Internet Service over Power Lines in Japan: Costs and Policy Implications by Atsumasa Sakai Bachelor of Engineering, Electrical

Engineering University of Tokyo, Japan, 1993 Master of Engineering, Electronic Engineering University of Tokyo, Japan, 1995 Submitted to the Engineering Systems Division in Partial Fulfillment of the Requirements for the Degree of Master of Science in Technology and Policy at the Massachusetts Institute of Technology June 2003 ©2003 Massachusetts Institute of Technology All rights reserved.

Signature of Author………………………………………………………………………………………………………. Technology and Policy Program, Engineering Systems Division May 19, 2003

Certified by………………………………………………………………………………………………………………. Sharon Eisner Gillett Research Associate, Center for Technology, Policy and Industrial Development Thesis Supervisor

Certified by………………………………………………………………………………………………………………. Dr. Chathan M. Cooke Principal Research Engineer, Laboratory for Electromagnetic and Electronic Systems Thesis Reader

Accepted by……………………………………………………………………………………………………………… Daniel Hastings Professor of Aeronautics and Astronautics and Engineering Systems Director, Technology and Policy Program Chairman, Committee for Graduate Students

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Internet Service over Power Lines in Japan: Costs and Policy Implications by Atsumasa Sakai Submitted to the Engineering Systems Division on May 19, 2003 in Partial Fulfillment of the Requirements for the Degree of Master of Science in Technology and Policy ABSTRACT Thanks to high demand for broad band Internet service at a lower charge in Japan, it is expected that Internet service over power lines (IPL) will be launched in the near future. The problem, however, is whether the Japanese government should regulate IPL because of its potential antitrust issue. First, because of their stable financial base, electrical power companies might be able to offer bundled IPL service at a small charge to their electrical customers. Secondly, since an electrical power company has a so-called last one mile medium, a power line, which connects with every customers in its area, it might be possible for an electrical power company to capture most of the market share in the broad band Internet access service. The first part of this thesis analyzes the question of whether electric power suppliers have a cost advantage over the other broadband Internet data access providers such as telephone companies and cable television companies in providing the IPL service. After the analysis of the cost advantage, the thesis analyzes the potential antitrust issue of electrical power companies. First half of this part analyzes electric power company's steps to be a potential monopoly in the broadband Internet industry. Second half analyzes the same issue but in electrical power industry. IPL service bundled with power supply service might also result in unfair competition in the deregulated electric power industry because the incumbent utility company could use lowvoltage power line network, which entrants do not have. The results show that IPL would not have a cost advantage over the other broadband Internet services under the current situation in Japan. The sensitivity analyses advise how IPL can be more cost-effective in the future. Based on the findings, the policy chapter recommends that the Japanese government should not impose strict regulation on power companies with the IPL service, including unbundling network equipment policy (UNE-P). Thesis Supervisor: Sharon E. Gillett Title: Research Associate, Center for Technology, Policy and Industrial Development

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specifically those who shared joy in intramural sports games as well as hard times in and out of the class room with a myriad of projects during these precious two years. and to prepare myself to better serve my company and society. I owe a great deal to Mr. There are three people whom I would like to acknowledge individually. I would like to thank all the staffs and my friends in Technology and Policy Program. First. This thesis could not have been completed without her plentiful advice and insightful comments. Cooke. Last. I would like to express my profound gratitude to Tokyo Electric Power Company Inc. I would like to offer my sincere thanks to Dr. The support has given me opportunities to be exposed to higher education abroad. (TEPCO) for granting me support to pursue my graduate studies at Massachusetts Institute of Technology. my thesis reader. Secondly. Abe of TEPCO. I am deeply grateful to Professor Gillett. for her much-appreciated encouragement. specifically sharing this exciting time here in Boston. which have enriched my thesis. my thesis supervisor. for everything. but never least. I thank my wife. 2003 5 . for his insightful and critical comments and suggestions on the technical aspects. Kaoru. to work on a project I am interested in. whose advice has helped my study substantially. Atsumasa Sakai May 19.Acknowledgments First and foremost. Third. and careful and wise guidance of my study.

and my parents 6 .to my wife. Kaoru.

3. The history and current situation of IPL 1.2.5.5. Subscriber equipment 2. Introduction 1.3. IPL technology 1.6.1.voltage (MV) & LV line network architecture (pure IPL network) 2. Internet access over power lines (IPL) 2.2.4 Fiber to the Home (FTTH) 2. MAC technology for IPL: data link layer 2. Emission of electromagnetic waves 21 21 21 23 23 25 27 28 29 31 32 33 34 34 36 36 36 36 36 37 39 41 41 42 42 7 .1.4.2. IPL industry research 1.5.3. The market window for IPL in Japan 2.3. Market Overview 2. Medium. Evaluation of IPL LAN as Internet access network 2.2. This thesis 7 10 12 13 14 14 14 16 17 17 18 18 19 20 Chapter 2.1.4.1. Transmission of digital data: physical layer 2.3. Outline of IPL technology 2.6.voltage (LV) line network architecture 2.2.2.4. Topology of existing systems 2.1.1.3. Full.3. Security and network integrity 2.4.2.4.7.2.3. IPL Technology 2.2. Availability 2. Motivation for the study 1.2. Implications of IPL plant evolution 2.6.Table of Contents Table of Contents List of Figures List of Tables Chapter 1.1.1.3.3.2.3.1.1. The map of IPL industry 1.1.2. The emergence of FTTH 2. Technical Issues 2.time connections 2. IPL industry 1. Fiber & low. Electrical power distribution networks 2.2.3.1. Unbundled network elements (UNE) policy 1. The perspective of future price 2.3. Speed 2.6.3.7. MV& wireless network architecture 2. Perspective 1.5.5. Engineering cost models 1.3. Network architectures 2.

3. Type of customers and networks 3. Profitability of IPL 4. Interference with radio waves 77 77 78 82 84 84 85 86 86 88 89 8 . Antitrust issues in IPL 5. Network architecture and facilities 3.2.2.2.3.2. Bypassing a transformer 44 45 45 Chapter 3.1.3.3. Asset allocation 5.3. Assumptions 3. Cost paid by one customer 3.1.3.3.2. Reality in Japan 4.2. Electricity market 5.3. The cost per subscriber with Japanese reality 4. Other policy issues 5. Output cost elements 46 46 47 47 48 49 50 51 53 55 59 61 Chapter 4. Costs shared by customers per LAN 3.2.3.4. Policy Implications 5.4. Noise 2.3.7.1.4.2.1. Cost per home passed 4.2.1.3.1. LAN size 3. Sensitivity analysis: Market window for IPL 4.5. Japanese antitrust policy 5. Input cost elements: technology reference model 3.7. The cost per home passed with Japanese reality 4.2.3. Modem sale 4.2.4.2. Other findings: Cost structure 4. Business model: wholesaler of access networks 3.4. Basic idea of the model 3.2.4. Definition of N (number of homes passed per LAN) 4. Broadband Internet market 5.2.1.1.2.2.3. Result variables 4.3.3.7. Cost Model 3.3. Results 4. The reduction of the equipment cost per LAN 4. Costs shared by customers per cell 3.2.2.3. The antitrust policy in telecommunications market 5.3.3. Standardization 2.1. Initial results 4. The antitrust policy in the electricity market 5.1.2.2. Rights of way (pole and conduit) 5.4. Conclusion 62 62 62 62 64 66 67 69 69 71 72 73 73 74 76 76 Chapter 5.2.3. The number of homes passed per LAN 4.1.1.1.2. Cost per subscriber 4.4.

Policy recommendations 93 93 93 94 96 96 Endnotes Bibliographies 98 99 9 .1.2. Policy recommendations 91 92 Chapter 6.1.3.3. Summary of key findings 6.4. Key findings from the cost analyses 6.1.1. Key findings from the policy analyses 6.4. Use of customer information obtained by an electricity business 5. Conclusions 6.2.5. Suggestions for further research 6.

3. The differentiation mode and the common mode Fig. 2. OFDM spectrum Fig.6. 2.2. 3. The penetration of Broadband Access Fig.2. The necessary number of homes per LAN (modem rental) Fig. Monthly IPL cost per home passed per LAN (modem rental) Fig.3. The image of Fiber and LV line network architecture Fig.7.1.1. 2. 2. 2. Monthly IPL cost per subscriber per LAN with various numbers of homes passed per LAN(modem rental) Fig. 2.6. 2.1.1.List of figures Fig.4.3. IPL LAN Fig. 2.3. The image of FTTH network architecture Fig. Outline of distribution network (overhead) Fig.1. 2. 2.7. 2. The image of equipment at a pole Fig. 2. 2.1. The image of equipment at a substation Fig.2. Monthly IPL cost per subscriber per LAN (modem rental) Fig. The image of MV&LV lines network architecture Fig. The image of Fiber and LV lines network architecture Fig.4.1.2.2.2.3.3.2.3.4. 2.3. 3.2.6. The cost structure of total cost 10 .2.2.2.1. The price of ADSL Fig. 3. 4. 3. The coverage of the model Fig.3. The prediction of ADSL price Fig. 4.6.3. Internet over power lines Fig.6. Logical bus architecture of LV network Fig.1.3. Outline of electrical power network Fig. 2.4.3.1.2.1.5.1. 2.2. Sample IPL spectrum map on an electrical wire Fig. The image of MV & wireless network architecture Fig.3.2.3. The image of the cost model Fig.1. Communications over power lines Fig.3. 3.5. Interoffice transmission network Fig.2. Dipole and Monopole Fig. The price of FTTH in Japan Fig.2. 2. 4.2. 4. 4. 2. 2.

4. 5.1.3. The relationship between MPHPT and JFTC Fig.1.4.3. The market window for IPL in Japan Fig.2.1.3.1. Monthly IPL cost per subscriber with Japanese reality (modem rental) Fig.2.1. 5.1.3.1.5.4.1.3.4. The organizations in charge of the telecommunications policy Fig.3. The organizations in charge of the electricity policy Fig.2. 4.3.4. 4. 4.3. Monthly IPL cost per home passed per LAN with Japanese reality (modem sale) Fig. Monthly IPL cost per subscriber with various market windows in Japan (modem rental) Fig.4. 5. The current market size for IPL in Japan Fig. 4. 4. 5.Fig. The difference between the two cases Fig. The necessary number of homes per LAN with Japanese reality (modem rental) Fig.3. 4. 5. 4. Monthly IPL cost per home passed with Japanese reality (modem rental) Fig. The spectrum map ranging from 1 to 30 MHz in Japan 11 . Monthly IPL cost per subscriber per LAN with Japanese reality (modem rental) Fig.

6. The number of customers Table 3. The summary of the network architectures Table 2.3.1.1.1.3. The cost shared by customers per cell Table 3.1. The cost shared by customers per LAN: onetime cost Table 3.1.3.3.1.3.2. The cost paid by one customer Table 4.1. Protocol layers of Internet access over power lines Table 2.2.2. The comparison of broadband access technology in Japan Table 2.5.3. The cost shared by customers per LAN: ongoing cost Table 3.4.1.3.2.List of tables Table 2. Japanese power companies’ business model of FTTH Table 3. The number of subscribers of broadband Internet in Japan Table 3. The retail prices of other broadband Internet methods 12 .

Introduction 21 .

The problem. which complements the “degree of influence to society” measurement. Meanwhile. Because IPL technology is still in its early stages and there are few market available products. I estimated the costs by assuming three scenarios: best. Therefore. This fact is advantageous to power companies. considering tha t the Japanese giant telephone company. this thesis proposes to use the engineering cost model. the Japanese retail power market has been liberalized partially since March 2000. such a bundled service would be regarded as an anticompetitive tactics. however. however. To derive conclusions.Chapter 1. I assumed that power companies would directly serve as wholesalers of Introduction 13 . aiming that the competition would result in the price decrease of the electricity service. specifically at a discounted rate. scope utilizing power lines. is whether the IPL service by the incumbent power companies might hinder this progress. is regulated by the unbundled network elements (UNE) policy. A simple view might conclude that the power companies should also be regulated by the UNE policy. This thesis investigates the hypothesis that the power companies’ distribution network enables them to provide more cost-effective Internet access than the other existing broadband Internet access technologies such as ADSL and cable modem Internet. Introduction The Japanese government stated in its e-Japan project in the summer of 2001 that the Internet service over power lines (IPL) was one of the promised access methods to promote the broadband Internet in Japan. Power companies could offer the low-priced Internet service because of the economy of. As for the business model. The weakness of the measurement is that the “degree of influence to society” does not show the quantitative analysis. The Japanese government analyzes the potential antitrust issues using the “degree of influence to society” to measure such market power described above. worst and intermediate. Nippon Telegraph and Telephone Corporation (NTT). I used the engineering cost model methodology for the analysis of IPL costs. which was relatively more expensive than those of other countries. Because the electricity entrants have no way to offer the IPL services. is whether the Japanese government should regulate IPL strictly because of its potential antitrust issue. The problem. The electricity customers would be happy to stay intact if they are offered the bundled IPL service with the electricity service.

