Powerful stuff?

Thu, 03/31/2005 - 7:00pm
Craig Kuhl, Contributing Editor

Broadband Power Line (BPL), a technology that could eventually bring triple play services to any device within reach of a standard electrical socket, is seeping into the commercial and residential markets, and into the psyche of potential service providers.

The use of traditional power lines—either overhead or underground—to carry high-speed data and Internet service to virtually anyone with an electrical outlet, is sparking a renewed interest among utility companies and municipalities, while also sending a gentle wake-up call to cable and DSL providers.

And why not? Providing Internet access over ubiquitous power lines with the potential to offer video and voice services is a compelling business proposition. Research firm In-Stat (a sister company to CED) projects total media networking connections in homes to reach 200 million by 2009. Another firm predicts more than 13 million households having BPL-enabled service in three to five years, with revenue topping $4.5 billion.

"Consumers tell us they're interested in BPL and would switch from cable or DSL. Being able to receive broadband from every electrical outlet is a compelling proposition, and BPL appears to be a substantial opportunity for electric utilities," says Barry Goodstadt, VP and senior consultant for Harris Interactive, a research and analysis firm.

Yet turning opportunity into a business is a whole different game. For years, BPL (also known as Power Line Communications, or PLC) has been plagued by interference issues because it shares common frequencies, as well as regulatory constraints, operational and business challenges and a general lack of awareness. But the game has since taken on greater significance as many of the technical and regulatory hindrances are disappearing.

"There are lots of companies showing interest, with more than 20 trials going on. But there's really no business case yet, so there are business and marketing challenges. It will take strength and guts for people who play in this area. We'll probably see a consortium of ISPs, utilities and others building a nationally recognized brand. But it won't happen fast," Goodstadt predicts.

Figure 1: In a typical deployment, BPL electronics are connected to the grid via
couplers. These couplers inject the high-frequency BPL signal onto the energy
infrastructure without any impact to energy delivery. Once injected, the BPL
signal travels down the grid until it is either extracted to serve customers, or
hits a repeater to go farther down the line. The extraction process can happen
either directly via the wall socket in the home or business, or via a wireless
connection, which often comes directly off the grid. In this example, service
is delivered to subscribers wirelessly.
Source: Amperion Inc.

Utilities, once scalded by their encroachment into the telecommunications space, have been understandably shy about entering the BPL business, a lingering fact that for many has branded BPL as a questionable technology and business, while at best a niche market opportunity for rural and underserved markets.

Says Goodstadt: "They (utilities) failed in telecom because it wasn't their core business and they didn't invest in the technology. BPL is closer to their core business."

And it's closer to becoming a realistic "third wire" for IP services into homes and businesses as BPL attempts to overcome its biggest technical challenge—interference—and lures a growing number of utilities that are willing to kick the tires on BPL to see if it can grow into a viable business.

"Clearly, we need to look at signal and frequency issues down the line. But we've been dealing with them for 100 years. We can build frequencies that don't interfere with each other," says Joseph Fergus, president and CEO of Communications Technologies Inc. (COMTek), a broadband service provider that is among the first to provide BPL service—this through a power line network in Manassas, Va.

Armed with an encouraging new set of rules from the Federal Communications Commission (FCC) to develop BPL and protect it against interference (Part 15 rule change), the appeal of triple play revenues and the natural cost-efficiencies of moving data over existing power lines, utility companies with existing power lines in place with minimal capital expenditures projected are renewing their interest in BPL as a lessee, partner, or both.

"We must work with electric companies and utilities, and they're regulated. So, they are very cautious in their approach to BPL because it requires sharing of space. But it's an inexpensive way of deploying ubiquitous Internet access and it lends itself well to VoIP," Fergus says.

How it works

BPL transmits high-speed communication services, including Internet access, over existing electric infrastructure using adaptive technologies such as repeaters, couplers, etc. The wires carrying electricity are also a conduit for data signals. Power lines, of medium voltage, travel from power substations to homes or office buildings.

