THE RACE to deliver broadband services directly into businesses and homes will heat up this summer when a new nationwide network created in secret by an alliance of utility companies and computer industry giants will offer voice, data, and television services.
Taking advantage of the deregulated telecom industry, the small, tightly knit consortium will initially offer digital voice, TV, and Web hosting over fiber, under the name SpectraDyne Services. It includes Sierra Pacific Power Co., Hewlett-Packard, Oracle, and TelecommUnity Systems.
This alliance will be the first to connect and interact with all consumers, retailers, medical facilities, libraries, schools, industrial companies, local merchants, and local government over computers, telephone, or television in their coverage area, said a senior executive at TelecommUnity Systems.
The initial rollout of services in southern Nevada -- including Las Vegas -- is set for this summer with projects and discussions under way between the consortium and at least 30 other utilities.
Sierra Pacific, like all utilities, has access rights to every home and business in its coverage area as well as a lot of so-called dark, or unused, fiber connections already in place -- giving it a huge advantage over its rivals in the network-provision market. It has been completing the fiber installation right to the home in secret over the last two years.
The TelecommUnity executive put the initial broadband connection at 155MBps. He also said the bandwidth can be upgraded to terabytes per second.
The potential multibillion-dollar revenues that the consortium could generate will be divided up between the players with HP managing and offering hosting services on its electronic-commerce platform.
"Once you have this high bandwidth connection, [HP can] put up large hosting centers and gain a whole new series of revenue services," said an independent source familiar with the project.
The operating technology will allow the utilities to do all the scheduling, billing, credit work, and accounting.
"It will do all of the things that make a network operation function," the executive said.
Most of those operations will be handled by HP, which is a significant investor, upgrading its initial $100 million investment in the project to over half a billion dollars.
"HP is showing its commitment by helping to finance the infrastructure build-out," the source said.
HP is not alone in supplying technology to the effort. Oracle, working alongside HP, is involved in creating the databases to maintain the underlying infrastructure.
According to a source familiar with the project, there are a lot of "skunk works" (joint projects associated with creating an e-commerce platform on the system) activities going on between HP and Oracle.
Sierra Pacific anted up its half billion-plus dollars investment by selling off its power-generation assets for $1.6 billion dollars -- believing like many of the recently deregulated utility companies that beyond electricity, the transport of digital voice, data, and television is where their revenues will come from in the future.
To make the network nationwide, the consortium will use a two-tiered hub system consisting of the Local Area Control Center (LACC) and a national hub called the National Operating Control Center.
The LACC will contain the databases and servers that allow access to any other commercial or industrial subscriber. It will offer all services, everything from Web hosting and videoconferencing to telephone and interactive TV on a single bill with a fee based on routing and the duration of the network connection, the senior executive at TelecommUnity said.
Broadband and a unified bill are compelling reasons for companies to sign up, said one IT manager.
"We have dealers, and dealers have remote locations and independent service providers, and communicating is a big deal. Modem access doesn't cut it when transferring wiring diagrams," said Dan Palmer, assistant chief engineer at Kenworth Truck Company, in Kirkland, Wash.
Palmer also says a simple $20 Internet bill can cost his company $150 because so many hands need to touch the bill before it gets paid.
"If we can combine those bills [IP, telephone, television] into a single bill, it would save us money," Palmer said.
Savings to consumers from a single point of delivery may also be substantial.
According to sources the initial charge for a 10Mb connection to the home will be $13.95 per month.
"That would be fabulous. With DSL [Digital Subscriber Line] you end up paying $50 per month for less than a 1Mb connection," said Melanie Posey, an analyst at International Data Corp., in New York.
However, Posey warns that it is one thing to have the right-of-way, the fiber, and the infrastructure, but marketing is a major challenge.
"The ability to do it doesn't mean you will have success in doing it," Posey said.
And there certainly are other competitors -- as witnessed by this month's multibillion-dollar AOL-Time Warner merger -- who are perhaps as adept at marketing as they are at deploying technology.
Sierra Pacific officials would not comment beyond saying that the company has been interested in offering telecommunications services for some time and received a license to do so in Nevada from the Public Utilities Commission of Nevada.
Deregulation will let the utilities offer an attractive package of telecom services.
* $13.50 per month for 10Mb broadband Internet/voice access (plus a fee for Internet appliance supply, installation)* Digital telephone service over fiber* Television with built-in Web access* Videoconferencing* Web hosting for large and small businesses