The rest of this chapter discusses the hypothesis stated above in more detail. IPL would not be as costeffective as existing broadband access methods under the assumption I made. If IPL technology could expand the number of subscribers under one LV network in future. The weakness. is that there has not been quantitative measure to show the “degree of influence to society. I found that two companies offered the service by themselves and three companies did through their affiliates. The results show different conclusions from the hypothesis. which Japanese power companies apply to their Fiber to the Home (FTTH) service. Under the current situation in Japan. the “degree of influence to society” is one of the most significant criteria to determine whether to regulate or not (76. It concludes providing a framework for the rest of the document. Motivation for the study According to the Telecommunications Council (TC). The history and current situation of IPL 14 Chapter One . as many ADSL access providers do. I believe that the cost comparison would give the clear chart to measure the market power of power companies. Considering the efficient maintenance of electrical wires.1.1. 1.2. I tested variations in the input parameter values as sensitivity analyses of the model. where only Nippon Telegraph and Telephone Corporation (NTT) had a dominant market power. the results show that the cost of devices per low-voltage (LV) distribution network occupies the significant component of the cost per subscriber. 1. 77).access networks to the Internet service providers (ISPs). Specifically. The cost structure of IPL also gives insight into what follows naturally from the technology. Finally. ” To make it worse.2. it would be more cost effective. because it is uncertain how dominant a market power would IPL have in the broadband Internet market in Japan. IPL industry 1. however. I assumed that power companies would operate the IPL network directly. For example. Observing the business model. I believe that this thesis’ quantitative approach to measure the market power of the entrants will help the regulator to implement more effective policies. the estimate of the entrants’ market power in the broadband market is even tougher for the Japanese government than the estimate in the telephone market. however.

’99 Nor. Power Plus Communications. was postponed in the summer of 2002 because the government research found that IPL might emit unintended radio waves which bother existing broadcast service and amateur radio. *4: Kwok. and a vendor.4. Ch. fast deployment of other broadband access such as ADSL and cable modem Internet. a Switss vendor. Despite these terminations. discontinued its IPL service in Great Britain (*1). In Japan. IPL was regarded as one of the promised access methods of broadband Internet in e-Japan project in the summer of 2001 (IT Strategy Headquarters Part II. *2: F. RWE AG.1. a venture between Nortel of Canada and United Utilities of Great Britain. launched the commercial IPL service in Germany (*3). ’01 July VYPE. however. While Japan or Introduction 15 . the expensive cost of the devices. Scottish Hydro-Electric launched the trial IPL service in Scotland (*5).Web’s decision are not clear. while that of Europe is up to around 350 (Libby 10). around 10 to 20. The eJapan project is the government project. the followings might be the reasons: the emission issue. a joint venture between a municipal power company. a German utility. whose goal is to make Japan the top IT nation within 5 years since 2001. sec. ’02 Dec. ’02 Sept. ’03 Feb.The history of IPL has not been without difficulties. in Germany (*2). there have been several technical and regulatory obstacles which make the commercial IPL service difficult. (Sources:*3: Power Plus Communications. and the management decision to redirect their focus (Libby 9). discontinued its one year commercial IPL service with Ascom. while the reasons of Nor. This difference is derived from the voltage which a country uses.A. In other countries. several companies have started the commercial IPL service. Hutchison Global Communications (HGC) started the commercial IPL service in Hong Kong (*4). The implementation of IPL.).Z.-Institut) According to the Yankee Group.Web. *5: Minto) The unique challenge of IPL in Japan is that the number of homes covered by a distribution transformer is small. (Sources: *1: Libby. MVV (Mannheim VerkehrsVerein).

2. including the U.citi.net/> These three organizations cooperate together. <http://www. The main members are utilities. The map of IPL industry There are several IPL organizations in the world. commercial IPL services have been done only nations which use 220 to 240 V systems.org/> • PLCA (the Power Line Communications Association): PLCA was founded in December 2001 in the U. as seen above. The related organizations are shown below. The key players are as follows: • PLC Forum (Power Line Communications Forum): PLC Forum was founded in March 2000.other countries. <http://www.org/> • UPLC (the United Power Line Council): UPLC was founded in late 2001 in the U. • The Columbia Institute for Tele-Information (CITI): a telecommunications research center at Columbia University. European countries use 220/380 to 240/415 V. though there is no organization like them in Japan.S.” (CITI). founded in 1997.edu/ • HomePlug Powerline Alliance (HPA): although they aim at the home networking using electrical wires. http://www.plca. This fact leads to the higher cost per subscriber in Japan than that in Europe.columbia. 1.2. Several Japanese power companies participate in one or two of these organizations.utc.org/ > • Echonet: this Japanese organization aims at the home networking using electrical wires as well as wireless technology. <http://www. HPA was founded in April 2000.S. 16 Chapter One .homeplug.uplc. their basic technology is the same as those used by some IPL vendors.S. The main members are vendors. <http://www. ”CITI has been monitoring the development of Power Line Communication (PLC) […] for more than a year.plcforum. The members of this organization are from worldwide. In fact. use 100/120V to 120/240 V distribution networks. and this is the main reason why the IPL activity has been more popular in Europe than in Japan.

Engineering cost models This thesis analyzes the cost of connecting homes to the Internet through electricity infrastructure and discusses the technology and policy issues involved. This study tries to argue the UNE policy over power networks combining the arguments about these cable networks with Japanese power networks’ uniqueness.<http://www. CISPR is a non. <http://www. Many previous studies deal with the open access policies about cable networks in the U. Because regulations on frequency differ among nations. Many national spectrum regulators are represented” (Office of Spectrum Management. the emission issue is one of the challenges of IPL implementation.governmental group composed of National Committees of the International Electrotechnical Commission (IEC).jp/index. It uses the engineering cost model methodology. <http://www.htm> • CISPR: “The International Special Committee on Radio Interference (CISPR) was established in 1934 by a group of international organizations to address radio interference. The results could lead to strict regulations like unbundling distribution power network elements to telecommunications carriers.p& committee=SC&number=cispr> • IEEE Power Engineering Society Power System Communications Committee (PSCC): Power Line Carrier Subcommittee (SC-3) is in charge of power line communications.. 1).echonet.ewh.S.pl/www/iecwww. 1. Although their arguments focus only on cable networks in the U. the IPL industry has tried to establish a unified international standard. 1993). 1992).gr. (Johnson and Reed.S.ieee.org/soc/pes/pscc/> As described. which would result in IPL cost decrease in the long run. Perspective The main purpose of this study is to analyze the potential antitrust issues of implementing IPL in Japan quantitatively. (Reed.1. as well as numerous international organizations. Introduction 17 . 1. which was used in (Reed.3.3.p?wwwlang=E&wwwprog=dirdet. there are several similarities between their arguments and the IPL argument.iec.ch/cgibin/procgi. The rest of this section introduces previous studies related to this thesis.

Pricing is not discussed. one of the IPL’s technical challenges. regarding the cable modem service as “Information service” confused power companies.2. the Internet over telephone networks or the Internet over cable networks (Gillett.3. Unbundled network elements (UNE) policy Many studies on this topic examine cable modem Internet’s open policy issues. the Internet over power lines (IPL) or the existing other methods. and the opinions vary. Patent (Sanderson. Arzberger. 18 Chapter One . The fifth work answers the specific question of which is more cost-effective. For this analysis. and that the asymmetric regulation brings about confusion. and (Fryxell. As for the transformer bypass issue. Second. Their purposes vary from the power companies’ internal use like the automated-meter-reading (Ramseier. 1995). Sirbu and Wanichkorn. IPL technology There are many academic papers dealing with the technology of power line communications (PLC). Lemley and Lessig strongly support the open access policy. The first four works deal with “the question of integration: are there economies of scope or scale for either cable or telephone companies to provide multiple services over a single ‘Integrated Broadband Network?’” (Reed. Meanwhile. They warn that such vertical controls would slow the future innovation. (Sirbu. Reed and Ferrante. 1999).1990). He proposes that vertical integration of the Internet service providers (ISPs) by not only cable companies but also telephone companies would bring benefits like the improvement of information quality (Hazlett). Dostert’s Powerline Communicatins refers not only to technical aspects but also to regulatory aspects (Dostert). This thesis adds one more element to this question: which is more costeffective. In fact. 2000). and the broadband Internet access (Sanderson.networking (Matsumoto). 1995). Sanderson suggests one solution in his U. 1992). 1989). 1999). except for capital investments specifically needed to support the Internet access application. 1. first. Third. (Gillett.S. the thesis takes existing infrastructure costs as given. the cost models developed in this thesis use 2002 cost data gathered mainly from the Internet websites. 1. This thesis refers to literature like those above for the IPL technology. the thesis considers only access providers’ capital costs.3. and Hause) to the home. Hazlett objects to the UNE policy.3.

a two-year project from January 2000 to December 2001 (EnerSearch AB). IPL industry research In the summer of 2002. 1. however. Among those. such as the simulation of IPL technology and the deployment tactics. organizing the U. In the U. In Europe. the technical issues. and discusses the costs and the benefits of the UNE policy over IPL.4. Their reports showed the possibility as well as the challenges of the IPL commercialization in Europe. reported about the IPL implementation in Europe in their Powerline as an Alternative Local AccesS (PALAS) project.S. an industrial research and development consortium. This thesis applies these previous ideas to the IPL case. the Japanese government announced that they would postpone the IPL implementation in Japan.S.. The Federal Communications Commission (FCC) recently announced that it would collect information and comments regarding IPL implementation from public (FCC). He calculates the benefits and costs of imposing the open access policy on cable companies using the framework. UPLC researches on the IPL implementation in the U.S. 5). Because the result showed that the expansion of PLC spectrum bandwidth would disturb existing wireless services. CITI has had a semi-annual conference. Noll proposes an analytical framework to examine this issue quantitatively (Noll 42). and the regulatory issues (Gray). Its reports deal with the overview of PLC development. The project examines more details of the commercial IPL implementation. PLC industry. These studies.3. the government reached the conclusion above. since 2002. based on their research result (MPHPT. have not examined or publicized actual cost analyses of IPL. This thesis contributes to these studies by showing the actual cost analyses and suggesting some policy recommendations.resulting in power companies’ attempts to charge different rates of pole attachment fees on the cables which are labeled as “Information service” use (APPA. Their research team examined field tests to see the effect when the government expands the spectrum bandwidth of PLC to higher ranges than now. EnerSearch AB. Introduction 19 . 2002). 9 Aug.

the present thesis reports on the cost analyses and provides policy recommendations of IPL implementation based on the obtained results. Chapter 5 discusses the policy implications in Japan based on these result. Chapter 6 concludes with a set of policy recommendations and suggestions for further research. The cost model yields two types of results: quantitative cost comparisons and their implications for public policy. 1. no study provides any quantitative analysis of IPL implementation.4. 20 Chapter One . The methodology employed for this research begins with the construction of an engineering cost model for IPL. Chapter 3 describes the details of the cost model.As can be seen above. and then inspects how far these results are affected by the changes in these values. Chapter 2 provides background on the multiple technologies involved in providing Internet access over power lines. Therefore. Chapter 3 describes the specific implementations used in a certain type of network architecture. Chapter 4 shows the quantitative results. These spreadsheet-style models are based on capital cost data collected from the current information technology market. Chapter 2 describes electricity infrastructure and how the Internet access can be provided over it. This thesis This thesis investigates the hypothesis that the power companies’ distribution network enables them to provide more cost-effective Internet access than the other existing broadband Internet access technologies such as ADSL and cable modem Internet. It compares the cost of IPL under initial values with the costs of other technologies. While Chapter 2 discusses technology issues at a general level.

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1.Chapter 2.1. 2. It then discusses how this infrastructure can be used to provide Internet access. 2.1. the LV network is used as a shared medium when it is used as communication media (Fig. Therefore. MV lines start from a substation. Nuclear) Transmission Network 500kV-66kV (High voltage) Substations Distribution Network 6kV/200. IPL Technology This chapter reviews the present state of electrical power distribution network infrastructure. 2. Outline of electrical power network IPL Technology 23 . It concludes with a qualitative evaluation of the advantages and disadvantages of IPL. and customers (Fig. 2. LV lines finally reach customers. circuit breakers.100V (Medium/Low voltage) Customers Fig. and electrical outlets. Electrical power distribution networks 2. and shows that IPL can be a substitute for existing broadband Internet technology such as ADSL and cable modems.2). 2. drop lines.1. substations. transmission networks.1. As seen in Fig. LV networks consist of LV feeder lines. The topology is similar to that of cable TV networks.1. Watt-Hour Meters (WHMs).1. 2.3.1. a typical network topology of LV networks is a tree-and-branch topology. distribution networks.1. connected with LV lines via a distribution transformer. Hydro. Distribution networks are divided into two parts: medium voltage (MV) networks and low voltage (LV) networks (Fig. Topology of existing systems Electrical power netwo rks are composed of several different parts: power plants.2.). This thesis focuses particularly on LV distribution networks.). Powerplants (Thermal.1.

Logical bus architecture of LV network Furthermore.3.1.1. industrial vs. Outline of distribution network (overhead) Distribution transformer Customer Fig. the topology of LV networks depends on several factors: • • • Location (urban vs. business area) Customer density The type of house (detached houses. 2. rural.2. multiple dwelling units (MDUs)) 24 Chapter Two . small apartments. residential vs.Medium-voltage Low-voltage distribution netowrks distribution networks Feeder Trunk Distribution substation Distribution transformer Drop Customer Fig. 2.

