Broadband over Powerlines May Rescue Stranded Organizations
The electric utility industry may play a role in breaking the broadband barrier in the US. Rural businesses and communities are the last to get broadband, mostly due to sparse populations and price sensitivity. Now there may be an interesting alternative for high-speed internet connections: Broadband delivered via the electricity distribution infrastructure.
December 14, 2004
After a decade of building out its broadband infrastructure, the United States has passed a milestone: More than half of all web-connected households are on broadband. So why are there still areas without access to high-speed internet connections? One of the strongest indicators of being on broadband, statistically, is proximity to an urban center.
The rapid spread of our broadband infrastructure is slowing down as it reaches the rural half, mostly due to population density and price elasticity of demand. If the phone or cable company extends costly broadband networks to farm country, they wonder if those customers will pay the same high prices charged to early-adopting city dwellers.
That leaves slow dial-up or expensive T1 connections. Now there may be an interesting alternative for rural businesses wanting high-speed internet connections to their suppliers and customers.
A Third Way: Broadband over Powerlines
Enter the electric utility, with an existing infrastructure reaching almost every home and business. Compared to digital subscriber line (DSL) or cable modems, broadband over power lines (BPL) has a cost advantage in reaching sparsely populated areas with new service.
That advantage could be a predictor of rapid growth. A new survey by Energy Info Source, "The Market for Broadband over Powerline," says that a third of new broadband customers will choose power line communications by 2012.
The economics of any broadband infrastructure expansion depends in part upon how far it must reach and how many customers are to be gained from it. When compared to DSL or cable modems, BPL could be faster to deploy, and with less capital investment per new customer. That equates to lower rates for users and faster cost recovery for the utility.
To extend DSL, the phone company replaces outdated field equipment with costly digital gear; existing phone lines handle the last mile. Cable operators must extend new cable to each point of service. Either way is slow and expensive. To extend BPL, the power company installs some equipment in their home office and attaches small repeaters to the existing lines. This gives BPL an advantage where the ratio of customers to devices is low.
How much advantage? A basic dial-up account costs about $20 per month for each PC, plus extra phone lines. BPL rates are currently $30-40 per site. Satellite broadband service costs twice that and has an up-front cost of a few hundred dollars. A T1 line from the phone company is more expensive still, if it's available.
Barriers to BPL Growth
Until recently, most utilities have taken a wait-and-see approach to BPL. Some learned hard lessons when previously investing and competing in non-energy businesses. Others are hesitant because of uncertainties about the technology, including regulatory issues.
Even though the wires are already there, BPL deployment is not without an initial investment for utilities. In addition to equipment at the power company, BPL requires repeaters installed on poles along the way.
Then there is the issue of technology standards. As with all technologies, compatibility between components affects cost of system ownership. A fragmented market innovates quickly around initial problems. Eventually, though, a single standard emerges, leading to industry consolidation. No utility wants to be on the wrong standard.
Europe, like the US, lags in broadband adoption behind a dozen or more countries, including Iceland, South Korea, Denmark and Japan. European utilities have been experimenting with BPL, which they call power line communications (PLC). Particularly in Germany, large power companies jumped into PLC, only to pull out later. Companies are now taking a more structured approach, beginning with standards.
"We currently have a number of proprietary systems in use around Europe, each with their strengths and weakness," said Michael Koch, a member of the EU PLC initiative and vice president of strategy and regulation at PowerPlus Communications AG, in an interview. "For power line communications to become a viable business, standardization is essential," he added. "One of our primary goals is to move away from proprietary systems."
This kind of cooperation has not emerged in the US market for BPL, but recent Federal Communications Commission (FCC) rulings at least removed some of the regulatory uncertainties surrounding the frequencies used for BPL. "It really has the potential of being the great broadband hope for most of rural America," FCC Chairman Michael Powell said, following the ruling.
Coming Soon to a Co-Op near You?
To fulfill that hope, BPL must be deployed across the lines of hundreds of small, cooperatively owned and municipal electric companies. BPL is in trial at a dozen, mostly larger, utilities. One of those, Cinergy, is planning to reach 24 million potential users by partnering with rural electric companies.
"The question, of course, is whether rural electrics are up to the technological and marketing challenge of running an Internet business," responds Kevin Eber of the Department of Energy's National Laboratories.
Perhaps more disquieting: whether we are ready for the utility to be our broadband company. Few utilities are expected to become internet service providers (ISPs), retailing broadband to their customers. Instead, most will partner with technology companies who will cover the up-front investment and handle the untidy business of support and billing. Utilities become landlords for their wires, leasing the "space" for broadband to ISPs.
In addition to connecting businesses to their customers and suppliers, broadband connectivity opens the door to other business services. For example, Voice over Internet Protocol (VoIP), an alternative to conventional telephone service, requires a high-speed internet connection. Some facility security systems are strengthened by broadband connections for real-time video monitoring.
Utilities, too, can take advantage of BPL. Power companies have assets throughout their territories, all connected by power lines. A data connection would make them easier to monitor and troubleshoot remotely, instead of sending a crew.
Automated meter reading (AMR) requires a data connection to each meter, again conveniently provided by the power line. AMR enables programs such as time-of-use (TOU) billing and machine-level demand response (DR) that would have long-term benefits.
Analysts expect to see BPL really start to grow in 2006. What matters to rural businesses is not whether BPL reaches them, but how soon any cost-effective broadband option becomes available. With added competition on the horizon from utilities, perhaps the incumbents will move faster to serve rural customers.