes that years ago the SEC “had an application from the Consolidated Natural Gas System, seeking the commission’s permission to lease excess (radio) capacity. In the 1980s, that was used as a test case by a number of entities.” However, C&G changed business direction and its capacity became excess as a result. “That is very different from Southern, which is making a deliberate attempt to create excess capacity. So Southern will have to cross the hurdles of the ’35 act,” explains Wason.
Southern also must obtain SMR licenses from the Federal Communications Commission, which has placed an Aug. 9 freeze on such applications. At press time, FCC officials could not be reached to provide details on Southern’s license applications.
However, Southern apparently filed a little more than a year ago for about five SMR frequencies. The assumption is that the holding company will try to tie together those frequencies with its existing 800 MHz industrial pool frequencies to endow a wide-area system with sufficient spectrum.
Relationship to Entergy, FPN
Meanwhile, Entergy Corp., another registered holding company with five utilities in the Southeast, is completing a Little Rock, Ark., demonstration of PowerView, a customer-controlled energy management system.
PowerView sends time-of-use pricing signals to customers over a fiber/coax network. Intelligent customer devices are clustered in local area networks supported by utility substation file servers. The servers are controlled by a head office workstation connected to the utility’s mainframe. MIRS is expected to substitute wireless data links for the hard wire connections between customer units and substations.
Customer and utility benefits are similar to those of Southern’s MIRS network, except that PowerView has two-way video capability. About 95 percent of the PowerView system is dark fiber, available for direct lease or diverse business partnerships.
Jack King, Entergy senior vice president, says, “Much of the justification for replacing totally adequate” utility telecom plant is based on `field of dreams’ markets-those that will develop if you put the cable in.” Some telecom and cable television executives claim those markets include movies-on-demand, interactive video and other offerings under development.
However, King continues, “The energy application market is one that is here today. To me, energy management may well be the killer application” the industry seeks.
Entergy maintains that on a 20-year present value basis, utility investment in PowerView can be more than recouped with electricity-related savings, a claim that regulators are eyeing closely.
Most utilities interested in enhanced telecom systems for energy mana
gement have focused on the type of fiber-to-node architecture Entergy plans to use. First Pacific Networks, a Southwestern Bell Corp. spin-off located in San Jose, Calif., is providing Entergy’s switching equipment.
In March 1993, Southern entered a letter of intent to acquire 10 percent of FPN. Southern was to pay an additional $18.5 million for technology licenses plus $2 million for engineering and standards development with the Electric Power Research Institute, the power industry’s research and development arm. At the time, Entergy already owned 10 percent of FPN. A spokesperson for FPN told RCR that the agreement has not been completed.
“Although Southern has not exercised the option, it is a partner in FPN’s tests and product developments,” says David Mould, a Southern spokesperson. “We are planning a test of FPN’s technology in 2,000 homes in mid-1995.” In contrast to Entergy’s Little Rock trial, which demonstrated the technology in upscale, newly constructed homes, Southern’s test will include a cross-section of dwellings by size, age, and type.
Other utility activity
Other utilities, including Baltimore Gas & Electric, are reportedly examining the potential of digital SMR for their specific applications.
On a much broader scale, EPRI plans to issue a report entitled “Business Opportunities for Electric Utilities in the National Information Infrastructure” within the next few weeks. EPRI has been conducting an accelerated five-month, $500,000 study examining the technical and economic issues surrounding electric utility involvement in telecom. The study was co-funded by the U.S. Department of Energy and the Edison Electric Institute, an association of investor-owned utilities.
Marina Mann, EPRI director of advanced information technology, says the study focuses on development of a decision-making model to help utility executives assess opportunities and risks of new relationships between electricity delivery and telecom
Industry background
Telecom technology deeply penetrates utilities, which have 107 million U.S. customers. Recent changes in federal energy policy and state deregulation will force utilities to transport power from competing sources over existing infrastructure. Those sources include factories that generate excess power as a byproduct of industrial processes. Such “retail wheeling” could start within two years in California.
To flourish in the coming competitive environment, utilities must maximize their telecom technology investment. A triple header: utilities can use telecom infrastructure to meet increasing corporate communications needs, establish a two-way data link with customers to strengthen business relationships and sell excess capacity to carriers or businesses for new revenues.
The data link allows expansion of energy conservation programs, which help defer construction of expensive power plants that have related environmental impacts.
While some electric utilities have profitably mined their fiber optic bandwidth as competitive access providers-providing phone and data lines to businesses-other utility diversification ventures have been less successful. Financial performance in these businesses is considered spotty at best.
Judith S. Lockwood, based in Santa Rosa, Calif., has been writing, editing, and publishing on wireless topics since the mid-1970s. Founding editor of RCR, she also consults in the electric utility industry. She can be reached at (707) 542-9178.
