By Hwan Kim and Kemal Hawa

The Federal Communications Commission launched an investigation in late April into the use of electric distribution lines to provide telephone and Internet access services, called “power line communications,” or “PLC,” and “broadband over power line, or “BPL.”

The investigation is expected to lead to FCC regulation of electric utilities that provide telephone and Internet access services. Such services have not been regulated by the FCC to date. It will almost certainly also mean that electric utilities will have to obtain FCC licenses to operate in the spectra that they previously operated in on an unlicensed basis.

The FCC set an August 6 deadline for comments.

Some believe the ultimate decision will be even more far-reaching. For example, the investigation might also lead to imposition of open-access requirements for power lines. It could also jumpstart the nascent BPL industry, thus providing electric utilities with a potential new market — the broadband access market — and a possible new revenue opportunity.

Background

BPL systems use existing electric distribution lines to transmit high-speed communications through radio signals on power lines. Because power lines reach every community in America, FCC chairman Michael Powell has heralded BPL as potentially the “third wire to the home.” That is, it represents a possible alternative to cable modems and Internet access services that today run through telephone lines. Powell believes BPL may be the only chance for broadband communications in many rural communities that are underserved by cable and telephone companies.

BPL services have been under development for some time. Development of the technology suffered setbacks starting in the late 1990s as companies with BPL projects began withdrawing from the market. Both Nortel Networks Corp. and Siemens AG withdrew, causing some observers to question the feasibility of the technology. However, work on the technology continues in Europe. There were more than 60 PLC sites around the world in September 2002, with thousands of PLC customers.

Within the US, BPL developers like Amperion, Current Technologies and Main.net Power Line Communications have partnered with utilities to demonstrate the technology in limited field trials. More than a dozen utilities are currently involved in such field trials. They include American Electric Power, Southern Company and Consolidated Edison. Both Pennsylvania Power & Light and Ameren have plans to launch test services later this year.

Part of the FCC’s enthusiasm for BPL service stems from a recent visit by the FCC chairman, Michael Powell, to a demonstration of the technology by Current Technologies in Germantown, Maryland in cooperation with the Potomac Electric Power Co. Current Technologies is also running field tests in Cincinnati in partnership with Cinergy. The US is widely believed to have fallen behind other countries in making the Internet available to all consumers. The FCC believes that BPL might be one way to narrow that gap quickly. It also believes that BPL can aid electric utilities by adding “intelligent networking capabilities” to the electric grid. These are the ability to do such things as manage energy supply during periods of peak usage, notify consumers about power outages, and do automated meter reading.

The FCC opened the latest investigation at the behest of companies and quasi-industry associations that want access to utility distribution lines for BPL services. The FCC is using its jurisdiction to regulate “harmful interference to radio communications” as a hook to get involved. Electrical wiring can act as an antennae, thereby causing such interference.

To date, BPL systems have operated on an unlicensed basis and with limited capabilities under FCC rules at radio frequencies below two megahertz. The only regulatory constraint on BPL services today is rules limiting the amount of radio energy that can be transmitted over power lines.

New BPL devices are expected to operate on a wide range of spectra at frequencies between 4.5 MHz and 21 MHz. In view of this development, the FCC became concerned about potential harmful interference from unlicensed BPL systems, particularly interference to other devices that are connected to electrical wiring and the possibility for interference with police and fire radios and radios used for navigation over waterways.

Investigation

The FCC expects to divide BPL services into two categories:“access BPL systems” and “in-house BPL systems.” Access systems are analogous to a telecommunications network: they allow consumers to have access to services that come from a central grid. An in-house BPL system allows voice and data signals to be carried between the wiring and electric outlets inside a building, like the local area network that a company creates among its own computers so that they can communicate with one another.

A number of issues are expected to come up during the FCC investigation. For example, FCC Commissioner Michael Copps has suggested that a central issue for the proceeding is how to ensure that there is no potential for electricity prices to be affected by what the agency does with BPL services. “How do we avoid cross subsidy from a corporation’s regulated energy business to its communications business and resulting price hikes for energy customers in non-competitive markets?” Copps asked. The FCC may also examine whether BPL systems should be subject to universal service contribution requirements — essentially a telephone tax — in order to subsidize services for consumers in rural communities, schools, libraries and hospitals.

Interest among electric utilities in entering the telecommunications market has ebbed and flowed in recent years. There was an initial burst of interest three or four years ago. However, given the state of disarray the telecommunications industry has been in for the last few years, most utilities have been hesitant to commit large resources to the sector. The FCC investigation comes at a time when utility interest in the telecommunications sector has waned, although if BPL trials prove successful, such interest may rebound. The FCC hopes to adopt rules for BPL services by the fall 2004.