[RFI] From Communications Daily re: BPL

[Ford Peterson]

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 at cmgate.com