Wired for Broadband

July 24, 2009

Ken Silverstein, EnergyBiz Insider
Editor-in-Chief

The federal stimulus package is expected to give rise to utility-related telecom spending and spearhead what may become the third link into consumers' homes -- one that would provide high-speed broadband access. Utilities, with their ubiquitous wires, will almost certainly make an indelible contribution to community development.

While utilities are focused on their bread and butter enterprises, they are positioned to prosper in the New Energy economy. They, in fact, own the rights-of-way where the fiber allowing for high-speed Internet access would be laid. Their role would be divided between providing advanced energy services and traditional Internet offerings -- a service that they would likely outsource to other, more knowledgeable retailers.

According to the Utilities Telecom Council, industry-wide spending on telecom-related equipment and services totaled $2.3 billion in 2008. That rose 13 percent to $2.6 billion in 2009, a princely sum given that most other segments of the economy curtailed their telecom outlays.

That figure, however, could escalate to $5 billion in 2010, it says, noting that the U.S. Department of Energy will allocate $4.5 billion of the $787 billion fiscal stimulus bill to smart grid projects that permit two-way communications between utilities and consumers. Meanwhile, the U.S. National Telecommunications Information Administration is to award another $7.2 billion in broadband deployment grants, which is also part of the same stimulus package.

"We expect that the growth of smart grid and the (federal) stimulus funding for rural broadband will accelerate broadband over power lines deployments nationwide," says Nachum Sadan, chief executive of Amperion.

Indeed, IBM and the International Broadband Electric Communications, Inc. that provides Internet services to rural areas have joined forces. Along with several rural electric cooperatives, they will deliver broadband capability in at least four states that include Alabama, Indiana, Michigan and Virginia. Such deployments could expand further given that critical broadband projects are now eligible for stimulus monies.

Broadband over power lines has long stagnated with the Federal Communications Commission estimating roughly 5,000 subscribers around the nation. But with the national government now backing intelligent utility projects, it may get new legs. Such two-way communications allows utilities to send price signals to customers, which can save them money and enable utilities to avoid power outages.

Basically, power line adaptors at substations take the data that is sent over the Internet and converts it to frequencies that can be channeled over the distribution lines. Power-socket modems split the data from the electricity so that the two don't bounce against and off each other and disturb the connection.

"Our focus since its inception has been to provide broadband over power line services to the underserved residents of rural America -- those citizens who are often neglected but who have the same need for broadband services as those living in urban and suburban America," says Scott Lee, chief executive of the broadband electric communications group in Huntsville, Ala.

Skill Sets

According to the broadband company, 28 percent of all homes have access to high-speed Internet service. But another 31 percent live in locations that are considered too remote for conventional providers of such service while another 14 percent are "waiting" for these features to be sold by some entity. That means 47 million homes are underserved, it says. With their omnipresent wires, utilities could bridge that divide.

The aim of those utilities seeking to get into the high-speed Internet access business is to sell subscriptions to their existing customer base, most likely through Internet service providers. As the technology advances and as more data can be transmitted over the wires at faster rates, additional services such as video conferencing could be offered that would create more revenue opportunities.

Beyond that, there's automated meter reading, outage management and demand controls -- the kind of stuff that comprises the intelligent utility. The payback for utilities and consumers will occur in the form of improved reliability, reduced operational and maintenance costs. In the end, that type of roll-out may also avoid the building of some new power generation.

Promise abounds. But some concerns exist. Specifically, utilities' wires are generally "slow" and "noisy." What that means is that fast Internet traffic would have to jibe with the lower-frequency electric power. Because electrical wires are noisy, they interfere with data transmissions that require general tranquility, although the latest "couplers" may be able to overcome these problems. Amateur radio broadcasters, however, are not persuaded and say that adding a signal to power lines interferes with their pursuits.

It's all a risk but one worth examining. The idea is not for utilities to bet the farm; rather, it's to carefully calculate their skill sets and financial resources. Some experts say that such power companies need to devise a long-range vision and plan. The variables to watch for include subscription rates, market potential and access to capital markets. Some utilities, already, are laying fiber for their own internal communications.

While some distance has always separated utilities from the mainstream broadband market, such pursuits may now be a little closer with the help of the federal stimulus plan. Perhaps the most relevant markets are those involving rural communities that have relatively close ties with their electric providers and which are less-than-ideal for cable and telecom carriers that like heavily populated regions. Others, though, say the urban areas may be the best target markets, at least initially, where many users are dissatisfied with their telecom carriers or their cable providers.

The goal, in any event, is to provide high-speed Internet services to allow communities to develop economically. In one form or another, utilities will play a key part in that growth.

More information is available from Energy Central:

• The Business Case for Power Line Communications, EnergyBiz, Jan/Feb 2005

• Broadband Knocking at the Door, EnergyBiz, Jan/Feb 2005