Internet access over power lines (IPL) 2. For the purpose of supervising electrical networks. According to Dostert (32). in order to achieve high speed transmission rates (Fig. than that of ordinary electricity. the network itself is a suitable as well as economical medium to communicate these operational and maintenance data because power companies do not have to use expensive leased lines and because the network connects to all nodes such as substations and relay switches. 10 to 450 kHz. Due to such high frequencies. Fig. which bridges a MV network and a LV network.2.7 MHz to 30 MHz (Gray.2. The basic idea of IPL is similar to this practice.1. 2.2.1).2. 2001).2). typically varying from 1. Communications over power lines IPL Technology 25 .2. Outline of IPL technology Electrical power companies have used both transmission and distribution networks as media to transmit not only electricity but also data signals that are necessary to supervise networks. IPL signals hardly pass through a distribution transformer. Power companies have achieved such transmission over power lines by using data signals with higher frequencies. signals with frequencies over 20 kHz rarely go through a distribution transformer. The difference is that IPL uses much higher frequencies than such operational use. 2.2.1. which are to be monitored (Fig. 50 or 60 Hz (JEAC 314). 2.

26 Chapter Two . 2.Electricity IPL 50/60 Hz 1.2.2. The data channel is mixed into and separated from electrical wires via a coupler inside of an IPL modem. featuring a high-band pass filter function. Sample IPL spectrum map on an electrical wire Fig.7MHz 30MHz Fig. Although their technology is limited to the inside home application.2. The extracted data signals at a substation enter an IP router and are transmitted to the Internet via the power company’s optical fiber based backbone networks. according to HomePlug Alliance (HPA). their experiments show that it is unnecessary for IPL users to add a blocking filter to each electrical outlet to protect the appliances from the data signals with high frequency through electrical wires (Mader). 2.3 illustrates IPL. similar things could be assumed for IPL access technology. As for ordinary electrical appliances.

ordinary single carrier modulation such as FSK or PSK is not appropriate for IPL Technology 27 . Table 2. distribution networks are subject to various types of noise.2.Backbone network/ Internet Electricity(50/60Hz) Data (LAN) channel Router Data (LAN) channel IPL Modem IPL Modem Fig.1).1. Internet over power lines IPL uses several technologies depending on protocol layers.2.1.3. Transmission of digital data: physical layer As will be discussed in more details later. Popular technologies are Orthogonal Frequency Division Multiplexing (OFDM) and Spread Spectrum (SS) for the physical layer.1. The next section describes each technology.2. 2. If a noise bigger than a data signal is input into the network. the signal might be lost. Protocol layers of Internet access over power lines Application layer Transport layer Network layer Data link layer LLC MAC Physical layer Same as any other technology LLC CSMA-CA OFDM SS 2.layer of data link layer (Table 2. CSMA-CA for the MAC sub. Therefore.

and the other is SS. Because OFDM makes use of a spectrum more efficiently than SS. 2. Each carrier can be modulated in several formats such as DQPSK and 16QAM. This technique obviously allows for a significantly greater number of sub-carriers than would be possible in there were no overlapping. OFDM is the most promising of the various PLT modulation techniques due to its inherent advantages in a noisy environment. most parts of the data could be transmitted. that of OFDM looks rectangular in shape (Fig. OFDM achieves more efficient use of the spectrum bandwidth than a modulation by a single carrier. So far.). One is OFDM. Although each sub-carrier has a low data rate. (73) In summary. The concept calls for dividing the available spectrum into small sub-carriers that are overlapped and orthogonally spaced (i. Therefore. OFDM has become more popular than SS recently. perpendicular to each other). That is. It is also noteworthy to mention that given the spurious nature of noise inside the home.4. having a system that only loses small amounts of data during an unexpected blast of noise is obviously beneficial. the strengths of OFDM are: • Robustness against noisy environment: The data are transmitted by several parallel carriers. 28 Chapter Two .2. • Efficient use of a spectrum: While the spectrum of modulated signals of a single carrier tends to spread like a rounded hill. two technologies are widely used for IPL to transmit signal over power lines.e.. while some portions of the data might be lost due to noise. 1) Orthogonal frequency division multiplexing (OFDM) OFDM has been applied to not only IPL but also to digital audio broadcast and ADSL. Therefore. The UTC’s 2001 report explains OFDM as follows: OFDM is a data communications technique for providing highly reliable data throughput in a noisy environment. the total (of all the sub-carriers) represents a very high data rate and provides for very efficient use of the spectrum.IPL.

#1 Fig. Although their standard is targeting electrical network inside home. Because distribution network is shared among customers. 2.2. SS achieves several strengths: • • • Low possibility of interference with other wireless telecommunications Robustness against noise High security SS is popular in wireless telecommunications. par. Because OFDM achieves more efficient use of a spectrum than SS.2. OFDM spectrum 2) Spread-spectrum modulation (SS) #N Frequency SS utilizes a wide spectrum bandwidth but with low spectral power density. 2. Because the electrical networks are subject to noise more heavily IPL Technology 29 . who creates an industry standard for high speed home networking using power lines. MAC technology for IPL: data link layer The purpose of media access control (MAC) is to transmit data between the physical layer and the logical link control sublayer (LLC). there is no standardized MAC protocol for IPL. Because IPL technology is still in early stage.3. There are two types of SS: Direct Sequence (DS) and Frequency Hopping (FH). Because of this low density. specifically for military purposes. same protocol can be used in IPL. suggests to use Carrier Sense Multiple Access/ Collision Avoidance (CSMA/CA) as the MAC protocol (Gardner.4. an access organization by MAC is necessary (Hines 28). CSMA/CA is the MAC protocol also used in mobile networks. SS is less popular than OFDM in the IPL market. HomePlug Powerline Alliance. 18). because the character of sharing medium is the same as that of distribution network.

2.3. Therefore. Internet service providers (ISPs) like AOL would rent the infrastructure so that they could offer their Internet service to their customers via power lines.1). To aggregate data signals communicated under one substation. As a business model of power companies. DS2. While some power companies have ample fiber infrastructure enough to lay FTTP network. a German vendor. Some IPL modem chip-vendors develop their own MAC protocols. others are not. For example. That is.2. this paper assume s that power companies would be wholesalers of Internet access of so called last one mile because this business model tends to be dominant as those of Fiber to the Home (FTTH) service by power companies mostly have adopted this wholesale of access infrastructure model (Yamazaki). which assumes that each node can listen to all other nodes. the power companies themselves do not connect with Internet point of presence (IPOP).3. which were installed for other purposes like operation use and rental fiber business use (Fig.). power companies utilize their own optical fiber based network. 2. 2.3. whose idea is similar to that of DOCSIS’s cable modems (Alfonso). 30 Chapter Two . Therefore. but with ISPs via their central stations (Fig. develops own MAC protocol.than Ethernet type networks. Network architectures This section introduces several IPL network architectures. power companies would choose appropriate network architecture for implementing IPL depending on its fiber infrastructure. it might be better for IPL to adopt Collision Avoidance protocol than Collision Detection (CD).

Some electrical power companies own fibers stretching from their substations to poles for their utility operation as well as business use like rental fibers. This architecture is similar to a Hybrid Fiber Coax (HFC) Network by cable TV companies. Interoffice transmission network To: high-voltage power transmission networks Electricity Substation MV and LV distribution networks To: Interoffice Transmission Fiber networks Terminals Signal Router Fig. I call such fibers as Fiber to the Poles (FTTP) here. Therefore.3. it may be possible for power companies to offer IPL making use of such fiber infrastructure. IPL LAN 2. 2.3.1. The cost model of this thesis assumes this network architecture because this case is more likely. 2. The circled part represents the location of the main cost of this architecture.2. Fiber & low-voltage (LV) line network architecture The image is shown in Fig.3. 2.Service coverage by a power company ISP ISP ISP Central Station Backbone network/ Internet Fig. IPL Technology 31 .3.3. most electrical power companies offer a kind of fiber business such as FTTH and rental fibers (see the web sites of power companies listed at the end of this thesis).1.

32 Chapter Two . b. Japanese case sounds economically inefficient. 14). It can use power company’s existing facility. Using fiber cables instead of electrical wires reduces the influence of radiated radio waves. The LV lines are connected with a fiber cable via an optical-electrical converter (O/E converter). • The bandwidth is limited. The problem. Advantage s • • • • Fiber cables provide ample bandwidth. Disadvantages • It would be economically inefficient.a. however. Compared with Europe whose number is between 200 and 500 (Gray. Fiber cables are more reliable telecommunications media than medium. That is. is that the number of customers under one distribution transformer is usually about less than twenty.voltage power lines as transmission medium. This is because the bandwidth capacity of the electrical wire is less than that of the coaxial cable used by cable TV companies. 1999. power companies do not have to install fiber cables newly for IPL purpose. As for fiber cables. the cost per subscriber is sensitive to the number of subscribers under one distribution transformer. which would be installed at the same pole where a distribution transformer is set. IPL users might not expect higher-speed Internet than the cable modem Internet.

IPL Technology 33 . a.net.2. At the station. the estimated cost of the bypass equipment is 100’s of dollars (Gray.3. 2.). 2. which try to communicate between MV and LV networks. • The radiation influence will be the largest among all network architectures because the whole lines are composed of electrical cables. A signal will be transmitted from a customer to a distribution substation via a LV network. The circled part represents the main cost of this architecture. The image of Fiber and LV line network architecture 2. the signal would be separated from the power lines and would be transmitted to Internet through power companies’ backbone network. The main issue of this architecture comes from a distribution transformer. Medium-voltage (MV) & LV line network architecture (pure IPL network) This architecture utilizes whole distribution networks including MV and LV networks (Fig. Main.3. par. an IPL vendor. 17).4. The transformer obstructs signals. though its detail is not disclosed (Helman. 1999. announced that their technology found big spaces in a spectrum so that IPL signals can go through a distribution transformer without any bypass device. Advantage • • Power companies without ample fiber infrastructure could offer IPL. Disadvantage The bypass transformer device is said to be costly. a bypass-transformer device. 15). data signals with 2 to 30 MHz cannot be transmitted. and a MV network. b.3. Since the distribution transformer is designed to transmit 50 or 60 Hz electricity.3. According to UTC.Tr Backbone network/ Internet O/E Fig.

Fig 2. the capacity would not be able to satisfy so many subscribers. estimates the capacity as 45 Mbps (Amperion). The circled part represents the main cost of this architecture.4. Amperion). a. 2. Advantage • • MV network is affected by fewer disturbances than LV networks. This network architecture expects to use distribution network as a substitute of optical fiber network whose installation cost is expensive. Disadvantages • • The cost of antenna installation The bandwidth limit Amperion. MV& wireless network architecture This architecture uses radio waves to connect with customers instead of LV lines (2003. b.3. This is mainly because the number of subscribers connected to one MV network could be far more than 20 because the network is connected to several LV networks. the bandwidth per subscriber might not be enough for the broadband Internet.3. MV networks are more robust than LV networks. Network architecture of MV&LV lines. Although 45 Mbps sounds enough as a bandwidth. Therefore. 34 Chapter Two .3. This is because MV networks have fewer nodes than LV networks.5 shows the image of this architecture.Bypass Tr Backbone network/ Internet Fig. 2.3. a Boston based IPL vendor.

Johnson par.20) IPL Technology 35 . a.4. Two power companies in Japan have offered FTTH service by themselves: Tokyo Electric Power Company and Chubu Electric Power Company (see their websites listed at the end of this thesis ). Fig. • • Robustness of the transmission media b.Tr Backbone network/ Internet Fig. 2.000 per subscriber (G.S.6 shows the image of this architecture.3. is estimated to be $1. Fiber to the Home (FTTH) This is a reference to the fiber-LV architecture. The circled part represents the main cost of this architecture. 2.3. The image of MV & wireless network architecture 2. 2003). Disadvantages The cost of installing fiber cables Recent research shows that the installation cost of FTTH in U.3.5. Advantages • Its wider bandwidth than any other Internet access technology NTT EAST offers the FTTH service with the peak rate of 100 Mbps (NTT EAST.

1 shows the summary of the network architectures. 2001. MV & LV Powerline Technologies (U. 2.1. it is more economical to make use of existing wires 36 Chapter Two .S.4.. Inc. The image of FTTH network architecture Table 2.) 2. I assume that typical IPL in Japan would adopt fiber-LV lines network architecture because many power companies in Japan have ample FTTP infrastructures which enable them offer FTTH services.) 3. which utilize the telephone lines inside a building. Subscriber equipment In this thesis. 2000) The O/E device at a pole 2. 20) The device to bypass a Transformer Estimated peak bandwidth Main invest required 3 Mbps (Kyushu. FTTH 100 Mbps (NTT EAST) Fiber cables 6 Mbps (Amperion) Wireless antennas 2. (Japanese power company.4.3.S. Implications of IPL plant evolution 2.Tr Backbone network/ Internet Fig.) 4.3. Fiber & LV Vendors Kyushu Electric Power Co. Like the FTTH service by telephone companies. MV & Wireless Amperion (U.6. The summary of the network architectures Architecture 1.5 Mbps (Gray. Table 2.3.1.

