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Technology Corridor

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

a recent study by the Florida Public Service Commission (FPSC), consumers in South Korea pay less than $23 per month for broadband service-roughly comparable to the cost of dial-up in the United States. South Korea's broadband penetration rate clocks in at around 50 percent, compared with the United States' anemic 10 to 15 percent broadband penetration rate. And these numbers have little to do with the availability of broadband. Approximately 100 percent of households in South Korea have broadband availability.

Europeans also exhibit similarly price-motivated broadband adoption rates. The FPSC report notes that in Europe, the average broadband price is about $40, "but consumer perceived value of broadband is only $30."

Main.net's Marsilii says that the key to the U.S. broadband market is a price point about $20 over dial-up costs-just under the monthly cost of a second phone line.

If Not Now, Then When?

"Every day without deploying PLC equals customers signing up for DSL or cable." That was the grim assessment of David Kelly, president of PPL Telecom, at the PLCA conference.

"Time-to-market is critical if PLC is to prevail," says Zoltan Fekete, vice president at Credit Suisse First Boston's London office. The business fundamentals for PLC are right, he believes-if companies can find the financing for the build-out. It's a big if.

As Fekete points out, the utility sector index from May 2001 to November 2002 dropped a whopping 55 percent, based on information from Datastream. But the telecom sector wishes it had such bad luck-the fixed line part of telecom had dropped 67 percent in the last two years. ISPs are in even worse shape, with their index down 86 percent since November 1999.

These are not promising numbers upon which to go looking for financing. But they are the numbers utilities must work with. Fekete says that despite the utility and telecom doldrums, opportunistic investors might be interested if companies can show commercial deployments-not trials-paying customers, and actual cash flow. Or, as Steve Byrd, vice president at Morgan Stanley puts it, those wanting to jump into PLC "need a fully baked business model."

With all the uncertainties, why should utilities think about investing in PLC? For ConEd's Frost, it's a combination of potential profits, and perhaps more importantly, a chance for utilities to improve their overall reliability and performance.

"Right now, the only way we know there's an outage is when a customer calls us," he says. PLC deployment can make the entire grid smarter. "It's a little like the invention of the laser," he says. In other words, PLC probably has possibilities that no one has yet explored. Frost says that utilities tend to underestimate the business costs of outages and other reliability problems, which PLC could help address. He also says that PLC could help deal with uncollectables, through the use of AMR. For example, to appease regulators concerned about disconnecting users during the winter, PLC technology could allow a low amount of kilowatts into designated dwellings-enough for lights and heating, but not for stereos, computers, and other non-necessary appliances.

As Kelly says, right now