News

Utilities Ready to Zap Broadband Ops

3/20/2005 7:00 PM Eastern

Could this be the year of the power surge? Backers of broadband-over-power line (BPL) technology cite a recent New Millenium Research Council report, which indicates the technology will become much more widely available this year on a commercial basis.

Twenty percent of the nation’s utilities — municipal and investor-owned — are considering high-speed Internet offerings, the report asserted. Trials are underway in several states, including Arizona, California, Michigan, Idaho, Florida, South Carolina and Louisiana.

Utility companies connect to the Internet at the transformer, and the data is sent down the plant and amplified via a series of repeaters. A utility can serve 100 to 250 homes per transformer, with the data stream entering homes via medium-voltage wires (140 to 480 volts).

PLUG IN SOCKET

Modems can be plugged into any residential socket.

Barry Goodstadt, vice president of Harris Interactive Inc. and a BPL consultant, told reporters on a recent NMRC conference call that broadband represents a $4.5 billion revenue opportunity for utilities. That’s based on research which indicates that 13 million households would adopt BPL service at a subscription rate of roughly $30 per month.

The power industry could hit those numbers within the next three to five years, he estimated.

The report cited Manassas, Va., as an example of BPL’s potential. In 2004, the town awarded Communications Technology Inc. of Chantilly, Va. (COMTek) a 10-year franchise to deliver broadband services.

COMTek is the Internet-service provider and handles marketing and billing; Manassas city workers install the residential technology and program the free modem to the specific computer that will use the hardware. In return, the city gets a portion of broadband-subscription revenue.

COMPETITIVE IMPACT?

COMTek CEO Joseph Fergus said he expects the product will be fully deployed to 12,500 homes by this month, and predicted a 20% to 30% penetration rate. That’s based on the company’s waiting list of 1,200 as of January, as well as those already online.

Manassas residential consumers pay $28.95 per month for the service; the commercial rate is $39.95. Throughput speeds may range from 500 Kbps to 10 Mbps, he said, depending on how many users log on. Users are guaranteed a minimum speed.

The product launch has been so successful, Fergus asserted, that the competing local cable operator dropped its high-speed Internet (HSI) price by 55%. But Comcast Corp. spokeswoman Jeanne Russo said that’s not so.

Comcast enjoyed a record year for HSI growth in 2004, she said.

Though the company does not break out its growth figures by region, Russo said there was actually an uptick in HSI subscribers in Manassas.

Comcast continues to charge $42.95 or $57.95 per month, depending on which tier of service a customer selects. The cable operator occasionally runs promotions, but hasn’t adjusted prices due to the introduction of BPL, Russo said.

COMCAST HAS CONTENT

Customers buy Comcast’s service for content as well as speed, she added. For instance, music-video viewership on Comcast’s video-on-demand platform is up 800% — an increase the company attributes to its proprietary technology, which lets consumers customize their content offerings.

Though BPL supporters see a big future for the technology, they also note that there are some technical and policy hurdles that will impact the product. Washington State University professor of electrical engineering Robert Olsen said on the recent conference call that BPL is not likely to escalate a “speed war” among technologies.

BPL can match speeds with cable modems or digital subscriber line, he said. But quicker data delivery wouldn’t be financially feasible.

He also noted that the Federal Communications Commission, though supportive of BPL technology, has admonished providers not to create “harmful interference” — a term which does not yet have a legal definition.

BPL transmissions are not shielded as well as signals delivered over fiber-optic or copper plant. In Manassas, the provider had to make alterations to avoid excessive interference with shortwave radio signals.

RURAL REPEATERS NEEDED

BPL has also been touted as a high-speed Internet solution for rural America, but even its backers noticed that the provision of services to remote locations would depend on the number of repeaters required to deliver data over long distances.

Utilities would still need to develop a strong business case for moving into this new business, Goodstadt noted.

To strike a cautionary note, he pointed to the failure of the Montana Power Co., whose demise he blamed on unwise expansion into the telephone business following that state’s deregulation of the power industry in 1997.

March