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Plug-and-Play Internet

Wall-outlet broadband attracts heavy hitters 7/15/2005 08:00:00 PM Eastern

Some of the biggest names in media, finance and technology have thrown their considerable weight behind what seems like a shockingly simple concept: consumers’ receiving broadband Internet access via modems plugged into their wall outlets.

Some recent big investments, coupled with a potentially relaxed regulatory environment, has the deployment of broadband-over-power lines (BPL) by utility companies seemingly poised for a breakthrough. With 99.99% of U.S. households potentially capable of receiving BPL, the technology could go a long way toward helping FCC Chairman Kevin Martin fulfill his mandate of accelerating broadband deployment across the U.S.

BPL technology, which uses existing utility and power grids as a foundation for broadband data-service connectivity, puts power companies on the growing list of broadband service providers. BPL’s concept is simple: Data routers are installed, which then pass the data signals to $30 modems plugged into outlets in the home. That makes every outlet in the house broadband-enabled, so additional modems can be used by simply plugging them into other outlets.

Heavy Hitters On Board

Spearheading the BPL charge is Current Corp., which made headlines two weeks ago by drawing investments totaling some $100 million from Google, Hearst Corp. and Goldman Sachs, on top of investments from Liberty Associated Partners LP (of which Liberty Media is a partner) and EnerTech Capital. And IBM recently announced a partnership with Texas-based power company CenterPoint to test the service in Houston homes this summer.

What’s bringing the heavy hitters to the plate? “It’s in the best interest of everyone to create as many [broadband] pipes as possible,” says Ken Bronfon, president of Hearst Interactive Media.

While Google had little to say, others are speculating about what attracted the Internet search company to BPL. “There’s certainly room for strategic relationships between a BPL provider, an ISP like Current and a portal from Google,” says Craig E. Moffett, VP and senior analyst, U.S. cable and satellite broadcasting, for Sanford C. Bernstein & Co. LLC.

What Makes BPL Stand Out

Given the competitive landscape, some wonder why a newcomer would enter the fray, particularly with cable owning such a large share of the market. The number of actual BPL subscribers is less than 10,000, and growing the system nationwide poses major challenges in terms of perfecting the technology, pricing and marketing. Kevin Kushman, VP, corporate development, for Current, acknowledges that such challenges may take as much as a decade to overcome.

Yet BPL’s upside is vast. Because almost every home in America is wired for electricity, the infrastructure is in place to equip any of them for BPL. That includes rural areas, which are expensive for cable and telcos to wire.

“Think of it as a large-scale IT project,” says Ray Blair, VP for IBM Broadband Over Power Lines Initiatives.

BPL technology also offers the utilities operational benefits. It enables them to read meters from remote locations and more easily monitor the system for outages—both of which will eventually bring down rates for customers.

Kushman says the utilities’ costs are minimal. Current puts in the gear and lets the utility pick from a menu of services that includes remote meter reading, load balancing and consumer broadband. He says some utilities need encouraging after the implosion not long ago of a certain energy giant that once touted the idea of using its pipes to deliver high-speed data.

“The Enron collapse really kicked off an era of conservativism at utilities,” says Kushman. “We’re trying to provide a good comfort level.”

Current is in talks with more than two dozen utilities, he says, and will announce a number of deals by the end of the year. Its largest customer to date is Cincinnati power company Cinergy, which rolled out BPL last year and offers 1 Mbps speeds for $25 a month and 3 Mbps for $35 a month to more than 50,000 homes. (Current and Cinergy won’t say how many of those homes are using the service, but Kushman says it is in the thousands.) Current also has smaller deployments in Hawaii and Maryland.

BPL technology isn’t just about e-mail and Web surfing. Current is testing a voice-over-IP service (VoIP), and IBM believes video and VOD can be pushed through the pipe.

Not Without Glitches

The concept, however, has some glitches. The FCC, for one, is studying ham radio operators’ concerns about BPL’s interfering with reception. And dividing up profits from a service that rides on assets paid by regulated rate payers is also emerging as a sticking point.

And with DSL prices falling, it’ll be harder for BPL to show a significant return. “By the time it really arrives in the market,” Moffett says, “terrestrial broadband will be almost fully saturated.”

BPL will take small steps. “The hardest part is that utilities are very, very conservative,” says Kushman. “It’s just a matter of getting them to kick the tires.”

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