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Utilities take pass on offering broadband – Most firms skeptical of providing service over power lines

The nation’s top telecommunications regulators are convinced that electric-power lines are finally ready to become a revolutionary new way for Americans to get high-speed Internet access, unleashing competition for cable and phone giants.

By Peter J. Howe, Globe Staff

http://www.boston.com/business/technology/articles/2004/10/25/utilities_take_pass_on_offering_broadband/

But the utility companies that would actually deploy the services remain overwhelmingly skeptical. Of the nearly 160 investor-owned utilities in the United States, dozens have tried out ”broadband over power line" systems. Only one — Cinergy Corp. in Cincinnati — has moved ahead with a significant commercial rollout, so far attracting barely 1,500 subscribers. Dozens of utilities that ran trials of the service in the last three years took a pass on making a business venture of it.

Locally, Western Massachusetts Electric Co. is starting up a 25-home trial in Agawam of a hybrid system that carries Net traffic on medium-voltage lines and uses wireless gear for the last-mile connection to homes. But the state’s two dominant electric utilities are both steering clear.

”This is not our core business," said Deborah Drew, a spokeswoman for Massachusetts Electric Co., the state’s biggest utility with 1.3 million customers. ”We think it works, but we certainly wouldn’t want to be in the business of being an Internet service provider."

Michael Durand of NStar Electric, which serves nearly 1 million customers in Greater Boston and Cape Cod, said: ”It’s an evolving technology that certainly is exciting, but we don’t have any plans to enter that business at this point." NStar’s last venture into telecommunications, a 49 percent stake in cable/telecom carrier RCN Corp.’s Boston network, proved to be a fiasco leading to $200 million in accounting write-offs.

The deep hesitancy among utilities hasn’t squelched one of the leading evangelists for the technology, Michael K. Powell, chairman of the Federal Communications Commission.

”Every time there’s new technology, I hear the same thing," Powell said during a Boston appearance last week. ”I am unabashedly an optimist. I believe this stuff has way more potential than the cynics give it."

Powell and other fans of the technology note that virtually every US home and business already has an electric wire coming in. Broadband over power line service injects data traffic onto existing wires, at high-frequency levels that escape interference from electricity. Companies like Amperion Inc. of Chelmsford, whose backers include Internet giant Cisco Systems Inc. and Ambient Corp. of Newton, use various pieces of gear to shunt the Net traffic around transformers and circuit breakers to deliver it to end users.

”Subversion is a wonderful thing," Powell said. ”The broadband world is so much better if we have multiple service providers and multiple technologies." Without saying how soon it will happen, Powell added: ”I’m very bullish that this country will have three to five broadband architectures" in many areas, which could include various combinations of cable, telephone digital subscriber lines, new optical connections deployed by phone companies like Verizon Communications Inc., and wireless broadband as well.

Telecommunications specialists say a big reason utilities are leery of the technology is that industry officials are still two or more years away from developing common standards for powerline broadband gear. Phone and cable companies like Verizon and Comcast Corp. can shop for bulk DSL and cable broadband gear from multiple vendors who build it to industry standards, but utilities today remain locked in to unique, proprietary technology, something they want to avoid.

Utilities doing powerline broadband trials also chronically battle with ham radio enthusiasts about reported interference with radio transmissions, a problem the new FCC rules seek to decisively regulate.

”You also need to talk about whether there’s a business model for coming in late with what is basically a me-too broadband service," said Matt Davis, an analyst with The Yankee Group in Boston. Because of lingering bitterness over their disastrous 1990s forays into telecom, like NStar’s big losses in RCN, Davis said he thinks many utilities’ investors are pressuring them to steer clear of running broadband networks, even if they use their existing electric lines.

New York’s Consolidated Edison Corp. has been testing Ambient powerline broadband systems for years. But asked whether it plans to go to a commercial rollout, ConEd spokesman Chris Olert said: ”No way. We’re not in the broadband business. Our primary interest is in utility applications" such as using communications channels over electric lines to read meters and monitor blackouts.

ConEd is letting EarthLink Inc., an Atlanta-based Net service provider, attempt to use its wires to provide high-speed access to a Manhattan apartment building. EarthLink has already conducted trials with North Carolina utilities that have led nowhere yet.

Mass. Electric’s Drew said that while the Westborough-based utility has no interest in providing Net service directly, it would be open to a partnership with a provider like EarthLink. ”We’re open to talking to ISPs," Drew said. ”We’d basically take a landlord approach and rent out space on our lines, but we wouldn’t participate in providing the service."

Peter J. Howe can be reached at [email protected].
© Copyright 2004 Globe Newspaper Company.

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