UTILITIES CALL STATES FACTOR IN BROADBAND OVER POWER LINE DEBUT

“It remains to be seen whether states are so interested in seeing broadband in their jurisdictions that they are willing to give a little bit more leeway on affiliate transactions than in the past to encourage utility companies to get into that space,” said Brett Kilbourne, regulatory dir. of the United Power Line Council. State regulators may require compensation for, and impose conditions on, the use of regulated assets for power line communications (PLC), he said. Compensation for regulated assets may be determined on its book value, market value or the greater of book or market value. Because PLC assets are used for both regulated (electric) and unregulated (broadband), affiliate transaction review at the state level raises “unique” issues, he said. Kilbourne said the present net value of a PLC business could be reduced 4-14%, depending on the valuation methodology adopted by the states.

Conditions on the use of regulated assets could include open access, Kilbourne said, which could pose an “undue technical burden on PLC.” Open access for PLC is different from that required by municipalities that had franchise jurisdiction over cable operators, he said. “Here, you are really aren’t talking about a regulated service that they [PUCs] have jurisdiction over.” BPL technology does allow broadband providers to offer multiple ISPs, but there are technical limits and cost implications in that, said Jay Birnbaum, pres. of Current Technologies, one of the technology companies involved in BPL trials with utilities. “I think open access is unnecessary,” he said, because BPL providers will change the “dynamics” of the market by offering multiple ISPs. “I just don’t think the government needs to tell us to do it, given the fact that as an information service it [BPL] should remain unregulated.”

Although BPL technoloy allows for multiple ISPs, it can’t handle as many as regulators may want because “it’s going to ultimately remit to the bottom line and the cost of the service,” Birnbaum said. Utilities aren’t opposed to multiple ISPs either and it’s unlikely to be a major issue, Kilbourne said: “From everything I've heard, the power line guys are interested in dealing with multiple ISPs.” State regulators also could condition the use of utility workers for repairs or removal of PLC equipment, Kilbourne said. Such conditions would create “artificial inefficiencies” that could drive up operational expenses for PLC significantly, he said. The first utility to get regulatory approval from state regulators was Pa. Power & Light (PPL), one of more than dozen utilities conducting BPL trials (CD March 26 p4). Pa. was the first state to consider PLC from an affiliate transaction standpoint, Kilbourne said, but much of the documentation was sealed, so it wasn’t known publicly how the PUC came about its decision to grant approval or whether conditions were set. But the PUC did grant approval fairly quickly, he said.

Twelve states had statutes barring municipal utility entry into the telecom business, Kilbourne said: “The concern is that there may be more if the Bell companies intensify their lobbying campaign.” For now, Bell lobbying at the state level is confined largely to UNEs, he said, but “it’s not a huge leap to see them also lobbying to restrict municipal telecom.” The FCC has declined to preempt state statutes prohibiting municipalities from providing telecom services and the issue now is before the U.S. Supreme Court after 2 appeals courts made contradictory opinions.

One regulatory issue that may go to the FCC is pole attachment, Kilbourne said, because there’s an “assumption” by Copps that PLC is a pole attachment. “They are up on the poles,” he said, but a pole attachment is a legally defined term and “right now the only pole attachments that are out there under the statute are those used to provide telecommunications or cable service.” On another aspect of pole attachment, the FCC said recently that even attachments that weren’t cable or telecom were to be counted in developing rates, he said: “I could see that, even without any change in the statute, this is becoming an issue for power line communications.”

There was nothing negative for BPL in the FCC inquiry, Birnbaum said, but “we have a lot of work to do” to answer some of the questions being raised on emissions and interference. “Some of them were softball and some of them were sliders in the dirt and there were pretty tough engineering questions.” Current Technologies was part of 2 trials with PEPCO in the Rockville, Md., area and Synergy Corp. in the Cincinnati suburbs involving 200 customers, he said: “We expect to commercialize the service in the 2nd half, probably in the fall.” The price will be competitive with cable and DSL, if not lower, he said, and Current proposes to offer 2 to 3 tiers of pricing depending on the speed sought by customers. The company also plans to provide secondary voice services “fairly early on,” he said.

Birnbaum said he expected cable and DSL competitors to make things difficult for PLC at the FCC, although the inquiry was focused on issues that didn’t concern them directly. “It wouldn’t be first time that an industry like cable or DSL was able to get 3rd parties to file comments in a proceeding where they may or may not have a great interest but helps slow down the competition.” Pole attachment wasn’t an issue, he said, because “we have to pay pole attachment fees in the same way that anybody else would. The law is the law.”