Telecommunications Strategy in the Face of Competition

Telecommunications Strategy in the Face of Competition

By Jack King, Scientific-Atlanta

The Telecommunications Act along with recent electric utility legislation is forcing many utilities to look at the way they have done business in the past and re-evaluate what tactics they need to employ to become more competitive in the future. As business requirements shift from operational considerations to customer service, brand loyalty and new revenue sources, the strategic use of telecommunications will play a key role in a utility`s ability to remain competitive in the long term. In a regulated environment, there was little need for electric utilities to think strategically. Utilities enjoyed a guaranteed customer base, set prices and no direct outside competition. Delivering service indiscriminately to its entire customer base was the required goal of the utility. The market now will require them to differentiate their products and services to survive. Because retaining existing customers or gaining new ones was not a major concern, utilities had little incentive to take risks or introduce new products. Instead, their focus remained on servicing their existing customer base with an eye toward cost rather than customer satisfaction.

There is a paradigm shift away from this business model that is occurring with deregulation. As in other competitive markets, competition will drive prices downward, which, in turn, will increase the need for brand identity and additional revenue streams for the utility. To succeed in this environment, utilities must begin to take steps that will ensure their survival in a competitive marketplace. Implementing and expanding upon interactive energy management systems (EMS) will be a critical component in a utility`s effort to differentiate itself. Because its customer base will no longer be guaranteed, utilities need to refocus their efforts on tactics to maintain customer loyalty and ensure new entrants don`t take away their customer base. While pressure from within and without the electric utility might steer one toward short-term, “quick-hit” solutions, longevity in the evolving market requires that players have mapped out long-term strategies and solutions.

Many utilities are looking at AMR as a first step in adjusting their focus to be more customer oriented. However, to be successful in the long term, utilities must ensure that this first step is just that (an initial step toward a more strategic two-way interactive EMS). The ideal telecommunications infrastructure to implement is one that is “future proof,” allows the electric utility to adapt to any communications protocol (especially now when there is no set standard) and has an open architecture for future additions by multiple suppliers. There should also be potential for growth and flexibility, cost efficiency and investment return. Electric utilities should make an investment in a product that delivers multiple communications solutions for a varied customer base, allows for the addition of value-added services and will support the utility when it`s ready to venture into new businesses. Aside from AMR, outage detection and remote connect/disconnect, a complete two-way interactive EMS will allow for more strategic, revenue-generating offerings, such as data monitoring, security and even telephony and entertainment services. While at present many utilities see entering new businesses as a far-off proposition, why not choose a product that can support this scenario when and if they`re ready. Otherwise, they may have to make additional costly purchases and investments to migrate later on.

Results from a recent informal survey of 44 energy executives conducted at the Edison Electric Institute (EEI) `96 Conference support the fact that utilities` top priority is customer satisfaction, with increasing revenues a close second. A majority of the respondents expressed that they are feeling pressured to enhance their core energy-related business with cost savings methods such as AMR, outage notification, two-way load control and remote connect/disconnect. Most utilities are planning to start with AMR, but many have not considered the broader spectrum and which communications infrastructure offers a migration path for delivering other, more interactive, services. The survey also showed that they plan to implement two-way interactive energy management services within a six-month time frame.

Most utility leaders feel the need to take action as quickly as possible to keep up with the competition. Many plan to restructure their organizations, focus on customer needs and continue to pursue existing strategic goals. As the EEI survey indicated, many utilities are planning for, but few have actually implemented, these complex two-way interactive EMS. With the numerous choices available, including expanding the home energy management concept to provide a complete home control network linking appliances and information devices, utilities are being bombarded with information. Many are still in the process of deciding which menu of services to develop, which transmission and communications protocols to use and which type of customer access devices to employ.

It will be crucial for utilities to examine all of their options, understand what is available and then make good business decisions on which communications program to implement. A device that allows for flexibility among user interfaces and communications protocols and is non-application specific protects your investment by ensuring compatibility with current and future industry standards. Additionally, those vendors with only tactical solutions, such as AMR or outage detection, should be questioned to make sure they have the vision to offer long-term solution or a means of migrating to a fully integrated EMS. Within the energy industry, strategic marketing has never been a necessity.

However, with deregulation advancing quickly, utilities need to refocus their efforts and take advantage of advanced telecommunications technology to redefine their strategy. To remain a player in this highly competitive market, action must be taken to enhance the efficiency, quality, reliability and cost effectiveness of existing products.

Utilities that are able to provide a bundled set of enhanced energy services as well as provide data, monitoring, telephony, entertainment and lifestyle services will come out ahead of the pack. The ability to offer these premium services will raise customer satisfaction and loyalty while providing incremental revenue opportunities, which will ultimately be their key to success.

As deregulation gains momentum and the electric utility industry becomes exceedingly competitive, Florida Power Corp., an industry leader in customer information technology and client-server innovation, plans to be ready for the new market structure. Florida Power, which services 1.3 million customers in central and northern Florida, is working with Scientific-Atlanta to initiate a pilot program of two-way interactive energy services in an attempt to improve customer satisfaction and service. Their initial offerings will include AMR, outage detection, meter tampering detection, remote connect/disconnect and load control. The communications infrastructure, however, will allow for more strategic uses in the future, such as entertainment, security and telephony.

This pilot program, scheduled to be launched in the fourth quarter of 1996 and completely installed by the end of the first quarter of 1997, will provide 1,000 homes and businesses with the basic applications at a low per-site cost. The project will investigate real-time pricing services and customer response to having greater control of their power usage and energy costs. Florida Power`s new system will also experiment with some more elaborate customer interface capabilities in order to better anticipate customers` needs. Contributing a major part to the pilot program is a new gateway that is being developed by Scientific-Atlanta which will support a range of wide area network interfaces and multiple in-home protocols. The open architecture gateway will allow flexibility in functions provided as well as in communications protocols. In order to increase operational efficiency and provide a platform for future services, the system utilizes a hybrid/fiber coax network and is non-application specific.

This gateway resides on the side of a customer`s home and facilitates communication between the utility host and residential devices such as electric meters or home user interfaces. It utilizes broadband media and will be capable of supporting basic applications such as AMR, service connect/disconnect, tamper detection, customer-controlled load management and real-time pricing. It will also support up to three LAN interfaces, including LonWorks or CEBus, RS-232 and proprietary wireless communications. WAN sources, in addition to broadband, could include satellite, cellular, radio or telephone. With the capabilities the gateway provides, Florida Power will be able to move forward in the face of deregulation and meet its long-term goals. While it has chosen to implement operations-oriented products and services initially, Florida Power has kept the door open for future offerings. It will be the addition of these value-added services tailored to meet customers` needs and business requirements that will help Florida Power compete effectively in the newly deregulated marketplace.

Author Bio

Jack King has nearly 30 years of public utility experience in all phases of utility operations including foreign and domestic diversification. He has served as chairman or president of 10 different companies owned by or associated with Entergy Corp., both domestic and foreign. He has served on 16 Boards of Directors of Entergy-owned or -related companies, including its major utility subsidiaries. He is president of Scientific-Atlanta`s Control Systems Division, specializing in communications products for utilities.

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  • The Clarion Energy Content Team is made up of editors from various publications, including POWERGRID International, Power Engineering, Renewable Energy World, Hydro Review, Smart Energy International, and Power Engineering International. Contact the content lead for this publication at

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The Clarion Energy Content Team is made up of editors from various publications, including POWERGRID International, Power Engineering, Renewable Energy World, Hydro Review, Smart Energy International, and Power Engineering International. Contact the content lead for this publication at

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