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Power Lines: No 'Third Front' Yet

3/30/2003 7:00 PM Eastern

Could electric power lines become the next big thing in broadband? Some utilities and federal regulators think so, but cable companies and other high-speed Internet providers doubt power lines will upend the broadband industry's competitive balance.

For years, electric utilities have been experimenting with ways to transmit data signals via power lines. Industry officials now say they're in the final stages of testing technology that eventually could allow any household to plug a modem into an electrical outlet and go online.

The current generation of power-line modems can transmit anywhere from 300 Kilobytes per second to 7 Megabytes per second of data — speeds comparable to cable modem and digital subscriber line technologies, said Victor Ugo, the manager of research and development at Conectiv Power Delivery, a Delaware-based utility.

Ugo and others in the utility industry say pilot programs in several states have proven that power-line communications technology is effective, easy to use and commercially viable.

'Third wire'

"My sense is that this has every potential of becoming the 'third wire' that really makes broadband competitive," said Power Line Communications Association president Alan R. Shark. "Bringing in a third player, that changes everything."

Federal Communications Commission Chairman Michael Powell has spoken glowingly of the potential of power lines to "simply blow the doors off the provision of broadband, [because] there's a power plug in virtually every building in this country."

Edmond Thomas, chief of the FCC's Office of Engineering and Technology, said the agency is "very, very enthusiastic" about power-line communications because "it could bring in another set of players" to compete for broadband customers.

Officials said some utilities might start offering commercial broadband services in selected suburban markets as early as this summer or fall. Other utilities plan to make their electrical grids available to independent Internet-service providers.

The utilities plan to initially target areas where broadband isn't available. They hope to eventually compete directly against cable systems and other high-speed platforms.

"I think that it will, in many situations, go head-to-head with cable and DSL," said David Shpigler, president of the Shpigler Group, a Nyack, N.Y.-based management-consulting firm with electric-utility clients.

Maybe not economic

But while some utility-industry officials say they're optimistic about the potential of power-line broadband, they aren't convinced it is ready for commercial rollout.

"It's not clear to me how quickly it will be demonstrated that this is, in fact, an economically viable service," said Larry Brown, a legal affairs director at the Edison Electric Institute, a Washington-based trade association. Utilities are still testing the technology and studying business models, he said.

Cable-industry officials acknowledge that power companies might be able to make inroads in unserved broadband markets, but insist that power lines won't affect the overall shape of the industry.

"While other services have been developing their broadband services, we've been deploying it," said Matthew Polka, president of the American Cable Association, which represents hundreds of small, independent cable operators.

Almost all of the association's members — many of which serve the suburban and rural areas that power companies have said they will target first — will offer high-speed Internet service by the time power-line broadband becomes widely available, he said.

"The first one in the market generally has the best chance of getting the market and holding it," Polka said.

Need 30% share

Like other broadband providers, analysts said that electric utilities would have to win at least 30 percent of a market's broadband customers to turn a profit — a difficult task in a market that's already fragmented between cable, phone and DSL companies.

"The market isn't big enough for four people," said Barry Ellson, a former Cox Communications Inc. vice president, who went on to work for Conectiv and is now a private broadband consultant. "It's just not a real viable concept."

Though Ugo said the "technology is ready" to be deployed, a report prepared last year by the consulting firm McKinsey & Co. for the FCC cited a host of potential problems.

Power-line broadband is "unproven" and faces "significant technical hurdles," the report said. It cited problems in transmitting digitized data over the electrical grid, which was designed to transmit signals at much lower frequencies.

Powell apparently agrees. He told a Senate panel this year that "significant capital investment and technical research is needed" before power-line broadband will be commercially viable.

Thicket of rules

In addition to outstanding technological and economic questions, electric-utility officials say they will need to navigate a maze of federal and state regulations before power-line broadband is ready for widespread commercial deployment.

Two industry trade groups — the Power Line Communications Association and the United PowerLine Council — are urging the FCC to ease rules that restrict radio-frequency emissions from broadband power lines.

The rules are meant to ensure that the emissions don't interfere with other communications devices, but utilities say they are unnecessary and might delay the introduction of more powerful second-generation technology.

"To the extent that the emission levels are changed or relaxed, that would improve our performance," said Brett Kilbourne, United PowerLine Council's director of regulatory services.

Thomas said he and others at the FCC would review the current emissions rules this spring.

"The trouble with this is everybody on the planet who's involved in rule-making always postures," Thomas said. "Obviously, if the power-line carrier industry gets an easier set of rules, they probably can do something cheaper. That's not what we're trying to do. What we don't want to do is have the power-line industry prosper at the expense of something else."

States News Service

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