The future of broadband over power lines (BPL) may depend upon the outcome of a battle between an irresistible object and an immovable object. In this case the irresistible object is the potential value created by deployment of BPL, and the immovable object is the well-established law and principles of regulatory ratemaking.
Ray Gifford over at the PFF blog extends his sympathy to “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.
Of course, 100 years of regulatory ratemaking practice demonstrates that we need not worry too much about this last quoted objection. Decisions do get made by regulatory bodies. But such processes take time, and my concern is that the increasing overlap of regulatory jurisdictions could keep BPL from getting off the ground.
Actually, lawmakers and regulators occasionally take a pragmatic approach — “damn the logic, let’s let it go and see what happens” (as, for example, in internet taxation) — and perhaps BPL will yet see life.