Two Cato analysts suggest a return to the past-vertical integration, but now with no state regulators.
The defeat of the energy bill in...
BPL service. For example, while distribution line investment would produce joint products-electric power and BPL service-it would not be economically efficient to assign any of that cost to BPL when demand for the latter would not cause an increase in distribution line investment or consume any power distribution capacity. 12 A similar economic test is applicable to distribution investment by cable and telephone companies, since the former's distribution facility produces cable television and cable modem service, while the latter's produces voice grade service and DSL. Unless demand for cable modem in the one case, or DSL in the other, would cause an increase in investment in distribution facilities over the long run, costs of the latter would not be assigned to the broadband service to determine prices necessary to cover total costs caused by its offering. To the extent that the provision of BPL imposes additional costs on electric utility distribution systems, those costs are properly allocable to BPL. For example, there may well be additional line maintenance due to the addition of BPL equipment to distribution lines.
A Fair Shot
If policy-makers want investor-owned electric utilities to enter the broadband market, they will need to craft rules that allow those utilities to earn a fair return on BPL investments.
Government agencies have legitimate interests in protecting FCC-licensed radios-as well as competition in the broadband transport and complementary markets-from harmful interference by operating BPL systems. Preserving those interests need not conflict with a goal of wide deployment of BPL. The FCC's Part 15 rules for BPL systems provide ample protection against any actual (and even some apparently theoretical) radio interference. Any actual harmful interference with competition is punishable under established antitrust law principles. 13 The government need not impose open-access rules or structural constraints on BPL operators to preserve its interest in protecting competition.
Establishing a reasonable regulatory policy for BPL presents, however, a daunting institutional challenge. While the FCC has exclusive jurisdiction over radio interference issues, it shares jurisdiction with state regulators over providers of telecommunications services. Moreover, state regulators have an interest in protecting against cross-subsidy of BPL by power distribution service, while the Federal Energy Regulatory Commission has a similar interest relative to power transmission service. If these various agencies were to produce disparate policies that conflict with the goal of widespread BPL deployment, judicial or legislative action would be necessary to realize the benefits of additional, efficient broadband transport competition from BPL systems.
1. The FCC has named the external BPL system discussed in this article "Access BPL" to distinguish it from "In-House BPL." The latter, which uses internal electrical wiring as the transmission medium and offers the user "plug-in" portability, could in theory be connected with any external broadband system. Further development of satellite and terrestrial wireless broadband, which currently serve less than 10 percent of the total broadband market, could produce additional, effective competition. However, since they generally require additional scarce radio spectrum licensed by the FCC to the highest bidder, market entry is not easy for wireless broadband. Joint ventures between telephone and satellite