Boulder, Colo. — May 21, 2002 — The long-anticipated market for delivering high-speed Internet and data networking to American homes over electric power lines may never materialize, concludes a study by Primen, an energy market intelligence company based in Madison, Wisconsin, and Boulder, Colorado.
Primen's sobering view that the nation's electric utility lines may never become competitors to cable modems and digital subscriber lines (DSLs) comes despite a number of positive developments in powerline communication (PLC) technology:
The recent introduction of high-speed Internet services over electric power lines in Europe has boosted the hopes of stateside PLC proponents. If the technology can be made to work in the U.S.-both technically and economically-electric utilities envision offering a broad set of services. These services, including high-speed Internet access, home automation, telephone, streaming video, energy-load control and pricing, suggest potential for vast new revenue streams.
During the past four years, major technical barriers that have stymied adoption of PLC in the U.S. have been largely overcome, including problems that constrained both the low-voltage distribution network and the in-home, powerline infrastructure from carrying clear, secure, and high-speed data. Moreover, off-the-shelf technology has been used successfully to transmit data synchronously over low-voltage wires at speeds in the range of 1 to 2 megabytes per second, comparable to cable modem and DSL.
[Note: For an illustrated description of how power-line communication technology works, please visit the following link to view a page from the Primen study: http://www.primen.com/promotions/ci/downloads/pcpage.pdf.]
"Clearly, PLC technology has made major strides and now shows significant promise," said David Lineweber, Primen president and the study's coauthor. "Some observers see these developments as hints in the marketplace that the 'pot of gold at the end of rainbow' may at last be in sight, and that energy service providers may be in the right place at the right time to benefit.
"However, our view is that the positive developments simply move the biggest issue from the technology side to the business-case side — not can it be done, but will customers pay enough for it to be worthwhile?" Lineweber continued, "Right now, the answer appears to be no. Our analysis shows that the cost of implementation is much too high to appeal to a broad customer base."
Primen's analysis concludes that electric utilities would need to invest approximately $700 per customer to bring PLC capabilities into homes (compared with an expenditure of $400 per customer in Europe). "At that price, the business case for high-bandwidth PLC may never be justified," Lineweber said. "Moreover, we at Primen see no compelling evidence that market conditions-including a dramatic decline in price points-will change sufficiently over the next three years to make PLC communications viable or competitive."
As the study suggests, PLC is also fighting the clock. "The window of opportunity is probably closing," he said. "The longer it takes for outbound PLC in particular to be demonstrated and commercially available, the more market share is likely to be gained by the key competitors — particularly cable modems but also xDSL. Those gains will become increasingly difficult to displace without a compelling value proposition for PLC."
The $300 gap in the required PLC investment between the U.S. and Europe is largely attributable to differences in regulations and electric distribution system designs. For example, U.S. utilities typically have fewer customers per transformer, necessitating larger investments in equipment installations to allow data signals to bypass transformers. (The average U.S. transformer serves 5 to 15 households, whereas the average single transformer/PLC base station serves 100 to 250 households in Europe.) Some service territories in the U.S., such as Con Edison's in Manhattan, may have unique characteristics that improve the PLC business case.
The study, "Powerline Communications: NOW Have We Found the Pot of Gold?" combines extensive secondary research and a series of in-depth interviews with key players in the PLC market. Also included are detailed profiles of the major PLC industry players, including companies offering commercial outbound PLC services, full-scale PLC system providers, and chipset manufacturers.
The full research report is available on Primen's website at: http://www.primen.com/promotions/ci/downloads/PowerlineCommunications.asp (registration required). More information on Primen's ongoing research on energy customers, markets, and technologies can also be obtained by contacting Primen at 877.976.4681 or by email at [email protected]