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: Hand out money with my mobile? I think I'm ready

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

Hand out money with my mobile? I think I'm ready

Apr 17, 2014

A service is soon to launch in the UK that will enable us to transfer money to other people using just their name and mobile number. Paym is being hailed as a revolution in banking because you can pay peopl ...

Quantenna promises 10-gigabit Wi-Fi by next year

Apr 16, 2014

(Phys.org) —Quantenna Communications has announced that it has plans for releasing a chipset that will be capable of delivering 10Gbps WiFi to/from routers, bridges and computers by sometime next year. ...

Tech giants look to skies to spread Internet

Apr 16, 2014

The shortest path to the Internet for some remote corners of the world may be through the skies. That is the message from US tech giants seeking to spread the online gospel to hard-to-reach regions.

Wireless industry makes anti-theft commitment

Apr 16, 2014

A trade group for wireless providers said Tuesday that the biggest mobile device manufacturers and carriers will soon put anti-theft tools on the gadgets to try to deter rampant smartphone theft.

Dish Network denies wrongdoing in $2M settlement

Apr 15, 2014

The state attorney general's office says Dish Network Corp. will reimburse Washington state customers about $2 million for what it calls a deceptive surcharge, but the satellite TV provider denies any wrongdoing.

Netflix's Comcast deal improves quality of video

Apr 14, 2014

Netflix's videos are streaming through Comcast's Internet service at their highest speeds in the past 17 months now that Netflix is paying for a more direct connection to Comcast's network.

User comments : 0

More news stories

Health care site flagged in Heartbleed review

People with accounts on the enrollment website for President Barack Obama's signature health care law are being told to change their passwords following an administration-wide review of the government's vulnerability to the ...

Airbnb rental site raises $450 mn

Online lodging listings website Airbnb inked a $450 million funding deal with investors led by TPG, a source close to the matter said Friday.

Researchers uncover likely creator of Bitcoin

The primary author of the celebrated Bitcoin paper, and therefore probable creator of Bitcoin, is most likely Nick Szabo, a blogger and former George Washington University law professor, according to students ...