Communications Outsourcing to Utility Companies

Utilities, driven by deregulation and rising operating costs, are a ready market for those communications service providers that can deliver interoperability and maintain reliable service for critical communications.

Traditional private radio users include utilities such as municipal electrical companies, co-ops and large companies. Their employees are people who really need to communicate. People who, when the “buck stops,” have to be able to talk. We’re talking critical, serious communications.

What’s happening in these markets? The utilities are deregulating. They are looking for ways to control costs, and they are outsourcing a lot of what is not their core competency (generating and distributing electrical power, for example). “Core competency” is a significant term to utilities. It’s also important to us, as entrepreneurs, who look for an opportunity to serve customers like this with our own core competency-communications. Outsourcing and core competency are terms that chief operating officers in state and local governments and utilities are remembering.

For a communications service provider, marketing advanced network services to traditionally private users such as utilities is a top-to-bottom effort. This effort to convince large utilities and public service agencies to relinquish private control of their communications systems can be bolstered by several factors:

o the encouragement to outsource that potential customers are already receiving from public sector and management experts.

o addressing, step-by-step, their performance, reliability and control concerns and how advanced networks are a solution.

o presentation of advanced network services as a professional operation.

Outsourcing is managing

For its October 1996 issue, Government and Technology magazine interviewed 200 state and local officials about the future of information technology.

“Outsourcing is not only here to stay, it is accelerating,” the magazine found. Of the officials interviewed, 66% indicated that they were already outsourcing part or all of their information technology.

Among public safety and service agencies, 70% had plans for outsourcing over the next two years. Why would they do this? The obvious first answer is to control costs, but there are other impelling issues, such as spectrum limits and the technology curve.

Most respondents (88%) said outsourcing delivers access to skills and new technology. Public sector organizations are looking for ways to go into new technologies, and they do not always have the budget to do it themselves. Certainly, the taxpayers or ratepayers are not always willing to underwrite the transition.

The other opportunity is the privatized public service market. Large business and industrial (B/I) customers are merging and acquiring. They are looking for service providers to handle the extra systems load that they acquire in these acquisitions, as well as to manage and integrate systems when the technology bases for the existing and acquired systems differ. So, as entrepreneurs, operators who provide advanced networking should look for ways to fulfill that need by offering potential customers more productivity while maintaining the criticality of their systems.

Advantages of advanced networks

Utilities need extensive and complex radio systems that can require as many as 20 to 30 expensive sites. By creating economies of scale and using infrastructure that might already be in place, communications providers can make these systems more affordable.

Outsourcing also provides a bounded set of costs over a period of time, which is particularly attractive to utilities that are trying to serve a deregulated market.

Another advantage is immediate interoperability. For example, during Hurricane Fran, both the local utility co-op and the county government were on our advanced network-and able to communicate with each other. Users will pay for that advantage.

Loading requirements are also more easily met if the customer brings channels to the deal. In some cases, the existing system may have two or three channels, and the provider and the customer can create a loading synergy.

Advanced two-way networks are also more reliable than other commercial systems. Cellular systems are not designed for critical users. The first thing that happens on a cellular system when there is an emergency or a disaster is that it “busies up.”

Another selling point is that an advanced network can be integrated with other systems for wide-area connectivity. You can keep the cost of the infrastructure down, and you can provide switch access. A unique thing we offer to municipal customers on our system is to tie together their UHF and VHF systems, not on the same radio infrastructure, but by using the switch. A business case has to be made by the customers to request that service, but if they’re willing to pay for that interoperability, and for that connectivity, be willing to do that for them.

c The need to be in control – Control of the network can be addressed via contractual conference. Control is the issue that causes hesitancy in the private radio world: “If we can’t control it, then we don’t want it.” The simplest counter to this argument is the concept of the telephone company. How many times do they pick up the landline phone and make a phone call? They don’t own it or control it, but they have the confidence that it will work. There has to be a level of confidence, and that’s the operator’s job-to build that level of confidence with customers. But you can have an extra level of confidence by tying some elements into the contract.

Closely allied with the idea of control are security issues. Don’t wait to be asked: bring up issues of security, which can include encryption, restricted talk groups and equipment security as well. Define security requirements in your contractual negotiations, demonstrating your ability to tailor the system to the customer’s needs.

* Additional benefits of advanced networking – You may want to encourage your utility customer to enter a strategic partnership with other public sector users. This can be an advantage not only from an interoperability standpoint, but it also creates the possibility of taking channels and pooling them together.

Outsourcing to an advanced network also helps utility customers avoid the technology curve: obsolescence of equipment before it is amortized.

Advanced network operators also assume the load of compliance with FCC compliance. This is another area where the service provider has a competency.

In short, advanced networking should be characterized as a complete package of communications management activities, tailored to whatever the customer wants.

Presenting a professional image

I have intentionally used the term “advanced networks” in this article. The term “specialized mobile radio” (SMR) is not attractive to all potential customers; to some it connotes a traditional “plumber-type” two-way radio system. That outdated perception does not mean that from a marketing standpoint we stop serving our customer base of servicer users. But the image to project is advanced communications-advanced networking for critical communications. Utility customers perceive their system features needs as high-tier. This is another reason not to characterize your system as “SMR.” Customers assume they will be sharing space with tradesmen and servicer users, not realizing that the system can be designed to be virtually their own system, with key features tailored to critical communications.

Your ability to maintain the system and the user’s equipment is a key to confidence in your professionalism. Sales are important, but aftermarket service is critical for a long-term business relationship. This includes monthly unit/asset account maintenance and management.

It’s a hard, cold fact, but we’re selling use of these networks to the chief operating officers and the taxpayers, to the directors and the vice presidents; not necessarily to the person whose job might be displaced in some instances. However, the current system users and supervisors are definitely part of a top-and-bottom selling process. If you concentrate too much on one end, you’re going to lose. Your employees have to be able to show the users your radio system and convince them that it is a good system and can protect their resources and concerns, but it has to be a top-down process.

Your lobbying effort to get utility business can benefit from successful partnering experiences, case studies and testimonials from happy customers. Additionally, become visible in your business and professional community. Promote critical business communications solutions in the high-tier market by educating B/I leaders. Get on the speaking circuit and discuss outsourcing with trade and professional groups. Deal with the movers and the shakers. Create a new enthusiasm for SMR-without using the name.

Conclusion Advanced networking can provide critical communications users with the experience and capability of turnkey system design, management and maintenance functions. These factors are necessary to maximize their system’s value to the taxpayer/rate payer/shareholder while simultaneously improving their level of operation during normal and critical usage.

The communications service providers have the experience. When utilities buy private systems, who do they go to? To the guys who have been maintaining them for years. They have the confidence in you already. It gets down to bare economics of satisfying the ratepayer, taxpayer or shareholder. But cost savings are not worth a hill of beans unless you show them that you can control this network in a way that not just maintains their grade of service, but also improves it.