Electricity Giant Plans to Become ‘Carrier’s Carrier’
Sempra is doing it again.
Earlier this year, Sempra Communications, a subsidiary of San Diego-based Sempra Energy, announced it was entering the telecommunications industry through a strategic partnership with Denver-based Aerie Networks. Now Sempra is embarking on the next phase of its plan for a nationwide broadband network.
On June 21, Sempra received authority to provide competitive local telephone services on a statewide basis. The California Public Utilities Commission released an interim decision authorizing Sempra to become a Competitive Local Exchange Carrier.
Michael Allman, president of Sempra Communications, was pleased with the decision.
“We now have the opportunity to explore new business ventures to provide telephone service in California. We are considering several partnership opportunities with industry leaders that will allow us to utilize our respective resources and expertise to effectively compete in the local telephone service market,” he said.
But this doesn’t mean that customers will start seeing Sempra’s name on their phone bills any time soon. Instead, Sempra will most likely act as what Allman calls a “carrier’s carrier,” meaning the company will own the networks that other carriers will use to transmit telephone and Internet traffic.
CLEC authority is a relatively new concept stemming from the 1996 Telecommunications Act deregulating the telephone industry. The law requires local phone companies to allow any CLEC-licensed company to put its own equipment within their offices, Allman said.
Sempra Communications is a “limited facilities-based” CLEC, which means it does not yet have the authority to build any new structures or dig any ditches in order to provide telecommunications services. Allman expects full facilities-based authority by the end of the year, once the CPUC drafts new rules for compliance with the California Environmental Quality Act.
The CLEC decision comes on the heels of an April 12 announcement that Sempra would invest in Aerie Networks, a company looking to build and maintain a nationwide fiber-optic broadband network. For that project, Sempra didn’t need CLEC authority since it’s not involved directly in building the network infrastructure, nor is it marketing the service to customers, Allman said.
Both the investment in Aerie Networks and the CLEC authority are part of the same overall strategy. With each passing year, more customers get on the Internet and are demanding more content-heavy services, such as streaming video and two-way teleconferencing, he said.
But even if the customer purchases high-speed Internet access, that covers only the connection between the house and the local phone company. If the site receiving streaming video is thousands of miles away from the source, the data may face several bottlenecks on its way from point to point.
Sempra hopes to remove many of these bottlenecks. Aerie Networks will link the largest 200 cities in America with a fiber-optic cable network capable of handling 60 megabytes of information a second , about 20 times faster than today’s cable modems or DSL connections, he said.
Aerie will cover getting the data from city to city. Once it gets to a central location in the city, Sempra will take over, distributing the data over its own network to the local phone company’s facilities. The local phone company is then responsible for the last leg of the journey, to the customer’s home, Allman said.
It is theoretically possible that with its CLEC authority, Sempra may look into taking care of that last leg, and start offering telephone or Internet service to business customers.
This is just one of several business models Sempra is looking into, Allman said.