The coupler should also perform as a surge absorber. I assume that power companies would utilize the facilities used for their FTTH service. iii. IP routers and transmission facilities to connect with backbone networks In this thesis. An IPL modem function. A coupler with a high band pass filter to divide and combine data signals with an electrical wire. which translates the IPL protocol and Ethernet protocol. The coupler should also perform as a surge absorber. which is equipped with a distribution transformer.connecting with customer than to install additional fiber cables. An O/E conversion to convert electrical signals from and to optical signals. Terminal equipments to connect with IPL LANs. power companies need to install only LAN cards of an IP router to implement the IPL service. According to HomePlug Alliance (HPA). Devices at a pole The device which is put at a pole needs to perform the following functions: i. Devices at a substation The devices are as follows: i. which supports the IPL LAN’s media access protocol. ii. Power companies utilize their own fiber cables between a substation and a pole. A device at a customer The customer premise equipment (CPE) is an IPL modem. A protocol converter. The modem should have following functions: i. IPL Technology 37 . iii. b. iv. A bridge function to connect IPL LAN with the point-to-point fiber to the substation. An IPL modem to communicate with users’ modems. line filters at other electrical outlets for the other electrical appliances are not necessary (Mader). ii. Because IP routers and transmission facilities for backbone networks are installed for the FTTH service. A coupler with a high band pass filter to divide and combine data signals with an electrical wire. c. ii. Necessary devices are as follows: a.

encryption technology could be provided at the MAC layer.5. To protect privacy of users. and the development of even faster ADSL chip has been kept. In fact.4. resulting from the fact that an IPL network is shared by users like cable Internet. IPL does not have such a severe limitation. This rate is competitive with existing technology because typical ADSL and cable modems offer 1. 48).1. 2. Therefore.5 Mbps to 12 Mbps. this concern could be mitigated by future expansion of burst rate. the rate in practice might become larger than the current one. 2. Although the variable bandwidth per subscriber might be smaller. the burst rate of ADSL has increased from 1. For examples. 2.3. FTTH is not included in this evaluation because of its extremely wider bandwidth than any other technology. subscribers of ADSL have to live within 2 to 3 38 Chapter Two . Availability While other broadband technologies have a certain limitation in availability.2.5. In fact.5.5. close to 100 Mbps in the future. Full-time connections IPL achieves full-time connections because it needs no dial.up. Security and network integrity Because IPL uses shared medium.2. The theoretical capacity of IPL bandwidth is estimated to be as large as 250 Mbps (Dostert 273). user’s information could be easily obtained by others. 47) 2. The rate would depend on the selection of a network architecture and transmission technology. 2001.5 to 12 Mb/s burst rate. par. Speed The typical burst rate of IPL is said to be 2 to 10 Mbps (Gray.5. Evaluation of IPL LAN as Internet access networks This section analyzes whether IPL can be a substitute for existing high-speed Internet access technology such as ADSL and cable modem. the use of 56-bit data encryption standard (DES) is applied to HomePlug standard (Gardner.

The comparison of broadband access technology in Japan IPL Speed (Mbps)/ Medium 2-10/ Unshielded twist copper pair cable with 2-5mm diameter(*) Full.0% in population and 60. 2002 (The penetration of Internet in total is 44.).. People who want to subscribe FTTH have to install a fiber cable to their homes. The penetration of cable television in Japan is around 30 %. I conclude that the IPL can be a substitute for existing high-speed Internet access technology such as ADSL and cable Internet. 311) OK OK ADSL 1.9mm diameter OK OK OK Cable 1.S. IPL Technology 39 . power lines are almost everywhere. The smaller penetration of cable Internet than that of DSL may come from the relatively small penetration of cable television in Japan. compared with that of U.6. the broadband penetration in Japan is 15% in October. Market Overview According to the Prime Minister of Japan and His Cabinet.6.1.5. On the other hand.5-8/ Coaxial cable FTTH 10-100/ Optical fiber cable 2. and IPL subscribers do not have to install cables. The detail is shown in Table 2.4-.5-12/ Shielded twisted copper pair cable with . I summarized the character in Table 2.miles from the central office. From those analyses.time Connection Security OK (Shared medium) OK OK (Shared medium) Availability OK Distance limitation Smaller Penetration (30%) Need to install fiber cables (*Source: IEEJ.1 Table 2. 60 % in 2001 (the Prime Minister of Japan and His Cabinet). around 30%.5.5% in household.1.

1.8 27.0 (Source: the Prime Minister of Japan and His Cabinet) The number increased from 6% in December.).0 100.0 150.1. the growth rate of ADSL has increased rapidly.7 52.6.1.1 1. The penetration of Broadband Access The number of subscribers (million) 450.6.5Mbps (Fig 2. White Paper) 40 Chapter Two .0 0.0 50.0 250.6. 8Mbps. After the price of ADSL has become around 3.0 350. 3.6 FTTH 0. The penetration of Broadband Access (Source: MPHPT.0 200.6 Cable 1.6 70.0 300.000 yen/mo.2.0 400.000 yen/mo may be the criteria for potential customers to start the broadband Internet.0 M ar -0 0 Ju n00 Se p00 De c-0 0 M ar -0 1 Ju n01 Se p01 De c-0 1 M ar -0 2 Cable DSL FTTH Wireless/FWA Total Time Fig. Therefore. 2. compared with traditional 1.5 725. 2000 (Fig.7 667.). The number of subscribers of broadband Internet in Japan Type of access Number of subscribers (million) Market share of each method (%) Annual Growth rate (%) DSL 4.6. 2.Table 2. The main reasons of this rapid growth are the decrease of the price of ADSL service after the summer in 2001 and the emergence of wider bandwidth service.

in the past.The Price history of ADSL 6. 2.6. by around 1. First. NTT EAST explains the reasons in their press release as follows: Feb.000 Retail price (yen) 4. ’01 NTT began to offer ADSL services which require customers to purchase an ADSL modem (NTT EAST. White Paper) 2.600 400 Wholesale price (yen) 800 'Retail price (NTT-East) 'Wholesale price (NTT-East) 0 Fig.. 2.200 yen per month stimulated the competition among ADSL access providers. The reason of Yahoo! BB’s low price in the summer 2001 is reported that Yahoo has adopted Annex. Oct.1 The perspective of future price As can be seen in Fig 2. there were two big price decreases.100 600 2.000 yen per month. The price of ADSL (Source: MPHPT.000 2.2.. the wholesale price of ADSL networks decreased from 800 yen per month per line to 187 yen per month per line (NTT EAST. ’01 NTT dropped the price to response to the customers’ requirement (NTT EAST. 2000).800 3.900 2. Jan. which has been created IPL Technology 41 .453yen/mo 3.C.000 5. which is so widely used in the world that the costs of the equipments could be lowered than the costs of those by Annex. 2001). In my opinion.000 3. A.000 Dec-99 Feb-01 Jul-01 Oct-01 Dec-01 Dec-02 Time 187 173 200 800 4. Secondly.2. Sept. 2001).6.100 5.000 1. the entry by Yahoo! BB with 2.050 1000 Yahoo! BB in August 2001. Yahoo! BB’s price was half as low as the typical ADSL price then.6. the price decrease in October was brought by two events.

although NTT announced a 30 % decrease of wholesale price for backbone optical fiber networks in December 2002.000 4.000 3. there will not be a huge price decrease of ADSL service.000 Price (yen per month) 5. The prediction is shown in Fig. I also believe that the reduction of the wholesale fee in the winter 2001 also enabled Yahoo! BB offer such a low retail price. though there is neither significant wholesale fee change nor technological innovation during this period.specifically for Japanese environment (Serizawa).000 2. The prediction of ADSL price 42 Chapter Two . For these reasons.3. After the summer in 2001. In fact. Besides this. The prediction of ADSL Price 6.000 1. the decrease of NTT’s retail ADSL price looks like being brought purely by the increase of subscribers. 2.3. this did not affect the retail ADSL price much. 2. Furthermore. it can be predicted that the price could still decline but slowly as the number of subscribers increases until the number reaches the maximum capacity of 35 million subscribers provided by NTT (the Prime minister of Japan and His Cabinet).000) Retail price Subscribers Time Fig.000 De cAp 99 r Au -01 gDe 01 cAp 01 rAu 02 gDe 02 cAp 02 r Au -03 g De -03 c-0 3 7000 6000 5000 4000 3000 2000 1000 0 Number of subscribers (unit: 1. Because it is not likely that the above type of events would happen in the near future. Instead. the retail price would decrease eventually reflecting the economy of scale.6.6. the retail price has decreased.

000 0 9.4.6.000 yen per month IPL Technology 43 .000 Decmber.800 3. Several customers share a single fiber.000 yen per month to the potential criterion.000 yen per month. 3. 2.000 9. The market window for IPL in Japan For those reasons.000 12. 2000 5. (MPHPT). if IPL could achieve the low price below 3.2. White Paper) In the figure.).4. 32.3. MDUs: The service aiming at customers living in MDUs. the dashed line represents the potential criterion price. A customer can occupy a single fiber. “Service menu”) As can be seen from Fig.000 yen per month (Fig 2. because IPL will not target residents of MDUs. Basic: The service aiming at customers living in a detached house.2.000 yen per month soon. 3. 2. this will not affect the deployment of IPL in the future.6. Several customers share a single fiber via optical couplers. 2002 High-value Basic Service menu MDUs Fig. The emergence of FTTH The ministry also predicts that the number of FTTH subscribers will overtake that of ADSL subscribers at the end of year 2005 because the price of FTTH decreases eventually from around 5.800 Apr.6. The price of FTTH in Japan (Source: MPHPT. (Source: NTT EAST. However. the price of MDUs type may reach 3. The meaning of each service menu in the figure is as follows: High-value: The service aiming at customers living in a detached house..000 15.6.000 3. 2.4.000 Price (yen/mo) Price history of FTTH 13.000 3.000 6.6.

Elimination of common. which use the same range of frequencies. Similar issue is also found in xDSL in Japan (NTT EAST. there is a possibility that IPL could capture the significant share of the rest of broadband Internet market. functioning like radio wave antenna. Emission of electromagnetic waves Unfortunately. 44 Chapter Two . Several solutions are proposed as follows: a. ranging from 1. however.mode This solution is technically feasible and used widely as a solution of interference problems. Therefore the waves interfere with existing wireless communication system. i. Technical Issues 2. 2002). Because IPL and other broadband access methods are no more than the substitute of FTTH in terms of the speed.1. Japanese government announced last summer that IPL service should be postponed until this issue is solved. IPL would miss the market unless its implementation would be done in a couple of years. Underground networks Power companies can avoid the emission issue by implementing the IPL service only in underground distribution networks because electric power cables used for underground are typically shielded.7.. b.7. 2. however. emits electromagnetic waves.7MHz to 30MHz. is that most of the residential houses. FTTH might achieve the price in a couple of years despite of the downturn economy in Japan.immediately. Nor. Because IPL uses high frequency carrier. This issue is said to have affected the deployment of commercial IPL services. which prevent electromagnetic waves from emitting.e. The problem. which are IPL’s main target. receive electricity through overhead wires in Japan. the electrical wire.Web in Britain (Libby 9). The problem. or its speed would increase to competitive level like 100 Mbps. is that the higher Internet service. because the unintended emitted electromagnetic waves by IPL interfere with existing telecommunications such as amateur radio and HF-broadcasting in Japan. This solution is also costly.

which is a market-available less expensive product.2. An electrical cable act like a dipole antenna * .7.7. 2. Therefore.7. An electrical cable act like a monopole antenna. 2.1. the distance between wires and ground. 2. 2. only D and r should be taken account of. if one succeeds in suppressing the common mode. Fig.. at both sides of the line. other factors such as d. the distance between a pair wire.7. Dipole (left) and Monopole (right) IPL Technology 45 . one will achieve significant emission reduction. also affects the radiation power. but this will emit more power of radio waves than that of the differentiation mode.Fig. “r” means the distance from the center of an electrical wire. Here. The emission power of each mode is as follows (Fig.2): • • Differentia tion mode: proportional to 1/r^4. Common mode: proportional to 1/r^2. * : In the case of the differentiation mode. However. The common mode is unusual. and D. One popular practical solution is to insert a common-mode filter. electric current on each electrical wire goes toward the same direction in the common mode case. because d is usually small enough. The differentiation mode (left) and the common mode (right) As can be seen in Fig.1.

Twisted pair cables This will make quadrangular pole. e. UPLC. it would not be impractical for the same reason as that of shielded cables. A PLCA executive told me that they wanted to build the IPL standard within a year (Schaar). 2. resulting in high cost. That is. one effective solution might be to shield the power cable. such as PLC-Forum. it is hopeful for IPL providers to have fewer standards. 2. Yahoo! BB achieved lower ADSL prices than others 46 Chapter Two . it might be another option to cooperate with HomePlug Powerline Alliance (HPA).mode issue.c. the market size determines the manufacturing cost. Because multiple standards would create several separate markets. the number of a certain type of IPL equipments would be small. and PLCA.mode because other solutions are neither economically feasible nor technically feasible. the feasible solution so far is to eliminate the common. This issue is important in predicting the prices of IPL modem and its service. Besides these organizations. If power companies have to replace existing electrical cables with more twisted pair cables. which released a standard for inhome powerline networking. However. Therefore. In summary. Therefore. this would shorten the transmission distance as well as make data signal less robust against noise in distribution networks. Reduction of the transmission power Another solution might be to reduce the transmission power of IPL modems. Because overhead electrical cables are usually unshielded. which will result in huge investment in IPL business. there are several organizations dealing with IPL. this measure means the replacement of existing cables with shielded cables.2. d. power companies should check the radiation is small enough if they succeed in eliminating the common. The radiation is much smaller than dipole and monopole cases. Shielded cables If one wants to suppress the emission of differentiation mode.7.6. Standardization While standardization has not taken place yet. As seen in the Market Overview section.

