Two years after its passage, the Telecommunications Act of 1996 is finally producing some new competitive alliances. A heretofore obscure section of the legislation (Section 103) allows previously-restricted public utility holding companies to create subsidiaries that can provide telecommunications and information services without prior SEC approval. These companies achieve this capability by seeking an "exempt telecommunications company" (ETC) status from the FCC.
The bottom-line result? Utilities can go toe-to-toe, either on their own or with partners, against incumbent broadband service providers. In fact, a number of utilities are finding a willing partner in ICG Telecom Group Inc., a division of ICG Communications Inc. (www.icgcomm.com), based in Englewood, Colo.
One of ICG's most aggressive utility partnerships is with Central and South West Corp. They've formed a limited partnership, CSW/ICG ChoiceCom L.P., to provide local telephone, long distance and a variety of data communications services in a four-state region that includes Texas, Oklahoma, Louisiana and Arkansas.
What brought the two together? According to Sheldon Ohringer, president/telecom, at ICG Telecom Group Inc., it boils down to opposite, but complementary strengths. "We initially found each other in Texas," says Ohringer, "as we both desired to get into the competitive local exchange market against SBC (SBC Communications Inc.). I think we picked each other for the opposite reasons. We picked them obviously for their availability of rights-of-way, their existing fiber optics, their capital and their desire to compete in a deregulated market. You'd have to ask them why they picked us, but they probably picked us for our telephone know-how."
The ChoiceCom partnership is not the only competitive deal ICG has forged. Ohringer ticks off a number of other "arrangements" his company has set up with a variety of utilities across the country. The company acquired more than 1,200 route miles of fiber and 500 miles of right-of-way from Southern California Edison. He notes his company has done a deal with AEP in Columbus, Ohio (". . . that's the company that's buying CSW"), and two deals in Atlanta, Ga., and Birmingham, Ala. with Southern Company (". . . the biggest utility in America").
While the various deals may not mirror the ChoiceCom equity deal, they do share other common traits. "Initially, as a group," says Ohringer, "they've brought us rights-of-way and fiber at deep discounts to what we could do on our own, as well as the ability to get to the market quicker. In the future, we hope they bring us sales and marketing capacity, being that they're monopolies as well."
These utility deals will boost ICG's ability to promote, develop and deploy a variety of DSL (digital subscriber line) technologies and services.
This past March, the company also announced the rollout of Internet Protocol (IP) telephony service for 5.9 cents per minute in 166 cities around the nation.Voice. Data. What's next?
According to the FCC's ETC orders (see chart), a number of companies (and ICG utility partners) are keeping their options open, and not ruling out putting the video piece in place sometime, possibly in the not-too-distant future.