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Technology Corridor

Can utilities make a credible play for power line communications?
Fortnightly Magazine - February 1 2003

Indonesia, Norway, Peru, Poland, the Netherlands, and Spain, according to Joe Marsilii, president and CEO of Reston, Va.-based Line Communications. But that doesn't mean PLC will be commercially successful in the United States.

For starters, there's the issue of transformers. Transformers on the 220-volt European grid serve an average of 100 to 250 households, compared with the five to 15 households served by each transformer in the United States. The higher density of the European grid translates into lower capital expense for build-out of a PLC network.

In addition, a larger share of the European network is underground and uses shielded cable-factors that tend to minimize signal leakage problems in Europe.

And the incentives for upgrading a network to PLC can be vastly different. As part of ConEd's own PLC pilot, Frost has looked closely at the Italian business case for deploying PLC. For Italian utility Enel, he says, deploying PLC makes sense. In addition to enabling broadband communications, PLC can also enable automated meter reading (AMR), energy management, and real-time pricing, as well as provide a tool to control power theft and deal with uncollectables. These tools can make a real difference for Enel, which reads meters once a year, and has high theft and uncollectable rates. In fact, Frost says that Enel estimates it will save $25 annually per customer by deploying low-voltage PLC. In other words, Enel expects a four-year payback on PLC deployment-a pipe dream for most U.S. utilities.

The Regulatory Conundrum

Regulatory uncertainty also clouds the business case for PLC. Asset ownership, cost sharing, radio frequency (RF) emissions, access, and common carrier issues all must be sorted out before PLC stands a chance of commercial deployment in the United States.

The regulatory problems straddle two distinct agencies-the state public utility commissions (PUCs), which utilities are accustomed to dealing with, and the Federal Communications Commission (FCC), which they are mostly not.

On the PUC side, it is far from clear whether commissions will require utilities to seek approval to use regulated assets (transmission wires) for an unregulated business. Cases in California suggest that the PUC would need to approve such use, while cases in Indiana point in the other direction, according to Richard Keck, an attorney with Troutman Sanders.

Even if utilities can get over the regulated assets hurdle, the more pertinent business question concerns access and common carrier issues, intertwined with cost sharing. In other words, if utilities begin offering PLC, will they be required to open their transmission networks to competitors? And if so, what rates will they be permitted to charge?

Keck says that PUCs may draw an analogy to the regulations dealing with ISDN lines. Before passage of the 1996 Telecommunications Act, phone companies allocated zero costs for use of telephone lines to their unregulated affiliates offering ISDN service. After passage of the act, which forced telcos to unbundle the local loop, regulators required the local carriers to charge the same cost to competitors that they charged their own affiliates-nothing.

But PUCs might not require utilities to act as common carriers. Keck points