Home / Blogs

World First: Merger of a Telco and a Power Company

Paul Budde

I have long been advocating that new business models, based on a trans-sector approach (breaking down silos), need to be developed in a rapidly changing green and digital economy.

I very much welcome the vision of two American companies, who have not just talked about it but have actually done it.

As far as I know, Hancock Telecom and Central Indiana Power in the USA are the first telco and power company to merge in order to reap the benefits of converging and transforming industries. The newly merged entity is called: NineStar Connect.

Both companies had a need to deploy fibre in territories that largely overlapped.

The electricity company realised that deploying fibre would be the best option for its smart grids plans; and it also realised that this would most probably lead them into new markets, such as telecoms. At that point in time they decided to talk to the local telecoms company.

On the telco side there were also only positives. By working with the power company it avoided facing a potential new competitor in the market; and by taking a trans-sector approach the costs of fibre could be shared.

Also, together they had much more chance of extending the network outside their current footprints.

Having convinced the regulators that the move had the potential to save costs for customers of both companies, they received regulator approval. The two companies also received over 80% shareholder approval, indicating that they had been able to put forward a good business case.

Since the merger in January 2011 there have been no lay-offs, demonstrating the supplementary nature of the deal.

By mid-2011 55% of homes in NineStar Connect's territory were reached by FTTH, and this is set to grow to 75% by the end of the year. On the smart grid side, the aim for 2011 is to deploy smart meters to 50% of electric customers, with the other half receiving meters in 2012.

Initially some smart meters will be connected via a 900 MHz wireless connection; however the aim is for all meters to eventually be connected via fibre.

The smart meters the company is deploying initially will support meter reading and will be collecting data every 15 minutes, with the goal of eventually supporting more sophisticated capabilities, such as the ability to interface with smart appliances within a customer's home, enabling customers to use those appliances at times when demand, and cost, are lower.

Another element of NineStar's smart grid deployment involves interconnecting substations via fibre so that outages can be addressed more quickly.

By Paul Budde, Managing Director of Paul Budde Communication – Paul is also a contributor of the Paul Budde Communication blog located hereVisit Page
Follow CircleID on
Related topics: Telecom
SHARE THIS POST

If you are pressed for time ...

... this is for you. More and more professionals are choosing to publish critical posts on CircleID from all corners of the Internet industry. If you find it hard to keep up daily, consider subscribing to our weekly digest. We will provide you a convenient summary report once a week sent directly to your inbox. It's a quick and easy read.

I make a point of reading CircleID. There is no getting around the utility of knowing what thoughtful people are thinking and saying about our industry.

Vinton Cerf, Co-designer of the TCP/IP Protocols & the Architecture of the Internet

Share your comments

Nicholas Carr's Big Switch didn't go far enough... Richard Donaldson  –  Jun 16, 2011 10:59 AM PDT

Paul:

Fantastic recap of what should become the norm vis-a-vis converged Utilities thereby allowing for all things that are delivered via a wire - Power, Voice, Video, Internet - to be centrally managed and realized economy of scale benefits.  While Nicholas Carr did a good job to highlight the emerging IT utility, I think this takes it that next step - seeing IBM, Cisco, HP, and others race to bring IT to utilities like Power, Water, etc., it makes all the sense in the world to blend a few...and given the inexorable tie between power and IT, this first step makes the most sense.  Also look at the other direction of power generation efforts by Google, for example, to help push the glacial pace of innovation in the power industry further!!

Everything new is old Leo Vegoda  –  Jun 16, 2011 11:20 AM PDT

Back in the late 1990s, Scottish Power had a telecoms division. I think it was called Scottish Telecom and then Thus before being bought by C&W;. I think they saw the same kind of synergies as you describe above.

First step Paul Budde  –  Jun 16, 2011 2:23 PM PDT

Thx Richard and Veda,
I hope that these developments end up in an open network approach. Utilities are much closer to such a concept then telcos. I envisage a trans-sector approach where this utility infrastructure is not just used for smart grids and telecoms but also for e-health, e-education, etc. Companies such as the one you mention are ready but sofar the telco's pricing makes it impossible to operate such service in any economic viable way. You first need structural separation of the infrastructure/open network to make this happen.

I remember Scottish Power well and also other utilities have embarked on telecoms network, but so far always as a separate business unit. None of them have gone the full way of a full merger. The strength is in that trans-sector approach.
Paul

To post comments, please login or create an account.

Related

Topics

Cybersecurity

Sponsored byVerisign

DNS Security

Sponsored byAfilias

New TLDs

Sponsored byAfilias

Domain Names

Sponsored byVerisign

IP Addressing

Sponsored byAvenue4 LLC