7.S. the noise issue is not so severe now. impulse noise. IPL has to install an additional device. an IPL vendor. Bypassing a transformer The weakness of IPL is that IPL cannot make most use of its distribution network due to the signal block by a distribution transformer. which separate MV networks from LV networks. the cost of Annex-C type equipments could be higher than that of Annex-A type. One is about the difference of voltage system. Annex-A. Fortunately. 100V systems and 200 V systems. 15). as stated above. the above IPL organizations should try to coordinate one standard so that they could achieve low cost. 1999.4. which is allowed to use in some country.e.7. because OFDM has mitigated this influence. distribution network suffers from various noise such as those caused by electrical appliances (Gray. which detours the transformer to link MV and LV networks. The other is the difference of regulation in emission issues. Main. PLC Forum and the European Committee for Electrotechnical Standardization (CELENEC) cooperate with the International Special Committee on Radio Interference (CISPR). i. the standard might be divided into two sub-standards accordance with the voltage system. Furthermore. which addresses radio interference internationally (Newbury). while IPL typically use high frequency band. and other nations. Because there are two main streams in the world. For these reasons. in another country.. Annex-C. though its detail is not disclosed (Helman par. though they are said to be costly (Gray. Noise Although few data are shown about SNR (signal to noise ratio). 2. 2001. IPL Technology 47 . So far there are two important challenges. announced that their technology does not need any device to let IPL signals go through the distribution transformer. the noise caused by electrical appliances. IPL users cannot use a modem. mainly affects signals in low frequency band. Because the market of Japan is smaller than that of the sum of U. 17). Some vendors like PowerComm created such devices. 2. 65).3. Because of this limitation.net. Because the permitted levels of radiated radio waves differ among nations. As for the emission issue. while others had adopted Japanese-only standard.because Yahoo! BB has adopted world standard of ADSL.

Chapter 3. The image of the cost model It is difficult to specify and obtain exact cost data of IPL because the technology is still in its early stages and the commercial products are not available in today’s market. 3.1. (INPUT) .1. Therefore. Original prices are collected from price lists available from vendors’ websites. cheaper and more capable 48 Chapter Three . The model looks only at the marginal cost of providing Internet connections (Fig. the model does not include the costs of providing traditional electricity service. Cost Model 3. this thesis sets a price range as the substitute for the actual cost. # of homes/LAN Fig. The cost figures used in the model reflect what it would cost a power company as an Internet access wholesaler to purchase equipment that is currently available from vendors.# of subscribers . this thesis investigates sensitivity analyses using variables.1. whose service area includes metropolitan areas or smaller areas.costs of elements ? [ MODEL ] ? (OUTPUT) . The model aims to be applied to Japanese electric power companies with ample Fiber to the Pole (FTTP) infrastructure. Basic idea of the model I have built a cost model to provide residential Internet service over power lines (IPL). Since the market for networking equipment is extremely competitive and digital technology continues to advance rapidly. The price range is composed of prices of market-available products whose functions are similar to those of each IPL product. That is.cost/subscriber vs. 3.cost/home passed vs. some power companies built FTTP infrastructure to offer rental fiber and Fiber to the Home (FTTH) services primarily. This chapter explains the assumptions and the cost elements in the model. penetration . To make the cost ana lysis result more realistic. whose actual costs are unknown. before offering IPL service. Also.1. For example. the model does not include technology investments that are used for Internet service but are being made for other purposes.). Only the portions of the infrastructure that were specifically required to support IPL service are included in the model.1.

3.2. I set several assumptions: wholesaling to Internet service providers (ISPs).mile access. either. This chapter details the model’s inputs and variables. Cost Model 49 . For those reasons. I assume that the same thing could happen to IPL service in Japan because IPL offers an access medium to customers.2. are not included in the model. which is the same idea as FTTH service. this thesis assumes that power companies would be wholesalers of the Internet access service to ISPs. The main reason for these assumptions is that the assumed situation is likely to occur in Japan. As seen. Business model: wholesaler of access networks First. 3. four other power companies such as Tokyo Electric Power Company (TEPCO) and Kansai Electric Power Company (KEPCO). I used 130 yen per dollar and 110 yen per Euro as the currency rates in this thesis.): while only Chubu Electric Power Company (Chubu) offers the service directly to its Internet users. such as cables and connectors needed at the substation. They will not operate ISPs by themselves.products are constantly appearing. no power company except Chubu. using fiber and LV network architecture. Assumptions To build a cost model for IPL.1.1. This assumption is based on the observatio n of Japanese power companies’ analogous business models of FTTH (Table 3. Incidental costs (under $100). discussing first the assumption of this model. providing last. runs its own ISPs.2. offer their optical fiber infrastructure to several ISPs or to their telecommunications affiliates (Yamazaki). The results are described in Chapter 4.

10.). 6. Network architecture and facilities First. 3. ISP Backbone/ Internet ISP ISP Central Station Fig.mile” networks as ADSL and cable modem Internet do.. 8.2. 2..Table 3.1.3.. The coverage of the model 3. as described in Section 2. Nowadays.1. (TEPCO) 4.2.. not backbone networks (Fig. Japanese power companies’ business model of FTTH Power company 1. Shikoku Electric Power Co. Chubu Electric Power Co.voltage networks as a backbone instead of fiber networks (Amperion).1. this thesis assumes that power companies would use low. Kyushu Electric Power Co.mile”-access networks. this thesis assumes that power companies would offer so called “last-one. Tokyo Electric Power Co. 5.. 9. this thesis assumes that the network architecture of IPL would be Fiber and LV line network architecture.... Chugoku Electric Power Co. 3. Okinawa Electric Power Co.. 3. Hokuriku Electric Power Co.voltage networks as “last-one..2. 7. FTTH (Planning) Wholesale Retail Wholesale (affiliate) Wholesale (affiliate) Wholesale (affiliate) (Planning) (Sources: see the list at the end in bibliography1 ) Second. Kansai Electric Power Co. seven power companies out of 50 Chapter Three .2.2. Hokkaido Electric Power Co. Tohoku Electric Power Co.1. Although some IPL vendor proposes to use medium.

would be costly because the power company might have to dig the ground for this purpose in addition to simple cable installation. it is likely that the assuming situation will happen. Because such a backbone has been built for a power company’s operational use. Cost Model 51 .ten have started or are planning FTTH service in Japan (Yamazaki). The second reason is that the installation cost of FTTH may be larger than that of IPL because FTTH needs to install fiber cables. Therefore. Type of customers and networks 1) Detached houses or multiple dwelling units (MDUs) This thesis assumes that the types of houses are detached houses and apartments that are one or two stories. installatio n of FTTP needs less effort than that of FTTH in terms of the amount of cables to be installed. implementing IPL parallel to FTTH will probably be economically reasonable. Therefore. Apartments that are more than two stories like MDUs usually connect to medium. The reasons are twofold: first. the construction cost is not taken into account for this model. There are two reasons for this.voltage network directly because of the large amount of electricity that they consume. The installation. this thesis assumes that IPL service utilizes a power company’s fiber network backbone.3. This means that there are enough FTTP infrastructures to achieve this network architecture. First. and consequently the construction cost.2. about fifty percent of dwelling buildings in Tokyo’s 23 wards are detached houses or apartments that are one or two stories (Tokyo Metropolitan Government). For example. targeting MDU residents would raise cost. 3. Secondly. Secondly. One might wonder why power companies do not complete their Internet service with FTTH alone instead of combining IPL. while IPL does not. These detached houses and apartments that are one or two stories are typically provided with LV networks. which links substations together. This means that a power company needs to install a fiber cable into the MDU building to be connected with LV networks inside of the building. the market size is still large enough to support IPL economically. however. This situation would happen because the cost model assumes the Fiber and LV line network architecture.

2. LAN size This thesis defines a LAN as one LV network under one distribution transformer.2. 3. 52 Chapter Three . 56. The rest. the targeted customers.2.4. power companies would implement IPL only to overhead LV networks. As for the market size. Second. usually serve commercial buildings. residents. for example. this thesis assumes as follows: the type of customers would be residents of detached house and apartments that are one or two stories. which limits such emissions. IPL would target residents of about fifty percent of dwelling buildings in Tokyo’s 23 wards. whose building density is so high that costly underground networks can be efficiently developed. as shown in Table 3. underground networks. implementing IPL to underground networks would be more costly than to overhead networks because power companies would have to dig the ground to install an O/E converter near a distribution transformer. this thesis assumes that the issue could be solved in the near future because the standard of such emitted radio waves is under review world-wide (CISPR) and also because the IPL vendors have made efforts to build an IPL modem. usually receive electricity through ove rhead networks.7 % of distribution networks in Tokyo ’s 23 wards are overhead networks (TEPCO Illustrated 56). For those reasons. residents of detached house and apartments that are one or two stories usually receive electricity through overhead LV networks. Therefore. First. The percentage of overhead networks rises to 91.1 % in their total service area (TEPCO Illustrated 56). The model assumes two related figures.2) Overhead or underground LV networks This thesis assumes that IPL focuses on overhead LV networks. As for the market size. Although there is an issue of interference by emitted electromagnetic waves specifically for overhead networks. for example.

328. Therefore. 3. Therefore.000/511 = 12. Cost Model 53 . 56). is reasonable. is reasonable. the number of customers covered by a distribution transformer is calculated as follows: 50kVA / (30A * 100V) = 16.Table 3.2.2. 4. Second.7 Because it is not likely that all the customers use the peak electricity simultaneously. The average ampere of residential customers is around 30A (TEPCO Illustrated.300. the assumption 2) in Table 3. Input cost elements: technology reference model Fig. the total number of substations in Tokyo is 511.7.3. and the number of household customers is estimated as 6.2. the capacity of a distribution transformer varies from 3kVA to 100kVA (IEEJ 316). shows the image of the necessary elements of the cost model. The number of customers 1) Per substation 10. This thesis chose 50kVA because this was the average value of the capacity and most likely in Japan. too.000 households (TEPCO Illustrated. and actually. the assumption 1) in Table 3.1.000 2) Per LAN 20 The reasons are as follows: first.2.8 Therefore. the transformer capacity is designed in the same manner. 3.300. 17). the number of customers covered by a substation in Tokyo is estimated as follows: 6.2.3. the number can be more than 16.2. Therefore.

In the following sections. Similarly. a LAN. 20 customers (LAN) c. 54 Chapter Three . and Intermediate or Realistic. this thesis calls them a cell. a customer. Intermediate or Realistic scenario assumes that everything works moderately and more realistically than other scenarios for implementing IPL in terms of cost.a. equipment powering and maintenance. cost elements are further classified as onetime cost or ongoing cost. 3. such as the costs of supporting ISP retailers. all cost elements would end up costing the value at the high end of the estimated range. all cost elements would end up costing the value at the low end of the estimated range.1. this thesis sets a cost range for such elements depending on three scenarios: Best. 10. 1 customer Backbone network/ Internet O/E IPL-modem Distribution substation Optical fiber networks LV network Customer Fig. The image of Fiber and LV line network architecture A LAN in this context is the group of residences served by a single fiber and its attached LV network. To distinguish the aggregated LANs from a LAN.3. Therefore. Operating expenses (OPEXs). Both costs are capital costs. in the worst case. many LANs converge in a distribution substation.000 customers (cell of 500 LAN) b. Within these categories. In the following.. Because of the difficulties of specifying and obtaining the real cost of some elements from publicly available sources. In the best case scenario. are outside the scope of this thesis. Worst. I use two types of capital costs: those incurred upfront (onetime) and those incurred on an ongoing basis. I categorize input elements according to the network where they belong: a cell. These scenarios are reasonable because there are no tradeoffs among the cost elements.

a Japanese telecommunications giant. and connect the cable with its existing telephone network inside of the building.1. routers. the number of the necessary items is derived from this capacity analysis. which would integrate an IPL LAN into FTTH networks. In fact. the total capacity of a LAN is 1 Mbps. Costs shared by customers per cell Most of the facilities in a substation are shared by customers under one substation.3. such as IP-based facilities because that is cost-effective.3. offers its MDU customers a similar choice in their FTTH menu: Type1 (Combined FTTH): install fiber cable to the entrance of the building. 2000). the average bandwidth per customer during peak time is estimated to be 50 kbps (le Tanneur 102). Therefore. Consequently. Because this thesis adopts the number. This thesis assumes that IPL utilizes in-use FTTH facilities because some potential FTTH customers might choose IPL instead of FTTH because of its lower price. In this thesis. The optical fiber cables which are used for the IPL purpose are assumed to be installed already. this type of choice has been offered in Japan. that of a cell of 500 LANs is 0. and will be connected with the terminal system. Fig 3. “Service menu”).3. Cost Model 55 . Nippon Telegraph and Telephone EAST Corporation (NTT EAST). This assumption means that the costs of most facilities in a substation have been already invested for FTTH purposes. Such facilities include optical transmission equipment. and network management servers.2 shows the image of the terminal system at the substation. There are several ways to build a terminal system of IPL (Kyushu Electric Power Co. The only cost which IPL will incur is the costs of a terminal system and additional LAN cards.. Type 2 (Pure FTTH): install fiber cable to the customer through the building (NTT EAST. I assume that Japanese power companies would build the terminal system using publicly available devices.5 Gbps. 1) Onetime cost According to le Tanneur.

