Becoming a Household Name – One of the most significant opportunities presented by expanding individual use of the internet is the ability to reach customers quickly and inexpensively – across the country and around the world. By partnering with e-business companies, KeySpan can literally get inside peoples’ homes and offer them an array of products and services that will be limited only by our ability to meet customer demand. In the deregulated environment, with new regions open to energy companies, the internet will be a key tool in creating brand awareness for the KeySpan name, paving the way for sales of bundled and unbundled energy products and services.

The Versatility of Fiber – KeySpan’s fiber optic network provides the company with opportunities to explore new product and service ventures in communications and data transmission. Building on our excellence in customer service and experience in managing distribution systems, we envision establishing a presence in the data carrier market and gradually expanding into the retail sector.

KeySpan Powers Times Square – KeySpan’s commitment to clean energy solutions is helping a Times Square office building demonstrate environmentally friendly fuel cell technology. Our subsidiary, KeySpan Services, is responsible for maintaining the fuel cells that power the Conde Nast building, home of the NASDAQ sign. ONSI Corporation, manufacturer of the fuel cells, has chosen KeySpan Services as the authorized service provider for the two fuel cell units in Times Square, as well other locations throughout New York City.

The E-Business Equation
As people become more and more comfortable with computer technology, the internet has become an efficient and effective medium for connecting customers with information, products and services. In particular, today’s homeowners are looking for ways to maximize their leisure time and simplify their lives through the power of e-business. Web sites are springing up nationwide to offer homeowners one-stop shopping for such daily needs as energy, telecommunications, internet access, and shopping. We believe that there is significant potential for KeySpan to combine our range of energy products and services with a variety of home management services to become the ultimate internet personal access point for our growing customer base.
    We are currently pursuing an equity interest in such a venture. The site would aggregate customers and brand name fulfillment partners to provide both e-business and community services. With just a few mouse clicks customers would be able to change their home environmental controls, do their grocery shopping, find an appliance repair provider, check their e-mail and catch up on community events. The wide assortment of products and services that could be accessed through this kind of site would also provide KeySpan with name association in areas that are currently beyond our scope.
    E-business also has the ability to provide significant internal benefits to KeySpan, helping the company streamline procedures. We are also in negotiations with a potential partner to develop a new concept in online e-business that will combine the company’s purchasing and procurement process into a single internet portal. It will connect the company’s suppliers throughout the country into an open yet confidential purchasing
e-market. The new online purchasing network will help reduce costs and improve productivity. As an equity partner in the venture, KeySpan will be the first company in the utility industry to develop an online purchasing platform.

Transmitting By Fiber
Another innovative technology that KeySpan is developing is fiber optics. KeySpan owns a 400-mile, high-speed fiber optic network that loops across Long Island and through New York City, with several key access points to Trans-Atlantic cable systems.
    Fiber optics transmit voice and data by light pulses along hair-thin glass fibers. Those fibers are then bundled into transmission cables that are smaller and lighter than conventional copper wire or coaxial tubes, yet can carry far more information. The increased capacity makes fiber optic cable ideal for transmitting computer data, television pictures or many simultaneous telephone conversations. But capacity is not the only benefit of fiber optic cable. Unlike conventional cable, fiber optics are not affected by electromagnetic interference from lightning, nearby electric motors, or other sources; they do not experience “crosstalk" from nearby wires, and attempts to tap into them are easier to detect. They also carry signals further with less deterioration.
     With the demand for bandwidth steadily increasing, KeySpan’s network represents a very viable opportunity for bundling energy and communications products and services in the future. Our strategy for developing the asset is to enter the market as a “carrier’s carrier,” selling the network capacity to others and carrying their traffic. This is a role in which we excel – KeySpan is, after all, a very experienced distribution system manager.
    We are currently seeking partners to help us enhance the value of the network. The right partners will bring expertise and capital investment, allowing us to scale up what we currently own, build cash flow in the wholesale business, and then begin to explore options in the retail marketplace.