Word: enronize
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...market loves Enron because Skilling and CEO Kenneth Lay seem to have come up with a business model that works for just about anything. They provide a service to their customers by packaging a supply of name your commodity and then using the efficiency of their vast network to beat most prices. They arrived at this model back in the mid-1980s almost out of desperation, when crude-oil prices had collapsed, natural-gas deregulation had thrown that market into chaos, and the Peruvian government had just nationalized Enron's offshore properties. Figuring they might as well leverage deregulation instead...
...Enron also leverages its assets and expertise to provide services to big customers. Since 1997, companies like Owens Corning and Chase Manhattan Bank have signed long-term, multibillion-dollar contracts with Enron subsidiary Enron Energy Services (EES) that lock in their energy costs for up to 10 years and provide Enron with a steady revenue stream. What's more, Enron is beginning to actively manage its clients' heating and cooling plants, installing new equipment when necessary and monitoring it all over the Internet...
Skilling's latest gambit is to apply the same principles he learned in the power and energy sectors to making Enron a leader in the booming telecommunications business. The plan isn't to go head to head with established fiber-optic carriers such as AT&T, Qwest and Williams Communications. Instead, Enron wants to use new switching technology and its expertise in trading pipeline access to transform a modest telecom network into a powerful arbiter of bandwidth. Enron's bet is simple: supply and demand will increase exponentially, turning bandwidth into a tradable commodity, just like gas and electricity. Along...
Other new-economy players are also beginning to see the power merchant as a prize partner. IBM and AOL have joined with Enron to form the New Power Co. (TNPC), an independent start-up that will offer pricing schemes and a choice of power and gas service for residential and small-business customers. Enron provides the electricity; AOL enables customers to buy it via the Web; and IBM takes care of the billing. "It's ludicrous that we're in the 21st century, and you still have people jumping over fences to read meters," says Skilling, pointing out that...
Despite all Wall Street's enthusiasm for Enron's bold plans, there are still plenty of skeptics. Critics point out that there is barely a market today for the company's bandwidth trading exchange. They also stress that pushing digital signals through pipe is a world away from routing natural gas. Although there is plenty of cable across the country, carriers are not set up to mix and match access to it. "It's a very, very difficult concept," says Nolles. Even the Blockbuster venture is risky: technology aside, there is also the highly political question of digital rights...