3. Third. and vice versa.800 yen (Fujitsu 50). I cite the price of an O/E converter from a media converter. Its price is 29.).3. First. which transforms 10/100 BASE-TX into 100BASE-FX (single mode).3. Hub (1) has 24 ports plus 1 1000BASE-T port. The costs of the facilities at the substation are fixed here regardless of scenarios (Table 3. the actual LAN card configuration can be derived from the options offered by router vendors like NEC: the price of a LAN card is 88. the assumed protocol between Router and Hub (1) is 1000BASE-T.1.000 yen (Fujitsu 48). The protocol between Hub (1) and Hub (2) is 10/100BASE-T.000 yen (NEC). Hub (2) has 16 10/100BASE-TX ports.Backbone network/ Internet E/O E/O E/O E/O Fig. The card is a gigabit interface connection card (GBIC). The price is 62. Hub (2) has 16 ports. The price is 432. 56 Chapter Three . which can receive 1000BASE-T. I cite the prices of those hubs from Fujitsu. Hub (1) has one 1000BASE-T port and 24 10/100BASE-TX ports.2. The protocol between Hub (2) and O/E converter is 10/100BASE-T.000 yen (Allied-telesis). The image of equipment at a substation In the figure. Second.

Allied-telesis for an O/E converter) 3. The image of equipment at a pole 1) Onetime cost Cost Model 57 .3.3. which links a fiber cable and an LV network.3.200 (864.000*(33*15+5) 88. This upgrade has two components: adding an O/E device.877.000*2 298.053. Fujitsu for Hub (1) and (2).000*17*2 62. 3.3.3. and utilizing a fiber cable of FTTP infrastructure (Fig.Table 3.000) (1.013. The cost shared by customers per cell Cost (unit: yen/cell) Element Best Worst Intermediate A LAN card A terminal system Hub (1) Hub (2) O/E converter Total 176.2.1.000 32. 3.000. Costs shared by customers per LAN Each LAN can be upgraded separately.3).200) (31.200 432. LAN Tr IPL-modem LV wire O/E Converter Optical fiber cable Special IPL Modem Surge Absorber IPL-modem O/E device IPL-modem Fig.000*2 (Sources: NEC for a LAN card.000) 33.

I divide the cost of the special modem into two parts: an ordinary IPL mode and a bridge or a hub. this thesis uses 55. I cite the market price from a Fujitsu’s hub. In the worst case scenario.300 yen in 2002 (Fujitsu 86). “CN-100”). I cite the price from that of an optical node unit (ONU) used in Fiber to the Curb (FTTC) because the function is the same as the assumed O/E converter. 3.000 yen and 62. In the intermediate case scenario. In the intermediate case scenario. the price of an O/E converter ranges between 55. which can afford 10 BASE-T. As stated in Chapter 2.000 yen to 78. for the cost.This cost includes expenditure needed to invest one time. and the IPL’s MAC would be similar to that of Ethernet.3. which can afford 10/100 BASETX. The cost of a hub varies depending on the scenario. I cite the price from a Fujitsu hub. I substitute the aggregated prices of products. I assume that the special modem is similar to the access point antenna of the wireless LAN because both aggregate signals of a sub. This assumption can be reasonable because 58 Chapter Three . and a surge absorber. In the best case scenario. I cite the price from that of a media converter which transforms 10/100 BASE-TX into 100BASE-FX (single mode). I choose the same price as that of the worst scenario. The price is 55. This assumption is reasonable when the peak rate of IPL might expand to 100 Mbps in the near future.000 yen (NTT EAST. First. The price of an O/E converter is fixed here.000 because this is more realistic. In the best case scenario. Because no O/E device is available in the market now. usually up front. each of which has the same functions necessary to the O/E device. The price is 12.network and convert own protocols to and from Ethernet protocol (Fig. I assume that the aggregation function is similar to that of a bridge and the conversion function is similar to that of an ordinary IPL modem.300 yen.000 yen (Allied-telesis). The cost elements are the cost of an O/E device and the labor cost of installing the device. Secondly. In the worst case scenario. the O/E device is essentially composed of three products: an O/E converter. This specification is reasonable because the capacity limit of IPL would be less than 100 Mbps. the cost of the special IPL modem varies from 24. The price I cite is 62. Observing wireless LAN’s products. This assumption is reasonable because the peak rate of IPL is typic ally 10 Mbps. The price was 39. an IPL modem with the function similar to a hub (special IPL modem).000 yen.3).300 yen in 2002 (Fujitsu 86). and vice versa.

Such a price does not necessarily reflect the whole installation cost from my experience as an engineer. The price range of an IPL modem is between 11. In summary. the absorber should protect an IPL modem from an electrical surge like one caused by lightning outside of a house. Third. In the worst case scenario. Fourth. This value sounds reasonable because this product is designed to be used outside of buildings. to connect a feeder fiber cable with a drop fiber cable. I also choose the same absorber as the one in the worst case scenario because the O/E device is designed to be placed outside. 508). and to test the communication between an IPL model at the user’s home and the power company’s management server.000 yen (MTT Corporation. I choose a high-speed response type surge absorber as the substitute. “Installation fee”) for an attached house user. the price of the absorber ranges between 1. the assumed surge absorber should be designed like this splitter. The reasons are the following: the work of installing an O/E device has several elements: to attach an O/E device on a pole. Its market price is 15.000 yen. Although the splitter is designed to be used inside a house.an IPL vendor announced that their IPL modem had achieved 45Mbps (Amperion).3. I assume that the cost is similar to the price of the FTTH installation service fee in the best case scenario.800 yen (DTI). I choose an ADSL splitter with a surge absorber as the substitute for the surge absorber in the best scenario. which is why I use it as a lower bound defining the best case scenario. to install the cable in the user’s house. The cost of an IPL modem varies depending on the scenario. Its market price is 1. and to test the communication between an FTTH’s ONU and the FTTH provider’s management server. According to NTT EAST.300 yen.300 yen to 39. as for the labor cost of installing an O/E device. to connect the O/E device with a fiber cable and electrical wires respectively. That is. the work of FTTH installation has the elements following: to attach an optical distribution box to a pole. I assume that the cost is similar to the cost estimation of FTTH installation reported in Public Power magazine. the cost ranges from 12. the installation fee is 27.000 yen. Likewise.700 yen and 39.800 yen and 15. The reasons will be described later in section 3.3. In the intermediate case scenario. and the surge absorber used in the device would be as strong as the one used in this high-speed response type absorber.100 yen (NTT EAST. Cost Model 59 . In the worst case scenario.

2. In the intermediate case scenario. Johnson par. In summary.3. The opportunity cost of an optical fiber cable is fixed regardless of scenarios because this assumption seems reasonably certain. This is partly because power companies in Japan do not publicly disclose their price lists of the rental fiber business. The cost element is the opportunity cost of an optical fiber cable. I cite the cost from NTT’s rental fiber business.000. In summary. this cost could be the worst case cost. this value may be closer to the real installation cost. July 2001). the cost is 80. According to Public Power magazine. According to NTT EAST. usually monthly.3. but rather prudent.231 yen/core/month (NTT EAST. the installation cost of FTTH per home passed is estimated to be $1. Because the cost of the best case scenario does not seem to reflect the whole installation cost. 60 Chapter Three . Therefore. and partly because the power companies may offer the prices similar to that of NTT because they compete with NTT in the rental fiber business.000 yen.20). I assume that the cost is midway between those of the best and the worst case scenarios. Table 3. the price of rental fiber for access networks is 5. Because the work of installing an O/E device would not include the cost of installing fiber cables. 2) Ongoing cost This cost includes expenditure needed continuously. and 3. the cost of installing an O/E device varies between 27.3.The reason is almost the same as that in the best case scenario. show the onetime and ongoing cost respectively. which means 130.100 yen and 130.000 yen (G.000 yen.

the equipment is needed to perform the following functions: • • • • Provide a physical interface to the subscriber’s computer Provide a physical interface to the electrical wire.231 5.000) (15. For a subscriber to connect to the IPL LAN.Table 3.3.300 Intermediate 132.800) (15.000) (12. Separate data signal and electricity While this collection of functions could be implemented in a variety of ways.800 Worst 155. this thesis assumes that an IPL modem is equipped with all the above functions.3.000 212. Filters at other electrical outlets to prevent the Internet signals from entering other electrical appliances are not necessary according to HomePlug Alliance (HPA) (Mader).000 285.000) (1.000) 27.3.2.100 107. Cost Model 61 .900 130.300 (55.3.3.300) (39. including IPL modem functionality Support the IPL LAN’s media access protocol. The cost shared by customers per LAN: ongoing cost Element Scenario (unit: yen/LAN/mo) Best Rental fiber Total Worst Intermediate 5. The cost is a onetime cost and must be incurred by each customer who subscribes to the service.000) 80. The cost shared by customers per LAN: onetime cost Element Scenario (unit: yen/ LAN) Best O/E device (O/E converter) (Hub) (IPL modem) (Surge absorber) O/E. Cost paid by one customer The only cost element here is the cost of customer premise equipment (CPE).231 3.300 (55.300) (23.000) (62.300 Table 3.labor (installation) Total cost 80.300) (11.700) (39.000) (39.

I cite the cost from that of a cable modem before its function was standardized. which is commercially offered in Germany. the service provider. The IPL standard might be Japanese specific because the voltage is 100 V while the voltage of Europe and other countries is around 240 V. because the technology of IPL is also similar to that of ADSL. 23. The cost of the cable modem in 1998 was $300 in the U. Therefore.). 11.0. The price of an ADSL modem was 23. say around 20.000 yen (Data Over Cable Service Interface Specification (DOCSIS) Team. the price range of an IPL modem is between 11. Furthermore. the true cost could be more.4. the cost has decreased to less than $50 according to the DOCSIS Team. For those reasons. While the PLC modems are designed to be used inside a house rather than the access use outside a house.700 yen in the best case scenario (Microcenter).S. though the related organizations are trying to make a standard. The value is translated as 13. There is no standard of IPL modem technology. Therefore. Actually. 2001). both types of modem might have common cost elements.1) Onetime cost I estimate that the cost of IPL modem is almost as low as the price of a power line carrier (PLC) modem certified by HPA. I choose this price as the cost of an IPL modem in the intermediate case scenario. 62 Chapter Three . I estimate this price as the one in the best scenario.700 yen and 39.. the price of an IPL modem.. I estimate that the cost is almost the same as the price of ADSL modem in its first year end because IPL will probably follow the same path as ADSL followed: establish a standard suitable for Japanese environment. which can be translated as 39.000 yen.000 yen (Table 3. Actually. they basically use the same physical and MAC technology as those of IPL modems. In fact. Jan.000 yen. seems more realistic. cited from the price of an ADSL modem. In the worst case scenario. In summary. after DOCSIS 1. 8). i.000 yen. I choose the cost of a cable modem before standardization for the worst case scenario. the estimated cost.3.e. Therefore. In the intermediate case scenario. that provider might subsidize the cost of the modem. is 119 Euro (Vype).000 yen in January 2001 in Japan (NTT EAST. Therefore. the discrete frequency mode. an IPL modem vendor says that its IPL modem is compatible with the PLC modem (Turner). Because the modem is provided by Vype.

3.000 IPL modem (CPE) 13. The cost paid by one customer Element Best Scenario (unit: yen) Worst Intermediate 23.4.000 39.Table 3. Cost Model 63 .4. Output cost elements Output cost elements consist of cost per home passed and cost per subscriber The results are shown in Chapter 4.000 3.

tepco. See <http://www. (KEPCO) See <http://www.jp/> Okinawa Electric Power Company.Endnote: 1 Hokkaido Electric Power Company Inc. See <http://www.jp/> Chugoku Electric Power Company Inc.co. (TEPCO) See <http://www.jp/> Tokyo Electric Power Company Inc.co.jp/> Tohoku Electric Power Company Inc.tohoku-epco. See <http://www.co. See <http://www.ne.jp> Kyushu Electric Power Company Inc. See <http://www. See <http://yonden.jp/> 64 Chapter Three .okiden.kepco.jp/> Chubu Electric Power Company Inc. (O EPC) See <http://www.co.co.hepco.commufa. Inc.jp/> Shikoku Electric Power Company Inc.energia. See <http://www.kyuden.co.rikuden.co.jp/> Kansai Electric Power Company Inc.co.jp/> Hokuriku Electric Power Company Inc.

