Thinking of Making the Jump to Utelco? Take it Easy.


By Marcelo Blatt, ECI Telecom

Although energy utilities maintain their own, often vast, telecommunications networks, they are not like telecom operators. Their needs, customers and operational models and priorities are different. So why do network equipment vendors treat utilities like telecom operators when they want to help them build their telecom infrastructure?

For vendors who sell IP or Ethernet solutions, it would be great to be able to sell end-to-end solutions so that utilities can replace existing networks completely as some of their telco customers do. Telecom operators have large subscriber bases. They need to provide new voice and data services to those subscribers at what is becoming a dizzying pace as communications technology continues to advance.

In contrast, electric power utilities are concerned primarily with mission-critical communication applications to ensure safe, efficient, uninterrupted electricity service. While new opportunities in telecommunications are opening to utilities, the main value of the network to an electric power utility is to support the business of power distribution. The utility’s communications network should be designed to help achieve that goal as efficiently and as cost-effectively as possible. But times are changing. The same technologies—IP, carrier Ethernet, packet optical networks—that are helping telcos deliver new services also are opening doors for utility providers to generate additional revenue.

As a result of deregulation in the telecommunications and energy industries, the availability of these new technologies and growing demand for more capacity to support telecommunication services, utilities have started evolving into service providers in the voice and data services markets.


From Necessary Evil to New Revenue


Utilities have started to upgrade their internal communications systems to improve reliability, efficiency and automation to support new core business applications such as smart metering and to support the transition to the smart grid. These are upgrades that modern energy utilities must make to stay competitive. But rather than looking at this investment as a necessary evil, utilities are taking advantage of opportunities that new network technologies make possible.

The networking hardware and software used to optimize internal communications also make it possible to support all types of revenue-generating voice, data and video services that can be offered to a utility’s existing residential and commercial customer base. These services help justify the cost of the extra network capacity that carrier Ethernet-based networks deliver.

Internally, a typical utility company needs communication networking to support a range of functions including grid operations (such as load balancing and grid monitoring), security (including video surveillance), sensor management and control, as well as administrative functions (such as connecting branch offices, sites and mobile employees in the field). As new applications such as smart metering and smart grid come into the picture, utilities must consider moving to carrier Ethernet technology throughout their communications networks to support the new demands of next generation applications while still supporting their legacy services such as teleprotection.

But utilities have no intention of becoming full telecom service providers all at once. So they do not need to jump into a full network overhaul all at once. It is more logical to evolve the network as new services are needed. To do this, utilities can implement infrastructure upgrades with scalable network equipment that provides more flexibility to diversify into revenue-generating services beyond supplying power.


First Step: Leasing Surplus Capacity


Until a power utility’s networking staff has implemented a telecommunication infrastructure (including optical and carrier Ethernet), it will want to focus on supporting the utility’s new internal communication needs. It could take time to adjust to the new environment before providing services to outside customers. How long depends on the staff’s expertise and the technology’s ease of use and management interface.

New technologies such as Multiprotocol Label Switching-Transport Profile (MPLS-TP), which incorporates the Synchronous Optical Networking (SONET) and Synchronous Digital Hierarchy (SDH), or SONET/SDH, operational model into MPLS, also are a factor in ease of integration. The technology decisions must be made carefully ahead of time so that expansion and service diversification can be achieved efficiently.

Once the network is running, often the first step toward becoming a utelco is to offer carrier of carrier (CoC) services: selling surplus network capacity to telcos and large enterprises with similar geographical coverage, such as other utilities, railway and road authorities. Demand for cellular and fixed-line backhaul capacity is growing as telcos scramble to keep up with new bandwidth-hungry applications. By leasing capacity from utilities with reliable networks, telcos can extend their geographical coverage without the licensing, labor and time it normally takes to install network infrastructure. CoC services are a great way for a utility to optimize network investment.


Becoming a Voice/Data/Video Service Provider


Some power utilities have updated their network infrastructures and jumped right into CoC services and even retail data, voice and video services, but steps to become a utelco can be taken at any pace that suits the nature of a utility’s business and culture. When a utility is ready, some of the retail services that can be supported by carrier Ethernet networks include residential broadband access, Internet protocol television (IPTV), voice over Internet protocol (VoIP) services and enterprise virtual private networks (VPNs). These services can be offered to a utility’s existing customers, enhancing the utility’s revenue flow and improving brand recognition and customer loyalty.

When a utility shops for a carrier Ethernet solution, however, there is no need to switch out the entire network in one trip. Utilities planning to offer voice and data services are still not telco operators. A utility has its core business and can decide which, how many and at what rate it wants to offer new services. The solution is a flexible platform that can concurrently support multiple services and can start small and expand quickly by adding capacity and modular components as needed. Important is to start with a flexible, expandable solution to enable growth into new service offerings at the appropriate pace.


Carrier Ethernet Technology to the Rescue


While core utility operational networks can be based on several technologies, the most prevalent is next generation SONET/SDH, which is supported by multiservice provisioning platforms (MSPPs). Packet-switched networks (PSNs) also are becoming more popular in the utility telecom arena. Next-generation (NG)-SDH is attractive because it can support IP and Ethernet applications and legacy services simultaneously. In addition, NG-SDH augments the functionality of the existing SDH network and enables its evolution to MPLS by providing effective Ethernet transport over SDH. Pure PSN and Ethernet over SDH are considered carrier Ethernet networks.

There are two options for providing carrier Ethernet services:


  • Ethernet over SDH (implemented by the MSPPs), and


  • PSNs (carrier Ethernet switch routers)


    Both solutions offer advantages and disadvantages. MSPP is a proven, mature carrier-class infrastructure offering robust reliability, protection, and operations, administration and maintenance (OAM), while carrier Ethernet routers offer higher-capacity Ethernet services. The optimal utility telecommunications network enables a combination of both. The key technology is an MPLS-based Ethernet network that uses MPLS as a circuit-oriented layer spanning the entire carrier Ethernet and SONET/SDH network.


    Taking Advantage of a Regulatory Challenge


    Recently, a major power utility customer of ours in Scandinavia faced a challenge that more and more electric companies are encountering. In a move to improve power efficiency, the local regulator ruled that power utilities must provide smart metering: using IP technology to measure how much electricity was used when by which type of appliance, etc. The new regulations required that the utility upgrade its communications network to handle the new two-way data communication between the utility and customers. The utility implemented an end-to-end solution with carrier Ethernet infrastructure and broadband access nodes, all managed through a single network management systems (NMS).

    First, our customer took advantage of their new communications environment to become a CoC, leasing surplus network capacity to local telcos and mobile operators. Then it started offering electricity customers residential broadband service. Unlike a telco, the utility still needed to focus on its core business: delivering energy using a single communications network for control, monitoring and other mandated applications. By implementing a solution tailored for utelcos, it can continue meeting its internal needs, regulators’ changing demands and grow its business through new services at the pace that it chooses.

    Although power utilities could end up spinning or selling off their telecom services units once they become self-sufficient, it is unlikely that many utilities will turn into exclusively telecom providers. Either way, choosing the correct, most flexible and scalable equipment, planning for growth and the potential for providing new types of revenue-generating services ready for any opportunity and evolving the communications network rather than jumping into a total solution can open doors to additional revenue streams.

    Marcelo Blatt, Ph.D., is director of solutions marketing, network solutions division, at ECI Telecom. Reach him at


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