Investors Remain Wary of Efforts to Deliver Broadband via Power Lines

Dow Jones Newswires
By John W. Verity

December, 2004

Does the market have room for yet another way of delivering broadband Internet service? That’s a question that early-stage investors are weighing perhaps more urgently than ever now that the FCC has given the green light to something often referred to as broadband power line, or BPL. But at least for now, the attitude toward this latest entry in the last-mile access races seems to be more wait-and-see than full-speed-ahead.

“I continue to be very, very cautious,” said Bill Lese, managing director at Braemar Energy Ventures in New York. “At best, I think this is a business that might last for a period of time, but ultimately, the telcos and cable operators will overshadow it.”

Advocates argue that using electric utility wires to transmit data packets into homes and businesses could foster competition, get more U.S. homes onto the information superhighway, and thereby boost the nation’s competitiveness as a whole. Power lines, they point out, already “touch” virtually every residence, from Manhattan penthouses to mobile homes in Montana.

And field trials in places like Manassas, Va., and Raleigh, N.C., are showing that the technology at least works, even if interference with the amateur radio bands remains a serious problem. Internet service provider Earthlink plans to work with Consolidated Edison in testing BPL in New York City, and the technology’s getting a fair amount of attention from utilities in Europe, Asia, and Latin America.

And yet, primarily because the business case for BPL remains shaky, only a few BPL-specific business plans have received venture backing. They include Amperion, an Andover, Mass., maker of BPL equipment that drew a $12.5 million first round in 2001 from Cisco Systems and other investors; Intellon, an Ocala, Fla., fabless semiconductor company that has been around since the mid-1990s; and Current Communications, Germantown, Md., whose backers include EnerTech Capital Partners and Liberty Media Corp.

It’s not clear, investors say, if BPL will be competitive with DSL and cable over the long-term. One or both of those services is available in most neighborhoods, and wireless services are coming online, too. And in rural areas, where BPL might seem a natural, it must compete with satellite access.

These are early days, of course, and more investment opportunities may arise. One possibility: Service providers that would install, maintain, and operate BPL nets using wires rented from utilities. Focused on modernizing their power-generation plants and having pretty much failed in trying to crack the fiber optics-based networking market in the late 1990s, utilities are hardly keen on plunging into the entirely new business of Internet access.

The trick in investing in such a service operator, of course, would be to cash out at the right moment—as Liberty Media did, for instance, when it sold its 41 percent stake in Teligent, just before that high-flying fixed-wireless service provider crashed. Perhaps seeing a similar opportunity, Liberty went on to invest part of its $4 billion proceeds in BPL-operator Current Communications.