I agree that we should stay out of the financial projection business,
Ford. We should be in the "raise reasonable doubts" business; for
example
1. Why would a cable or DSL subscriber switch to BPL, given that BPL
offers no significant feature, performance, or price advantages?
('blow-in' flyers won't come close; to displace a leading product
(cable, DSL) with an undifferented alternative (BPL) requires marketing
expenditures on the order of the leading product's annual revenues!
Price discounting is considered a marketing expense)
2. How many hours of field labor are required to connect the first
subscriber in a rural area? How many hours of field labor are required
to connect the second subscriber in the same area? If BPL is a "last
mile" solution that routes data over existing wiring, why are these hour
numbers not 0?
3. Why have 3 pilots terminated with not plan to offer BPL service
within the past 6 months?
4. What's the 90% confidence-level budget for addressing and correcting
RF interference to local services?
These are kinds of questions we want asked in power company board board
and stockholder meetings, in town councils and planning commissions, and
especially by writers. The process is necessarily indirect -- few hams
sit on power company boards -- but the more "airtime" these kinds of
questions get, the more likely they are to eventually find their way to
someplace useful.
Lately, the explanations offered by BPL advocates for the slow uptake of
their technology provide good anti-BPL ammunition. The press release
that initiated this thread contained some gems.
One expense to add to your list below: connection to the network
backbone. One 45mbps T3 line costs around $14K/mo.
73,
Dave, AA6YQ
-----Original Message-----
From: rfi-bounces@contesting.com [mailto:rfi-bounces@contesting.com] On
Behalf Of Ford Peterson
Sent: Tuesday, August 31, 2004 19:21
To: Dave Bernstein
Cc: rfi@contesting.com
Subject: Re: [RFI] From Communications Daily re: BPL
Dave-AA6YQ wrote:
"One doesn't need expertise in economics to point out the flaws in BPL's
economics any more than one needs expertise in calculus to point out the
flaws in 2+2=22; they are equally glaring and egregious. Attempting to
compete with cable and DSL in urban and suburban areas, for example, is
ludicrous; for a latecomer to displace a dominant product with an
undifferentiated product would require hundreds of millions of dollars
in marketing expense alone, ignoring the rollout, deployment, and
still-unscoped RFI mitigation costs. In rural areas, the fiction that
BPL is a "last mile" solution becomes obvious in the need to deploy
repeaters, transformer bypasses, and other pole-mounted equipment to
access a sparse user population; WiMax will have the clear advantage
here."
Dave, and others...
The ARRL has taken the position to not attack BPL on its financial
merits. This is the correct position to take since the ARRL has NO
basis to understand the economics of being an ISP.
As an accountant, I am very familiar with the $$$ behind the ISP
business. I can only imagine what the actual budget projections are in
any specific instance of BPL, but I do know that the rewards are very
lucrative if they get the bugs out.
Think about it. 5000 people paying $30/month is $1.8 Million per year.
The costs of running such a system is really quite low after the initial
installation. For the utility, they already have maintenance people and
customer service / billing inquiry / collection staff that can easily
absorb an additional load of 5000 invoices / month (especially if they
automate billing, which almost all of them do by dunning credit cards).
In the initial projections, I'm certain the utility would rely on the
manufacturer of equipment to provide some basis for the 'maintenance'
costs, which I would also bet were very low (read unreasonable under the
circumstances). For most utilities, advertising costs are almost nill
as they would no-doubt choose to add a 'blow-in' flyer with each month's
utility bill, thereby reach 100% of the customer base each month at
almost NO added cost.
The economics being what they are, what is going to kill BPL is that the
maintenance people will not be able to 'fix' the noise problems.
Shutting down customers while mitigation procedures progress will cause
a flight of the customer base to more reliable connection methods.
And you would be VERY surprised to know that market saturation in rural
areas approaches 50% of households. So the notion of economics being
goofy is simply not true if you make several initial assumptions
incorrectly, which is no doubt what happened in the trial areas.
These bogus assumptions being: 1) low maintenance, 2) little competition
for high speed connections, 3) early and easy acceptance of BPL due to a
completely successful roll-out, 4) reliable 24/7 connections, etc.
Miss the mark on projecting these 4 basic assumptions in the financial
plan, and you would have a gang-buster business that simply swims in
cash. You can almost imagine the sales pitch delivered by the BPL
manufacturer regarding each of the 4 bullet points above. So the
financial projections would no-doubt look pretty good.
I think we should stay out of the financial projection business. There
is little credibility to be earned by doing so. We stick to RF and
noise issues, which is our strong suit, and BPL will simply die a
spectacular death (eventually).
Ford-N0FP
ford@cmgate.com
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