Globe Talk: Enron's broadband debacle

Jun 02, 2006

Enron was nothing if not flamboyant and eager to pursue the latest business trends. While its focus was on energy trading, it had expanded into telecommunications among other industries as executives cooked the books and the company's finances spun out of control.

While a Houston jury last week found both its Chief Executive Jeffrey Skilling and former Chairman Kenneth Lay guilty on a multitude of accounts including fraud, jurors this week convicted the fallen company's former broadband executive on conspiracy, wire fraud and falsification of books and records worth $11 million.

The Enron Broadband Services group had established a deal in April 2000 with video-rental chain Blockbuster to provide video-on-demand, which should have made use of the energy giant's infrastructure network. Like most projects that require hefty investments upfront, the deal was not expected to rake in a profit until a few years' time, but EBS's former Chief Financial Officer Kevin Howard had created a financial transaction that made it appear, at least on paper, that the project would be in the black almost immediately. Indeed, Enron had reported that the deal reaped in revenues of $53 million in the fourth quarter of 2000, which rose to $58 million by the first quarter of the following year, thus allowing the unit to meet its projected earnings. Yet in actual fact, the deal known as Braveheart had made no profit whatsoever, and Blockbuster had terminated the deal by March 2001 as a result.

The jury, however, acquitted former in-house accountant of EBS, Michael Krautz, who was tried on similar charges after a monthlong trial. Three other executives from the unit will be tried later this year.

The irony, of course, is that Enron had its eyes on a sound business plan, and with sufficient investment and of course, patience, the proposal to go beyond energy trading may well have taken off.

Since the company signed the deal with Blockbuster six years ago, hopes for video-on-demand have continued to increase, and for both cable providers and Internet giants alike, being able to provide a greater selection of films and clips in a matter of seconds has become one of the top priorities for the home entertainment industry. Indeed, while the idea of Internet television seemed unlikely only a few years ago, IPTV today is now very much at the forefront of many companies including software giant Microsoft. In fact, the company had signed on a deal with Deutsche Telekom earlier this year to help the German telecommunications group to provide IPTV across Germany.

Meanwhile, energy companies too are getting into the game of offering broadband over their pipelines. For instance, San Diego-based Nethercomm is developing a way to use wideband wireless signals to transmit broadband data through natural-gas pipelines. The idea is that most homes already have gas lines, and by using the existing infrastructure, the company will be able to offer high-speed connectivity while keeping the cost of setting up a network low, thereby making broadband connection more affordable.

Granted, the broadband-from-gasline project is still not a reality, but more and more industry analysts are becoming enthusiastic about the possibility of the idea bearing fruit.

So much the pity, then, that Enron had put its greed ahead of trying to follow through on its promises of delivery. But then again, had the company played an honest game in the industry it had set itself in, it could have made huge profits amid ever-climbing energy prices of recent months.

Copyright 2006 by United Press International

Explore further: DOCOMO and Huawei confirm LTE network over unlicensed spectrum

add to favorites email to friend print save as pdf

Related Stories

New antenna spreads good vibrations in fusion plasma

Nov 13, 2013

If you want to catch a firefly, any old glass jar will do. But when you're trying to bottle a star—the goal of fusion energy research—the bottle needs to be very special. A tokamak is one type of fusion ...

Base stations for 5G: Soon in our homes and on wheels?

Oct 22, 2013

In a few years, our mobile network will have to deal with a thousand times more the traffic it has to today. One possible solution is to place small base stations in our homes or cars. This is one of several ...

Luxembourg shows 'bigger is not always better'

Apr 19, 2013

Sometimes good things come in small packages and this is indeed true of Luxembourg when it comes to information and communication technologies (ICT). Take the example of broadband rollout. Being a small country ...

Recommended for you

Bringing emergency communications together

Aug 21, 2014

A new University of Adelaide research project aims to improve emergency operations through integrated communications systems for police and the emergency services.

For top broadband policy, look no further than Canada

Aug 20, 2014

You might have seen communications minister Malcolm Turnbull raising the issue about Australian press not discussing policy problems and solutions from overseas, in a speech delivered at the Lowy Institute Media Awards last week: ...

Cities, states face off on municipal broadband

Aug 19, 2014

Wilson, N.C., determined nearly a decade ago that high-speed Internet access would be essential to the community's social and economic health in the 21st century, just as electricity, water and sewers were in the previous ...

New loss mechanism for global 4G roaming

Aug 19, 2014

A loss mechanism that has not been an issue in previous mobile handset antennas will become important for global 4G roaming, according to results of experiments carried out in Aalborg, Denmark.

User comments : 0