Power lines connecting to homes or buildings from utility poles are low voltage. Data can be transmitted by bundling RF energy on the same line with electric current. Because electric current and RF energy signals carrying data operate at different frequencies, the two don't interfere with each other.

According to definitions from the New Millennium Research Council, BPL still requires the initial connection to the Internet backbone, where a last mile solution is required, either a direct connection to the home via power lines, or WiFi-type transmitters on utility poles. Once inside the home, a BPL modem allows access to signals through any electric outlet.

Filling more than a niche?

The rural, underserved market mentality that has dominated the BPL space may be changing with the recent deployments of BPL in select urban markets. Some BPL providers, albeit few and far between, insist BPL isn't just for isolated, niche markets, but is a cost-efficient, compelling technology and business that is well suited for multiple markets, including major metropolitan areas. But not in the immediate future.

"BPL is a good alternative to cable and DSL and you can compete head-on with them, and there's a natural progression to digital TV and VoIP. But for now, it's probably better to look at markets with fewer competitors and with a mix of rural and city enclave subscribers and clusters of buildings," Fergus admits.

He should know. COMTek is offering Internet service to Manassas residents for $28.95 per month and $10 more to commercial customers. It will eventually offer tiered services, but is already testing 100 Mbps applications via a test network for emerging manufacturers, despite a dearth of such companies.

"There are few manufacturers of quality products in the BPL space, and that's a concern," Fergus acknowledges.

But the few existing BPL product manufacturers have noticed a slight uptick in interest. Yet they have no illusions about the challenges that lie ahead.

Jeff Tolnar
"We've had to build an industry, not just a company, and it's hard to sell a vision to prospective companies, but the market is moving," says Jeff Tolnar, vice president of sales, marketing and business development for Amperion Inc., a joint venture between American Electric Power and Cisco Systems that provides medium-voltage powerline communications gear. "Utilities have an asset in place with untapped, enormous value, and there are deployments of 10,000 to 20,000 homes passed. Now, we have to convince people they need what we have." Nevertheless, partnerships between utilities, energy companies, manufacturers and service providers are sprouting as BPL business models emerge. Ambient Corp., Consolidated Edison (Con Ed) and Earthlink, for example, have struck a deal to provide high-speed power line-based connectivity and broadband Internet services to a 213-unit condominium on New York City's Upper West Side. The service uses Con Ed's grid system under the streets of the city.

Though certainly not a major deployment, it does represent an operational network and working business model replete with revenue, albeit in its fledgling stage.

Figure 2: New architectures are sparking the BPL evolution.

Two T-1 lines, a server and router are connected to Ambient's PLC system, with its MDU nodes transmitting the signal throughout the building.

"Our business model is looking at MDUs as a nice business," says John Joyce, president and CEO of Ambient. "But this condo complex is just one business model. Utilities, both overhead and underground, are also clearly part of our business model. And with 200-Megabit chipsets, we can offer triple play services over PLC. It's a great opportunity globally, as well."

The Con Edison/Ambient partnership is an indication of just how BPL is emerging into a business and why utilities such as San Diego Gas & Electric and others are pushing ahead with BPL trials.

"There's a potential to reach rural and underserved communities, but we also cover San Diego County and half of Orange County. We're now determining the size and scope of our customer base and will pilot BPL and look at the results," says Ed Van Herik, a spokesman for San Diego Gas & Electric.

Additionally, Internet America, HILCO Electric and Amperion have partnered to provide BPL service in north central Texas via a combined Wi-Fi and powerline Internet access service.

"Now, it's about scale. The rural, underserved markets are wide open and utilities and operators are forming new ventures this year, while large system integration partners are getting engaged. But the economics have to get better," cautions Tolnar.

Some experts believe the model to watch is a venture between Cinergy and Current Communications. Those companies are offering BPL to the greater Cincinnati area and parts of Northern Kentucky and Indiana. "Cinergy is the real test. If they can deploy and get revenue, that could prove the case," Goodstadt argues.

The Current/Cinergy venture is tapping Cinergy's electric distribution infrastructure, with Current taking the management role.