• • Cost per home passed (C hp ): average cost divided by all homes reachable with IPL system. Ongoing cost (C on ): expenditure needed continuously. First. Third. are composed of the above two sub-elements. Then it shows the set of graphs based on an original set of input parameter values as well as those of sensitivity analyses that explore the effect of changes in each of the different input parameter values. the outputs of the model consist of two elements: the cost per home passed and the cost per subscriber. • • Onetime cost (C one): expenditure needed to invest onetime. 4.Chapter 4. Result variables As described in the previous chapter.1. Cost per home passed The cost per home passed of IPL (C hp ) is calculated in the following manner: first. LAN. usually up front. it defines the model’s cost result variables. calculate Cone and Con using the cost outcomes obtained from Chapter 3.1. and customer. Results 65 . which are defined in Chapter 3 as cost shared per cell. usually monthly. it takes account of the reality in Japan. Cost per subscriber (C sub ): average cost divided by all subscribers reachable with IPL system. The chapter concludes with a comparison of the IPL costs with the costs of other broadband Internet access methods and a few suggestions to make IPL more costeffective. including the penetration of personal computers as well as those of other broadband access methods. each element consists of two sub-elements: onetime cost and ongoing cost.2. Results This chapter shows the results of the IPL cost model analyses discussed in Chapter 3.2. Three cost outcomes. The analyses begins with an examination of the cost per home passed resulting from the original parameter settings. 4. Initial results 4.

Finally.2. obtain Chp by adding Con to Cone . 66 Chapter Four .(4.2. In Chapter 3. Monthly IPL cost per home passed per LAN (modem rental) The result in Fig. The initial result is shown in Fig.2) [yen/mo/home passed] Here. amortize Cone at 6 % for the discount rate and 3 years for the period. 4.1.i) Onetime cost: Cone Cone = ( LAN _ card + TS ) (O / E + O / E _ labor ) + + CPE 500 × N N . the cost converges at between 1.000 and 2. 4.1.1. TS means a terminal system. Repeat these steps for each scenario.(4. N means the numb er of homes per LAN. O/E means an O/E device at a pole. Second. The key finding here is that as the number of homes passed per LAN increases. assumes that power companies provide IPL modems. N was set at 20. Monthly IPL cost per home passed per LAN Cost (yen/mo/home passed) 6000 5000 4000 3000 2000 1000 0 0 2 4 6 8 10 12 14 16 18 20 Number of home passed per LAN Worst ` Intermediate Best Fig. The reason for this is that these numbers are the usual case with telecommunications business. depending on the scenario. CPE means an IPL modem.000 yen per month.2.1) [yen/home passed] ii) On going cost: Con Con = Fiber _ rental _ cos t N . 4. which is maximal.2.2.

4. Cost per subscriber The cost per subscriber (C sub) is calculated in the similar way as that of Chp . N: the number of homes passed in one LAN.2. Second. I set N at 20 as a sample.2. The same trend is seen here as that seen in Fig. and calculated Csub.1 and 4. Monthly IPL cost per subscriber per LAN: N = 20 Cost (yen/mo/subscriber) 6000 5000 4000 3000 2000 1000 0 0% 20 % 40 % 60 % 80 % 10 0% Worst Intermediate Best Penetration (%) Fig. first. The result is shown in Fig 4. N is replaced by N*P in the equation 4. 4. I set the penetration as P in this thesis. The only difference is that the cost outputs are calculated based on the penetration of IPL. and Y: the period of IPL’s market window.2. Fig.2.2.000 yen per month for most of Ns. As can be seen.3.2.2. Monthly IPL cost per subscriber per LAN (modem rental) Next. Results 67 .2. 4. I chose two variables. shows the result when power companies are assumed to provide the modems. not the number of homes. The result is shown in Fig.2. 4. Therefore.2.2. The result assumes the intermediate case scenario and that power companies provide modems to their users.1.4. the prices converge on 1.2. I tried several values for N in the intermediate case scenario.2. I tried sensitivity analyses for the cost per subscriber. the cost rises rapidly as N becomes small.

The necessary number of homes passed per LAN: Intermediate Number of homes passed per LAN 120 100 80 60 40 20 0 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 1.2. Cost per subscriber per LAN with various numbers of home passed per LAN (modem rental) Fig 4.3. 4. 4.000 yen/mo 3.000 yen/mo 2.2.Monthly IPL cost per subscriber per LAN: Intermediate Cost (yen/mo/subscriber) 6000 5000 4000 3000 2000 1000 0 10 % 20 % 30 % 40 % 50 % 60 % 70 % 80 % 90 % 10 0% 0% N=10 N=20 N=40 N=60 N=80 N=100 Penetration (%) Fig.000 yen per month over 60 % 68 Chapter Four .000 yen per month. the cost will be below 2. the IPL cost per subscriber may have to range from 1. observing the today’s retail prices of other broadband methods in Japan. when N equals 20.2.2.000 yen per month to 3. shows the same result in another format.4.. 4.3.3..000 yen/mo Penetration (%) Fig. As will be described in Section 4.4. The necessary number of homes per LAN (modem rental) As seen in Fig.

000 yen. the cost per home passed of LAN level equipment ranges between 5.800 – 155. 1) Onetime cost per home passed a. Ø IPL modem: 13. such a penetration is not likely. when N equals 80 or 100. and specifies the cost elements.390 – 14.000 33. using 100/200 V systems.265 yen Ø Total c. § § LAN card: 176. These values of N.200/10. LAN level (N=20) According to Table 3.3.265 yen.200/10. However.4..of the penetration.000 yen per month over 15 % of the penetration.3.305 yen Ø Total b. and the penetration is 100 %...800 – 285.300 /20 = 5.2.000 to 39.000 /20 107.000 – 39.877.390 to 14.305 yen.3. which raise the cost of implementing IPL. The cost per home passed is derived by dividing the total cost by the total number of customers under a cell.000 yen Results 69 . the cost will be below 2.000 – 130.1. Customer level (1) According to Table 3.2.3. considering that the penetration of the broadband Internet in Japan is 15 % after the first commercial ADSL service started three years ago. Substation level (500*N = 10. the cost varies from 13.053.000 Terminal system for IPL: 32. are not realistic in the current Japanese electric distribution networks. Other findings: Cost structure This section investigates the cost structure of IPL.300 /20 O/E labor: 27. 10. The cost per home passed here is 3. Meanwhile.000) According to Table 3.000.000/10. I assume that N equals 20. however. 4. the cost elements are shown below. § § O/E device: 80.000 = 3.

3.5. 19% 103 . the significant reduction of the total cost could be achieved by reducing onetime cost. however. 4. Secondly.From the above calculations. Reality in Japan In the previous analyses. The cost structure of total cost (unit: yen/month) From Figure 4. The cost structure of IPL: per home passed (Total =1. according to the Economic and Social Research Institute (ESRI). the total onetime cost per home passed varies from 21.570 yen.6 yen/mo The total ongoing cost is 262 yen per month. and compared it with the ongoing cost. 4.438 yen/mo) 262 . shows the cost structure of total cost per home passed in the intermediate case scenario. 7% cell/10.5. 4. I amortized the total onetime cost obtained above into three years in a row. This 70 Chapter Four .2. This effect will be discussed later in Section 4.4.000 331 .231 /20 = 261. is different.3. the broadband market penetration (P bb) is 15 % in October 2002 in Japan (MPHP T. Fig.. LAN level (N=20) According to Table 3. the ongoing cost per home passed is 261.2. First. 2) Ongoing cost b.5.6 yen per month.4). 51% Fig. The reality. 2003). Ø rental fiber: 5. I assumed that 100 % of homes passed are potential customers for IPL. the penetration of personal computers (Ppc) is on the average 63.3 % in March 2003 in Japan (sec.2. specifically pushing the cost of a modem to consumers.695 to 56.3. 23% LAN/20 customer/1 Ongoing 717 .

Furthermore. The current market size of broadband for IPL Penetration of Broadband 15% No PC 37% Target of IPL 48% Fig.3. while the growth rate of Ppc is around 12 % a year (ESRI). Because Pbb is growing much faster than Ppc.3.3. the IPL target share is shrinking fast (Fig.1. That is. the fewer the target for IPL is left. 4.1. that of P bb is 115 % a year (MPHPT. 4. the later the IPL service is launched.paper assumes that other broadband users would not switch to IPL because the speeds are almost the same and the previous analyses show that the retail price of IPL will not be likely further lower than those of other broadband methods.2). as seen in Fig. The current market size for IPL in Japan Results 71 . The actual market left for IPL is only 48 % of total households. 2003). 4.

000 yen per month in general. the revised result is shown in Fig. 4.Mar.2.3. Nunserved-p = Nunserved * Pipl = 0.Mar. the cost rises by 500 to 1.Mar.48 Nmax .3.3.2. Nmax : The actual maximal number per LV LAN. 4. Definition of N (number of home s passed per LAN) For this reality in Japan.Mar. The cost per home passed with Japanese reality Taking account of this reality.The market window for IPL 80% 70% Penetration (%) Prediction 60% 50% 40% 30% 20% 10% 0% Mar.Mar. The average is 20.(4.1.48 Nmax * Pipl .. The market window for IPL in Japan 4. Pipl. Nunserved is calculated as follows: Nunserved = N max * (Ppc – Pbb ) = 0.Mar97 98 99 00 01 02 03 04 05 Time Other broadband IPL window Fig.Mar. Nunserved: The number considering the reality in Japan.3.1) Nunserved-p : The number considering the penetration of IPL.3.Mar.1.2.2.4. the valid number of homes passed per LAN is calculated in the following manner.2) 4. Compared with Fig. 72 Chapter Four .3. as described in Section 3. which ranges from 0 to 100 %.(4. 4.3. such as the PC penetration and broadband market share.

Because the operational cost is usually from 2.Monthly IPL cost per home passed 6000 Cost per home passed (yen/mo/home) 5000 4000 3000 2000 1000 0 0 2 4 6 8 10 12 14 16 18 20 Number of homes passed per LAN Worst Intermediate Best Fig.000 yen per month when the customers rent the modems (Table 4. Results 73 . Likewise. From these estimates.000 yen per month.3. However.000 to 3.500 to 4. par. The retail prices in Japan range from 3.000 yen per month (Black. 4.3. the costs can be estimated to be less then 3. Monthly IPL cost per home passed with Japanese reality (modem rental) The dashed lines in the figure represent the retail price range of other broadband methods.500 yen per month. the costs can be estimated to be 2. such as ADSL and cable modem. the best case scenario or the intermediate case scenario might be able to be more cost-effective than the existing other broadband methods. when the customers purchase the modems.1).500 yen per month because the retail prices range from 2. these analyses assume that the IPL penetration is 100 %.000 to 5. which is not likely. 17).3.

74 Chapter Four . it could be as cost-effective as other broadband methods.318 3. ADSL market share: 22% 2. shows the cost per subscriber with Japanese reality when N equals 20.153+ 3.2.030 3. as discussed in Section 4. That is.153 1. which are expressed as “-theory” in the figure.4. the costs rise by 500 to 1.3.650 8 M bps 3.453 8 Mbps 4.200 512 kbps. 4.200 4.600 1. I conclude that IPL in Japan would not have a cost advantage over the other broadband methods.3. that is not realistic at first.140 eAcess 3. Therefore. Cable market share: 26% 2.3.900 3.500 8 Mbps (Sources: see the list in Bibliography at the end) 2.5 Mbps. the low-priced service. The retail prices of other broadband Internet methods (unit: yen per month) Modem rental Modem sale ADSL Yahoo! BB NTT EAST 3.500 yen per month.Table 4. ADSL market share: 15% 3. Compared with the results without Japanese reality. Although such a penetration might be eventually possible. 2. IPL could be as cost-effective as other broadband methods over 60 % of the IPL penetration in the targeted market.3.2.953 Cable modem J COM iTS.650 8 Mbps.448 8 Mbps.1. if the penetration of IPL exceeds 29 % of total Japanese households. ADSL market share: 24% 2.COM 5. The cost per subscriber with Japanese reality Fig.200 2.5 Mbps.

which are not realistic. the Japanese government predicts that the number of FTTH subscribers would overcome that of ADSL by the end of the fiscal year 2005 (MPHPT. Results 75 . Sensitivity analysis: Market window for IPL The market window for IPL could be shorter than three years. shows the result when the market window for IPL is 2 and 3 years.4.3. White Paper).000 yen per month when the market window is 2 years. Furthermore. Monthly IPL cost per subscriber with Japanese reality (modem rental) 4. IPL could be as cost-effective as other broadband Internet methods only if the best case scenario occurs and the IPL penetration is over 80 %. Fig. the IPL’s market window would shorten more.3. say less than one year.Monthly IPL cost per subscriber in Japan: Nmax = 20 6000 Cost (yen/mo/subscriber) 5000 4000 3000 ` 2000 1000 0 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Worst-real Worst-theory Best-real Best-theory Penetration (%) Fig. which I assumed in the previous analyses. As seen. due to the accelerated broadband subscriber growth as seen at the beginning of this section. Unless IPL modem vendors could find any technical solution to the emission issues.4. 4. Once the superior FTTH becomes popular. there will be no room for IPL to enter the broadband Internet market. 4.3. or the government changes the emission regulation.5. the costs rise by 500 to 1.

