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Subject: Financing Fiber Optics' 'Information Highway'; Two Analysts See a Key Role for
Date: Sun, 1 Nov 92 09:14:31 EST
Message-ID: <1.1992Nov1.091431@AmeriCast.com>

Financing Fiber Optics' 'Information Highway'; Two Analysts See a
Key Role for Utilities<By John Burgess=Washington Post Staff
Writer=

 It's now old hat in Washington to call for construction of a
coast-to-coast grid of glass-fiber communications lines - so-
called "information highways" able to shuttle high-definition TV,
telephone calls, video conferences, school lessons, computer
games, electronic mail and more from home to home, office to of-
fice.  Most everyone who thinks about the telecommunications fu-
ture terms such a network key to the economic vitality of 21st-
century America.

But who's going to pay the hundreds of billions of dollars it
will take to build it?  Here the consensus shatters.

 Government says the private sector should do it. But telephone
companies say it would only be worth their while if they could
use the fiber-optic  lines to provide homes with cable television
programs - a privilege now denied them by law. Cable TV companies
might install the lines - but, unlike the phone companies, they
don't serve all American homes.

 Now come Steven R. Rivkin and Jeremy D. Rosner, two veteran
Washington policy wonks, with an idea for breaking the gridlock:
Bring in the nation's electric power companies and let them share
part of the cost and benefit of the network.< The communications
magic of a fiber-optic grid, they argue, could bring dramatic
savings in power consumption in American homes by providing them
with a constant stream of information about the price of electri-
city. As demand for power increased during times of peak usage,
the price would rise. That information would be sent electroni-
cally over the fiber line to homes, where people or computers
would economize by turning appliances down or off.

 The result would be an unprecedented, constantly changing market
for electrical power, in which millions of consumers could in-
teract with the fiber network in response to price changes.

  Neither phone companies nor utilities have jumped for joy. But
the idea continues to circulate and simmer. It is outlined in a
25-page report that Rivkin and Rosner wrote this summer for the
Progressive Policy Institute, a Capitol Hill think tank that is
trying to bring new ideas to the Democratic Party.

 On Friday, the 55-year-old Rivkin was in Kansas City touting the
idea before an audience of 85 power utility executives. "I've
been chasing this will-o'-the-wisp for 15 years," said Rivkin,
who in the past has proposed a similar marriage of utilities and
cable TV firms to do much the same thing.  "... There's always
been a huge economic benefit that's basically going up in smoke."

 A communications lawyer, Rivkin collected a handsome sum last
year when shareholders he was representing in a lawsuit against
GenCorp's RKO subsidiary reached a settlement with the company.
Since then, he's been devoting most of his time to the fiber
cause. (That includes talking with people who have approached him
about handling legal work for deals that would implement the
plan.) Rosner, 34, the institute's vice president for domestic
policy, has pitched it in meetings on Capitol Hill.

 The two say they hope for a Democratic victory in Tuesday's
election. Vice presidential nominee Al Gore has for years talked
up the need for a high-capacity data network.  The idea was born,
Rivkin said, at a 1974 utility conference he attended.  There, an
executive from Long Island Lighting Co. stood up and lamented
that there was no practical way to change, minute by minute, the
power rates charged to customers.

Now, as then, most homes pay the same for a kilowatt regardless
of when they use it. But it costs the power company more to gen-
erate it in peak hours, because older, inefficient generators are
only turned on at those times.

If prices could be raised to reflect true costs as demand peaked,
people would turn down air conditioners and other appliances to
escape the higher prices, the theory goes. That would reduce
brownouts, energy use, the need for new plants and the air pollu-
tion they generate.  Economists call this "demand-side manage-
ment." Many industries where supply is limited already use it:
Through discounts, airlines, long-distance phone companies and
resort hotels encourage people to patronize them at off-peak
periods.

 One way to accomplish this for electricity is to install a meter
that records not only how much power is used, but when - and to
price it accordingly. About 40,000 Maryland homes served by Poto-
mac Electric Power Co.  already have such meters; all its commer-
cial customers do.

 Rivkin and Rosner argue that the job could be done far better
through fiber-optic wires, hair-thin strands of glass that
transmit information coded as pulses of light.  They could pro-
vide circuits between power companies and houses carrying price
and consumption information.

 As usage rose on hot August afternoons, for instance, prices
would rise and be reported to houses. The new rate might be
displayed on a screen there, prompting people to turn things off.
Or a control device at the home might do that automatically. An
air conditioner's thermostat would readjust itself to a higher
temperature if prices rose above a rate the resident had select-
ed.

Rivkin and Rosner have estimated that if residential electricity
use declined by just 5 percent, the savings would total $3.5 bil-
lion a year.

An added benefit to the power company: Each house's consumption
would be reported instantly over the fiber link, eliminating the
need for human meter readers. Fiber also would help utility com-
panies manage their power plants and lines. Many utility com-
panies already have built their own in-house fiber networks to
move switching and load information around - Pepco has about 200
miles of fiber. As a result, some power companies already have
become part-time "phone companies," leasing unused circuits to
outside parties.

 Telephone companies have in general been cool to the
Rivkin/Rosner proposal, which would make telephone and utility
companies equity partners in constructing the fiber network. Ward
White, a vice president at the U.S. Telephone Association, notes
that it is "running contrary to almost everything we had tried to
promote" - mainly, that telephone companies should be allowed
into the cable television business.  That, they say, would give
the phone companies the financial incentive to build the fiber
network, which would carry phone calls, television and many other
services.

  Many in the power industry are skeptical too. "Steve's idea is
nice," said Mike Meehan, executive director of the Utilities
Telecommunications Council. "... But the practicality of it is
another thing." 02:01 11-01C9999-----

Copyright 1992, The Washington Post.  This story is from the
Washington Post's Capitol Edition On-Line and is not to be ar-
chived or redistributed.

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