New Telecom Unit Formed

Norfolk, Va.--Norfolk Southern Corp., the No. 4 U.S. railroad, formed a unit to lease its telecommunications system to phone, Internet and cable television providers and may eventually enter the business itself.

The railroad’s new Thoroughbred Technology and Telecommunications Inc. unit is negotiating with long-distance and local telephone companies and cable-TV providers to lease rights of way along its 21,600 miles of railroad tracks for cables, as well as its microwave network and other assets.

The U.S. local and long-distance telephone market was valued at about $200 billion last year, according to Strategis Group, a Washington-based market researcher. The U.S. Internet-service market adds an additional $5 billion, Strategis said.

“We have one of the largest private telecommunications systems in the world already set up and running, and doing a good job of serving our needs, with plenty of capacity to handle others,” said Bob Fort, spokesman for the Norfolk, Va.-based railroad.

Cable-based Internet providers are expected to have 13.6 million subscribers by 2002, up from 700,000 last year, according to Forrester Research.

“We are exploring any number of options, although that is not something we’re ready to step up to yet,” Fort said of Norfolk Southern providing such services. “We can’t exclude anything. This field is wide open.”

The separate unit allows Norfolk Southern to focus more on telecommunications opportunities, said James Higgins, a Donaldson Lufkin & Jenrette analyst with a “neutral” rating on the company. He said he doubts the firm will become a provider of phone or Internet service.

“It sounds like an area where they don’t have a lot of expertise,” Higgins said. “I think they’re too sensible for that.”