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BPL Takes Another Step

Steven Titch
December 21, 2005, 10:16am

North Texas stands to be a competitive hotbed for broadband services by this time next year. I've already reported on the Verizon's plans to introduce its FiOS fiber-to-the-home service in the Dallas-Ft. Worth area as well as its other service areas, largely scattered in northeast and panhandle regions of the Lone Star State, thanks much to a state law passed last summer that authorized the state to grant blanket video franchises (See entry Dec. 14). Now comes word that TXU Corp. will begin the largest roll-out of Broadband over Power Lines (BPL) service to date–aiming to cover its north Texas territory consisting of 2 million customers. As a broadband player, it will go up against AT&T (formerly SBC), Verizon, Time Warner Cable and Charter Communications. At this grand broadband soiree, BPL has been something of the celebrity invitee with a temperamental personality--the kind who can generate whispers of excitement and anticipation among other guests although no one's sure if he's going to show up. But BPL finally might be finally making an entrance, further weakening the central case for government-owned networks–that the market can only support only one underlying infrastructure. If TXU and its broadband partner, Current Communications, hold true to their schedule, communities in north Texas could have as many as five broadband access networks competing for business, all on different platforms. There will be the cable company – using hybrid fiber/coax, migrating to fiber-to-the-home. There will be the local phone company using DSL and fiber-to-the-node, also moving to fiber-to-the-home. There will be the cell phone companies, providing data connections There will be WiFi providers There will be BPL. What's also notable is that each technology has its own particular strengths. Fiber-to-the-home may cost more, but it yields more value. Wireless connections may be a bit cumbersome for broadcast quality video, but they still can provide robust connections to the Internet and easily support integrated voice, email and Web surfing at a lower price. BPL's biggest selling point may not be consumer services at all (although TXU definitely want to go there). Much of BPL's early business case is built around machine-to-machine communications, something that usually is overlooked when the discussion turns to broadband via fiber, coax or copper. But BPL begins with the notion that just about all remotely managed equipment, from ATMs to soda machines, are plugged into to the electric grid and therefore can transmit information as to their status without need of a second network. Hence there are immediate commercial applications that owners can take advantage of without the expense of a separate high-bandwidth connection or waiting for wireless. And unlike fiber or DSL, build-out is not dependent on high average revenue per user (ARPU). Indeed, TXU's 10-year, $150-million agreement with Current will begin with internal applications. According to the Wall Street Journal, TXU will use Current's BPL technology to get instantaneous alerts about outages and to gather information about its electrical system. The technology eventually could be used to read meters and even to remotely shut off or turn on power. Ultimately, TXU wants to move into consumer broadband, an opportunity that the state of Texas makes easier because it allows power companies to set up independent business units that can make investments and retain profits. In other states, regulations often require that profits made from outside ventures, including telecom, be distributed to ratepayers, even if the initial investment came from other sources. It's another way regulators, while clamoring for broadband competition and investment, foul it up. But I digress. In Cincinnati, Current and Cinergy operate the nation's largest commercial BPL service deployment to-date, covering approximately 50,000 homes with plans for expansion. Current also has ongoing trials with Southern California Edison, Los Angeles Department of Water and Power, Potomac Electric Power Company near its Maryland headquarters and Hawaiian Electric Company in Honolulu As a privately-held start-up attracting eager investors, Current Communications also counters the repeated claim that unless government gets involved as a competitor, service will be dominated by the "duopoly" phone and cable companies. Google, Goldman Sachs and Hearst have invested a total of $100 million in the Current. That came in addition to some $70 million raised from Cinergy, EnerTech Capital and Liberty Associated Partners, a unit of Liberty Media. With this kind of capital flowing to what still amounts to an expensive and unproven technology, it's hard to argue that the cable and telephone companies have locked up the market. It is also why market-driven innovation loses out when government chooses to subsidize services. True, BPL might be a bust. But if turns out to be an inexpensive and better alternative, communities that have gone into hock to fund wireless or fiber systems will loose this competitive benefit. You can't expect municipal electric utilities, when they've got millions of dollars tied up in one technology, to undermine it with another, even if it would provide their users with a truly cheaper alternative. Far from conceding the future to telephone and cable, the growing broadband supply chain wants alternatives, too. Only it is willing to risk its own capital. Each day's news offers more evidence that cities and towns need not pick taxpayer pockets to create broadband competition.


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