The tech industry is chock-full of clusters of initials. And there's another one we're likely to hear a lot about in 2006: "BPL," for broadband-over-powerline. As the name suggests, this is a way to pump high-speed Internet services through utility networks. Simply put, BPL lets businesses and consumers get online through their electrical outlets.
One of the leaders in BPL is privately held Current Communications. On Monday, the company announced a deal with TXU Electric
The deployment should take only about a year or so. After all, BPL has the advantage of leveraging an existing network -- TXU's 14,000 miles of transmission lines, in this case.
TXU will pay roughly $150 million over a 10-year period for Current's services and will get a piece of equity in Current. This could prove valuable. At very least, the short list of investors in Current sends a strong message: Google
Though the initial plan seems to be for broadband, TXU will have the potential for video and telephone revenue streams as well, making for the triple play that cable companies and telcos are attempting to provide.
It's certainly a competitive business. But by outsourcing the headaches to Current, and not having to shell out huge expenses for infrastructure, the utility company is looking at pure profit. What's more, BPL appears to be a good alternative for more rural regions of the country that may not have much competition from cable and telcos, since it doesn't make economic sense for those companies to penetrate such markets. By not dealing with the huge infrastructure costs of a network, TXU can offer competitive pricing on its services and even do bundling deals. It's incremental revenue -- something not always easy for electric utilities to get.
By using BPL, TXU will be in a position to more easily monitor electrical outages, read meters, and even offer security measures, in what it calls a broadband-enabled "Smart Grid."
Over the past few years, TXU has been a standout player in the utilities industry. Now, with a BPL rollout, the company can help reduce costs on broadband cable services relative to traditional players, prospectively increase quality, and realize new revenue streams. And, if Current goes public (which looks like a good possibility), it may reap a nice bonus from its equity stake.
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Fool contributor Tom Taulli does not own shares mentioned in this article.