Although the energy companies are believers, a number of areas still pose problems.
Chief among them is the reluctance of the regional Bells and the long-distance carriers to participate in the bandwidth trading business. Suspicious of the Houston companies, they have been hesitant to see their services turned into commodities: If bandwidth becomes a commodity, the big carriers will be forced to reveal their profit margins. Thus, the bulk of current bandwidth trading happens among a relatively small group of companies, and the large Houston energy firms have the biggest positions in the market.
In addition to the obstacles posed by the bandwidth trading market, the energy companies must deal with the uncertainties created by falling bandwidth prices. For instance, over the past 18 months, the price of an OC-3 [155-megabit-per-second] circuit from New York to London has fallen 83 percent.
Then theres the pesky last-mile question. For all their skills, the energy companies are not bringing any new solutions to the table with regard to the last mile. Until consumers are able to get fat pipes into their homes, "theres going to be a great deal of fiber capacity that could be used, but wont be," said Justin Craib-Cox, a Morningstar stock analyst who tracks the Houston energy companies. Such conditions, Cox said, mean profits from the broadband business "will be way out in the future, so its anybodys guess as to whether their broadband technologies will make money and when."
Dont tell that to Racicot. Hes certain that Enrons business model will prevail. "There will always be a need for efficiencies," he said. "And this industry is wrought with inefficiencies."
The current mess in the telecom business doesnt matter, Racicot said. What matters is that the telecom industry will change, and Enron is going to profit from it sooner or later. Every day the telecom industry delays adopting Enrons approach, Racicot said, "is another day that convinces me that we will be the biggest buyer and seller of bandwidth in two years time."
Call it confidence. Call it cockiness. Whatever the term, Houston has begun an assault on the telecom business.