Telcos eye possible competition from electric utilities

A trade group for the state’s telephone companies is wringing its hands over budding efforts of electric companies to offer
so-called smart grids to better monitor and manage electric distribution.

The Indiana Telecommunications Association, in filings with the Indiana Utility Regulatory Commission, worries that electric
utilities could become ratepayer-subsidized competitors in data communications.

The concerns have come to light as the IURC conducts a review of regulatory issues likely to emerge as electric utilities
prepare to build smart grids. Among the issues are how to define a smart grid, what minimum functions they should provide,
and how costs of deploying them should be allocated to ratepayers.

A key element of a smart grid is deployment of electric meters capable of two-way, real-time communication between the customer
and the utility.

The two-way meters often communicate via antennas utilities place on telephone poles. Locally, Duke and Indianapolis Power
& Light have smart meter pilot programs under way.

Consumers would pay more for power used during peak hours and less during off-peak times. Such time-of-use pricing could drive
consumer usage so utilities don’t have to invest as heavily in peak-demand capacity.

But might such infrastructure—or even signals embedded in electric wires known as broadband over power line, or BPL—be used
by utilities to offer communications services such as broadband or video? That’s what ITA, which represents local wire-line
and wireless companies and dozens of vendors, wants to know.

And, if so, might electric utilities effectively subsidize those communications offerings through rates and charges to their
captive energy customers?

"The cross-subsidies that could be created would also lead to inappropriate pricing signals to the communications market,"
said Alan Matsumoto, regulatory manager for Embarq Corp. in Columbus, Ohio, in testimony for the ITA.

"This lack of appropriate cost identification and recovery would greatly distort the robustly competitive communications market
and be unfair to telecommunications companies that would compete with energy utilities in the communications marketplace."

But electric utilities say they have no plans to use the technology other than for telemetry to run smart grids.

"All of the investments we are planning would use communications technology for energy purposes. Because we are a regulated
utility, we are not allowed, by law, to take utility property and begin using it for commercial non-utility purposes," said
Angeline Protogere, spokeswoman for Charlotte, N.C.-based Duke Energy, the biggest electricity provider in Indiana.

Duke might even use existing wireless carriers "for the vast majority of its smart grid data," Todd Arnold, a Duke senior
vice president, told the IURC.

Duke does, however, already have a communications service of its own, the non-regulated, wholly owned subsidiary DukeNet Communications.

The Cincinnati-based firm operates and manages 142 towers in eight states, including Indiana. The towers carry signals for
Duke’s own uses and on a contract basis for wireless companies.

"We do not currently plan to use DukeNet" to transmit smart grid data, Arnold told the commission, "but we have not excluded
it should it prove to be the most efficient method for carrying our data in specific areas."

Utilities generally use their own communications operations for internal uses, such as to talk with remote locations, said
Sam Lucero, senior analyst at ABI Research in Scottsdale, Ariz. "It’s not to compete with the AT&Ts or Verizons for communications
services."

If anything, Lucero said he thinks telephone companies are "most agitated" about the possibility electric utilities will compete
with them using BPL technology as part of smart grid development.

ITA’s president, John Koppin, declined to comment on his members’ concerns.

BPL is already offered in Indiana by South Central Indiana REMC, which sends broadband signals through ordinary household
electric wiring. But a recent survey of customers in its pilot found a number of problems to overcome, such as inconsistent
data speeds and periodic outages. The REMC’s board decided last year that the technology has "a way to go" before a wider
rollout.

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