Monday, November 29, 2004 - The Progress & Freedom Foundation Blog

No Preemption for Broadband over Powerline

Comm Daily (subscription required) reports today that state regulators do not anticipate federal preemption over broadband over powerline (BPL):

State regulators don't see a VoIP-like FCC preemption of broadband over power lines (BPL), said Mich. PSC Comr. Laura Chappelle, who heads the NARUC BPL task force. "I don't see the FCC or FERC [Federal Energy Regulatory Commission] as overly anxious to jump and try to preempt BPL," she told us.

Commissioner Chappelle is correct, though I feel sorry for any regulator who has to try and untangle the regulatory conundrums that BPL presents. With a regulated electric utility, the costs for the BPL infrastructure are in theory all collected through the electric rates that consumers pay. Thus, the incremental facility costs for BPL are zero, or so some would argue. Of course, one company's incremental cost of zero is another's predatory price, which is a consumer counsel's double recovery.

The cost allocation is quickly insoluble -- how much of BPL's cost is allocated to the regulated, electric side and how much to the competitive, broadband side? And how the regulator answers this question determines whether or not BPL is viable in the marketplace. Of course, if the regulator allocates all the costs to the electric side, the cost picture for BPL looks quite good. On the other hand, if costs are allocated to the broadband side, electric rates go down but the broadband cost may not be competitive. Complicating all of this: there is no principled way to do the cost allocation.

This is a little like the line-sharing context, where the incremental cost of the high frequency portion of the loop is zero. However, since the HFPL has economic value, there must be a positive price -- and hence an allocated cost -- to the HFPL. Trouble is, you can only theoretically describe that the cost should be allocated, you can't determine what it really is.

Like I said, cost allocation for BPL must be done, and the states would appear to be the ones to do it -- but I don't envy them.

posted by Ray Gifford @ 11:42 PM | Broadband , Electricity