WATPA: FW: Power Companies Enter the High-Speed Internet Market

From: Norm Jacknis <norm@jacknis.com>
Date: Wed Oct 19 2005 - 22:33:20 EDT
October 17, 2005 (NY Times)

Power Companies Enter the High-Speed Internet Market

CINCINNATI - The idea has been around for years. In Spain and elsewhere in Europe, utility companies have long offered high-speed Internet service to consumers over their power lines.

But American utilities are only now beginning to roll out broadband connections on their grid.

For Jim Hofstetter, a salesman for Cadbury Schweppes, the food and beverage company, this new option was far better than the high-speed connection he used for years from his local cable provider.

"I would never go back now that I have this," said Mr. Hofstetter, who often works from his home office in the Hyde Park neighborhood of Cincinnati. He pays $30 a month for the service from Current Communications, an Internet service provider, which uses the power lines run by Cinergy, the local utility in Cincinnati. That cost is about $15 cheaper than comparable Internet access from either Cincinnati Bell or Time Warner Cable.

The Current service can be piped into any electrical outlet in Mr. Hofstetter's home, with no reduction in speed even when he, his wife and their three daughters are online at the same time. All that is needed is a baseball-size jack that plugs into the wall and is connected to a computer with an Ethernet cable.

Known as broadband over power line, or B.P.L., the service is poised to challenge the cable and phone companies that dominate the high-speed Internet market. Instead of burying cables and rewiring homes, B.P.L. providers use the local power grid, which means that any home with electricity could get the service.

For now, the two biggest commercial B.P.L. services in the United States are operated by Current and Cinergy in Cincinnati, and the city of Manassas, Va., which has teamed up with ComTek Communications Technology, another B.P.L. provider.

[On Oct. 5, Manassas and ComTek announced that B.P.L. was now available in every home in the city.]

Dozens of other utilities across the country are testing the service and hiring specialists like Current and ComTek to run it.

While the technology is not new, the home adapters and equipment on telephone poles that transmit data over power lines as radio signals have only recently become affordable enough for companies to start selling the service.

Current's service is now available to more than 50,000 homes in Cincinnati, and it plans to reach 250,000 homes by 2007. The company declined to say how many subscribers it has, but industry analysts estimate that about 15 percent, or 7,500, of the city's households have signed up since the service was introduced in October 2004.

While its subscriber rolls are still modest compared with those of cable or phone companies in Cincinnati, Current's early success has shown other utilities - some of which dabbled disastrously in telecommunications in the 1990's - that B.P.L. could be a viable business.

With equipment prices falling, Internet access companies like EarthLink, which do not control their own data lines but contract with cable and phone companies to use their networks, are looking at B.P.L. as an alternative delivery system, too.

"It doesn't matter what pipe you use as long as you have a pipe into the house," said Kevin Brand, the vice president for product management at EarthLink, which plans to introduce a B.P.L. service in the first half of 2006. "The power companies don't want to do this alone and they need an Internet provider like us to make this fly."

The Federal Communications Commission is also promoting B.P.L. as an alternative to the cable and phone companies that dominate the broadband market. Since nearly every home has electricity, the commission hopes that utilities can provide high-speed access to rural areas where phone and cable companies typically do not sell the service.

To the Hofstetters in Cincinnati, the advantages are obvious. They do not need to sign up with a separate broadband provider. No wires are strung along the walls and no clunky modems are required.

They have two broadband adapters that they can move to any outlet in the house. When Mr. Hofstetter takes his computer to a different room in the house, he takes an adapter with him, plugs it in and is instantly connected to the Internet. He can buy extra adapters for about $30.

"I'm not sure we can make broadband much more simple than this," said William H. Berkman, Current's chairman. "It's like when Wal-Mart automated everything."

For big utilities like Cinergy, the additional revenue from selling broadband is just one benefit. Since B.P.L. equipment atop telephone poles sends data signals both to and from homes, the technology can help utilities quickly spot power outages as well as monitor each home's electricity use. That capability, if broadly deployed, could save utility companies millions of dollars by eliminating the need for meter readers.

"Providing broadband over power lines is really about using the network better," said James E. Rogers, the chief executive of Cinergy, which formed a joint venture with Current in 2004.

This "smart grid" technology is a big reason utilities around the country are showing more interest in B.P.L. In July, I.B.M. formed a partnership with CenterPoint Energy, a Houston-based utility, to develop broadband services. Other utilities, including Con Edison in New York, have started testing the service.

Investors are also taking note. In July, Google, the Hearst Group and Goldman Sachs invested an estimated $100 million in Current. And equipment makers like Intel and Motorola have recently joined the HomePlug Powerline Alliance, which is developing standards for adapters and other B.P.L. equipment.

In the meantime, B.P.L. providers have been besieged with complaints from ham radio operators, who say that B.P.L. signals interfere with their radio signals. The National Association for Amateur Radio said that Current had done a better job than other B.P.L. providers in avoiding frequencies that ham radio users occupy.

Jay Birnbaum, Current's general counsel, noted that last year the F.C.C. ruled that B.P.L. companies could provide their service as long as they transmitted radio frequencies below certain levels. The ham radio association, however, wants the F.C.C. to conduct more tests.

Current is already planning to introduce new services, including an Internet phone service later this year. Customers will be able to plug their phones into a B.P.L. adapter instead of a wall jack for a traditional phone line.

Mr. Hofstetter, for one, is eager to try the phone service, because he now spends nearly $200 a month on local and long-distance calls. Current expects to sell a bundle package of broadband and unlimited phone service for less than the phone companies charge for similar services.

"If these guys ever get into video, I'd get that, too," Mr. Hofstetter said.

Received on Wed Oct 19 22:34:33 2005

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