"We're providing service to thousands of customers and will do VoIP in the second or third quarter of this year," explains Jay Birnbaum, vice president of Current Communications Group LLC. "We're concentrating on small to mid-size businesses and residential markets and will seek additional utilities to become a multiple service operator. Our sole purpose is to deliver BPL to rural co-ops and utilities, then move into larger markets such as Los Angeles, Long Island, Jacksonville and others and compete directly with cable and DSL."

With their brand awareness relatively high, and with billions of dollars in upgrades either completed or near-completion, competing against DSL and cable rivals won't be easy, and poses a serious challenge to BPL's growth. Admits Birnbaum: "We have to go to urban markets and compete against cable and DSL. We just have to overcome that. We need to demonstrate we can compete effectively. But BPL costs less to deploy and has added value such as symmetrical speeds in all outlets in the house. And we must compete on pricing."

More than half of Current's customers are former cable and DSL users. "Our goal is to pass 250,000 homes, along with large-scale commercial deployments. As we scale, we'll learn more," he adds.

Good idea, but does BPL have what it takes to effectively compete versus cable and DSL? Some are doubtful.

"BPL providers are focusing on rural areas, and utilities are very conservative and know little about broadband. That's dampening the move to BPL. They have to determine how they want to run the BPL business. There are lots of trials in the U.S., and BPL is getting its feet wet, but until they get their operational costs down in the rural areas, where it's more expensive to deploy the service, there's not much going for them right now," says Nicole Klein, analyst for the Yankee Group.

And there's the pesky interference and security issues that have dogged BPL technology for years. The new FCC rules will lighten the regulatory load for BPL by establishing specific technical and administrative requirements for BPL equipment and operators to protect against interference, encouraging news for BPL.

Manufacturers and operators remain cautious, however. "The FCC has been very supportive, but all BPL providers know they'll have to exist with common spectrum users. We're working on coupler technologies where the more efficiently you can couple with wires, the less interference. Utilities are very cautious about interference and security," Tolnar says.

Nevertheless, ventures such as Cinergy and Current are pushing ahead with BPL service and express confidence in their ability to co-exist with common spectrum users and compete head-on with cable and DSL service.

"We've passed 40,000 homes, and the hardware is out there. Fifty percent of our customers have switched from cable or DSL and there are two million gas and electric customers in our market. We're moving out our deployments to them and anticipate a high take rate," says Cinergy Spokeswoman Kathy Meinke.

Exploiting the existing distribution grids of utilities nationwide is a key value proposition to BPL. Automated meter readings, preventive maintenance, IP addresses, substations, time-of-day-pricing, and the ability to remotely connect and disconnect customers make for a more cost-efficient operation, industry players insist.

"Truck rolls and in-home installations have plagued DSL and cable. We've designed our equipment to be truck-roll free. And it costs less to deploy BPL," Birnbaum adds.

Joyce of Ambient concurs. "The cap ex is more attractive than cable. We'll take the information and data from our project in Manhattan and update our business models and will test the capability of video streaming and conferencing. The potential is there."

But is the business there? And how will BPL overcome the long odds of competing with incumbent cable and DSL providers, many of whom have learned valuable operational and marketing lessons.

"BPL can do remote turn-on and turn-off, remotely read meters, detect outages and it costs less to deploy, so there are cost-efficiencies and compelling management capabilities. The utilities look at those first, so the answer is yes, they can compete with cable and DSL. But how will they market and run the business? Utilities are seen as [being as] reliable as the telcos and cable, but aren't strong marketers, and we haven't seen a business case developed yet, so no one really knows about ROI (return on investment). But we believe that, over time, BPL will happen," concludes Goodstadt.

To what extent BPL happens is likely to depend on results from the various trials either in-progress or scheduled. However, with the FCC's blessing, technical challenges being overcome, and a growing interest among utilities nationwide, the model for triple play services to be distributed via existing power lines to both homes and businesses is emerging.

Just how powerful that model is, and whether it can effectively compete against incumbent service providers such as DSL and cable, is being determined in homes, businesses and the board rooms of utility companies, manufacturers and BPL service providers.



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