The result is shown in Fig 4. In this section. Modem sale As predicted in Section 4.000 yen per month compared with when power companies provide the customers with IPL modems.1. 4. Profitability of IPL This section tries to analyze how IPL would be profitable in Japan based on the results above. Monthly IPL cost per subscriber with various market windows in Japan (modem rental) 4.Monthly IPL cost per subscriber in Japan: Nmax=20 Cost (yen/mo/subscriber) 6000 5000 4000 3000 ` 2000 1000 0 0% 10 % 20 % 30 % 40 % 50 % 60 % 70 % 80 % 90 % 10 0% Worst-2year Worst-3year Best-2year Best-3year Penetration (%) Fig.5. Therefore.4.2. I analyze how much the cost will be reduced when the IPL customers purchase the IPL modems.3.500 to 4. IPL will not become as cost-effective as other broadband methods.500 yen per month. the significant cost reduction can be expected if the IPL customers purchase the IPL modems. varying from 2. 4. The dashed line in the figure represents the price range of other broadband methods. but the other broadband methods’ retail prices also decrease by 500 yen per month on average.1. 76 Chapter Four . Indeed. the cost of IPL decreases by 500 to 1.4.. even if the IPL customers purchase the IPL modems.4.3.

reflecting the reality in Japan. Monthly IPL cost per subscriber per LAN: Intermediate 6. The result assumes that power companies provide customers with the IPL modems.000 3.2.000 1. The number of homes passed per LAN Then.4.2.000 4. Fig 4.3. 4.2.000 Cost (yen/mo/subscriber) 5.4.4.2. I analyzed what would occur if the number of homes passed per LAN increased. 4. the cost will be below the rivals ’ low-end prices over 60 % of the Results 77 . Monthly IPL cost per subscriber per LAN (modem rental) When Nmax equals 20. shows the revised result of Fig.1. 4.4.Monthly IPL cost per home passed: (modem sale) 6000 Cost per home passed (yen/mo/home) 5000 4000 3000 2000 1000 0 0 2 4 6 8 10 12 14 16 18 20 Number of homes passed per LAN Worst Intermediate Best Fig. Monthly IPL cost per home passed (modem sale) 4.000 100% 10% 20% 30% 40% 50% 60% 70% 80% 90% 0% N=10 N=20 N=40 N=60 N=80 N=100 Penetration (%) Fig.000 2.

From these findings. However. I conclude that IPL would not have a cost advantage over the other broadband methods unless the technolo gy. 4. is developed in the future. However. the cost will be below the rivals’ low-end prices over 20 % of the penetration.penetration.4.4. which would increase the number of homes passed per LAN. The necessary number of homes passed per LAN: Intermediate Number of homes passed per LAN 120 100 80 60 40 20 0 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 1.100 yen/mo 2. shows the same result in another format.3.000 yen/mo 3. if Nmax is equal to or more than 80. Fig 4. as described in Section 4.3. The necessary number of homes per LAN (modem rental) 78 Chapter Four .2.2.000 yen/mo Penetration (%) Fig. such a penetration is not realistic.

including the current IPL technology.e.300 yen.2. i.5. Conclusion This chapter analyzed the cost results using the engineering cost model and the input parameters collected in Chapter 3. I conclude that the IPL would not have a dominant market power in the broadband Internet market in Japan. 80 homes per LAN.4. As predicted in Section 4. Results 79 .. it is a challenge to achieve this cost. I analyzed how much the equipment cost per LAN should be reduced to make IPL cost-effective. I calculated the equipment cost if the monthly IPL cost was 1.3. Ø It might be cost-effective if IPL could technically increase the number of homes per LAN in the future. The result showed as follows: first.900 yen.. which meant 48 % of the total Japanese houhold. From these analyses. The result. Compared with the original value under the same assumptions is 212. Furthermore. The reduction of the equipment cost per LAN Finally. Second. Therefore. however. the IPL modems should be purchased by customers. showed that the equipment cost should be zero. the significant cost reduction next to the case of selling modems can be expected by reducing the equipment cost per LAN. I assumed that all equipment costs except the one per LAN are fixed. the equipment cost per LAN will be zero. For those reasons. I conclude that it is a challenge to achieve the same cost-effectiveness as that of other broadband methods under the assumption I made.000 yen per month under the condition that Nmax equaled 20 and the IPL penetration in the targeted market was 100 %.4. Otherwise. the equipment cost per pole is around 86. The key findings are as follows: Ø The IPL would not have more advantageous cost structure than other technologies. I assumed the intermediate case scenario. 4. I also tried another set by changing the IPL penetration in the targeted market to 50 %.3. IPL will not have an advantageous cost structure under the current situation in Japan. and Ø It might not improve the cost advantage to let IPL customers purchase the IPL modems.

i. The entity in charge of the issues is the Japan Fair Trade Commission (JFTC 2 ). is mainly in charge of Japanese electricity policy. 5. the Japan Fair Trade Commission has the character of being an administrative organization under the council system. According to its website. its role is as follows: The Japan Fair Trade Commission is positioned as an extra ministerial body of the Ministry of Public Management.Chapter 5. The main law which governs antitrust issues in Japan is the Act Concerning Prohibition of Private Monopolization and Maintenance of Fair Trade: Siteki dokusen no kinsi oyobi kosei torihiki no kakuho ni kansuru horitu. consisting of a Chairman and four Commissioners. the Japan Fair Trade Commission independently performs its duties without being directed or supervised by anyone else (2003. Japanese antitrust policy This section reviews Japanese antitrust policy before making a conclusion about the IPL case. However. Agency for Natural Resources and Energy (ANRE5 ).e. 2-1-1). In implementing the Antimonopoly Act. Policy Implications This chapter discusses the policy issues based on the results of this research. Likewise.1. which is in charge of Japanese telecommunications policy. whose affiliate. Home Affairs.. no price decrease in spite of the cost decrease. The relationship between MPHPT and JFTC As for the telecommunications industry. MPHPT JFTC Fig. 5. the so-called Antimonopoly Act . the Japanese government will advise the market in order to recover a competitive status.1. Trade and Industry (METI4 ). If a monopoly status harms the market. JFTC cooperates with the Ministry of Economy.1. as for the electricity industry. sec. 80 Chapter Five . Posts and Telecommunications (MPHPT). JFTC cooperates with MPHPT3 .

” the existence of two rules. Organizations MPHPT JFTC TC Law Telecommunications Business Law Antimonopoly Act Fig. “Permission for Type I Telecommunications Business” (MPHPT 81). has brought about some confusion among business entities (5). the proposal 1) is related to the IPL case. 5. JFTC encourages the fair competition among the participants. In their recent publication. The organizations in charge of the telecommunications policy According to the “Guidelines of Competition Policy and System Reform of Telecommunications Market. Therefore.1. they set the following rules over the Policy Implications 81 .5. The antitrust policy in telecommunications market The “Manual for Market Entry into Japanese Telecommunications Business” states that the entry into the telecommunications business should not impede fair competition according to Examination Standards Regarding the Telecommunications Business Law’s Chapter II.2. ” they propose three main points (TC 12): 1) Promote new entrants as well as secure fair competition. While TC focuses on how to stimulate the telecommunications competition. The Telecommunications Council (TC). Among these. and 3) Revise the regulation to adapt the shift toward IP networks. “The Guideline of the Competition Policy. 2) Protect customers from complexity of services. the Antimonopoly Act and Telecommunications Business Law’s connection rule for NTT facilities. is mainly involved in the current telecommunications policy. an affiliate of MPHPT.1.1.

200 yen per month (JCOM Kansai). is regarded as too small an influence on society to apply the UNE policy to cable television companies (The Dispute Processing Committee. 3. the IT Strategy Headquarters report that the number of ADSL subscribers is two and a half as many as that of cable modem Internet subscribers (sec.2. 1-(4)). • Cooperate and share information smoothly and efficiently. it is economically and practically appropriate to unbundle the network equipment of an entity.” the penetration of cable television subscribers. Have a liaison for the above purpose. For example. Because of this less dominant market power. The key policy here is the unbundled network equipment (UNE) policy. Case study (1) Cable modem Internet Cable television companies are exempted from the UNE policy. Chapter 45 and Ø Telecommunications Business Law. offers a bundled menu at 8.400 yen per month. First. a. there has been no quantitative criterion to measure a market power so far. 3-(4)). JFTC and MPHPT. though TC has been trying to develop one. in the guidelines to avoid such confusion (JFTC&MPHPT. Ch. Sec.S. TC uses “the degree of the influence on society. 51). and to lend it to the competitors. In terms of the “degree of the influence on society. which has a relatively dominant market power in the market. either (89). • • • Communicate with each other whenever one or both receives a complaint.1 % as of March 2002. Therefore. as of October 2002.” which does not have clear quantitative definitions. the Japanese local governments do not have as strong an authority 82 Chapter Five . Proceed the complaining based on the following laws: Ø Antimonopoly Act . whose original price is a sum of TV service charge. Unfortunately. In fact. Chapter 96. J-COM Kansai. 5. there are two differences between the U.980 yen per month and the Internet service charge. 27. As a reference. and Japanese policy for the cable modem Internet. Instead.supervising entities. cable companies are even allowed discounted bundled broadcasting service with the Internet service. the following parts review several cases to have a general image of Japanese antitrust policy in the telecommunications market. In order to solve the antitrust issue in the telecommunications market. the biggest multiple system operator (MSO) in Japan.

federal government tries to define cable modem Internet service as “Information service” to avoid telecommunications regulations like UNE policy. the Japanese government does not. (TEPCO) obtained permission to operate Type I Telecommunications Business under the six conditions below (MPHPT. 2002). Separate organization and customer information for telecommunications use. Case study (2) the entry of power companies As for power companies. on the other hand.as the US ’s local governments have. the Japanese government regards the entry of power companies as a big influence on society. while the U. a half year later by MPHPT (MPHPT.) • • • • • • Fair treatment of poles among TEPCO’s telecommunications department and other carriers. The MPHPT’s press release on February 8. Therefore. 2002): • • • Disclosure of the account information Assets and expenditures of telecommunications business Prohibition of mutual support By defining the actual percentage of expense distribution Securing fair treatment of pole attachment By applying the same charge to the cable for telecommunication use as that carriers incur. Three more detailed criteria were announced for the account. 2002 reported that Tokyo Electric Power Company. and public disclosure. Second. Shutdown of information between telecommunications department and others inside the company. 8 Aug. there will not be complex policy issues once national level policies are launched. and Separate assets in the account book. (The date was about one month before TEPCO launched the FTTH service. Policy Implications 83 . 8 Feb.S. Prohibition of utilizing electricity supply service and sales information. Periodic disclosure of pole attachment data. Inc. b.

2002). but abuse of their market power in the new fields is a matter of concern. In order to reflect these changes in telecommunications policy. so-called TYPE I Telecommunications Business. Sept. 2) what kind of harmful effects might be brought about. Therefore. JFTC proposed that the government should minimize the advance regulation on entrants to lower the hurdle to the entry for potential entrants.Chubu Electric Power Company Inc. and 3) 84 Chapter Five . JFTC proposed in their report that it is important to balance the regulation before and after entry. One of the important topics there was to promote the spread of broadband Internet. Both power companies have offered Fiber to the Home (FTTH) service in their electrical service areas by themselves. For example. Although two power companies in Japan have obtained the permission of the telecommunications business in Japan. the Japanese government founded an IT Strategy Headquarters as an affiliate of Prime Ministry of Japan and His Cabinet. 25. c. for the regulation before entry. JFTC stated that the current system to permit entrants the telecommunications business. also faced the same condition when it received the permission of a telecommunications business (MPHPT. 2002. The Headquarters proposed an “e-Japan Strategy” to implement its purpose. neither can offer the IPL service today. power companies in Japan can neither offer the service nor make active efforts to fix the problem. it should be analyzed thoroughly 1) whether it is possible for the entrants to abuse their dominant market power in utilities in the telecommunications field. 9). announced June 18. the third largest power company in Japan. Nov. Because the Japanese government decided to postpone the implementation of the IPL service due to its technical problem on August 8. 2002 (The Headquarters Part II. entry by utilities to other public industries is expected to bring about competition based on facilities. In fact. 2002. As seen above. the investigation of implementing IPL in Japan was included in the e-Japan Priority Policy Program-2002. like field tests. Trends in Japan For the ambitious purpose of making Japan a top IT nation in the world within five years since 2001. not only got rid of entrants’ incentive to enter the market but also tended to reflect someone’s intention (JFTC. (Chubu). the two power companies are not requested to unbundle their network facilities. 1(4)-2).

1. if the government determines to put some limits on the entrants’ activity in order to insure fair competition. Summary From these case studies and the results from the cost analyses. there has not yet been any regulation that applies to the bundled electricity service with the telecommunications service. Although there were some voices saying that IPL needed more strict regulation than FTTH. Observing these telecommunications policy trends in Japan. 5. d. “The pricing of electricity far below the cost violates antitrust law” (6). which do not have LV networks. 5. However. the cost analyses showed the relatively weaker market power of IPL in the current broadband Internet market. The discounted bundled service might entice the electricity customers. Organizations METI JFTC ANRE Law Electricity Utilities Industry Law Antimonopoly Act Fig. I conclude that it is appropriate to apply the same or less strict regulation to the IPL service as discussed in Subsection (b).2. The antitrust policy in the electricity market According to JFTC and the Ministry of Economy.whether advance regulation is sufficient to secure fair competition. resulting in the anticompetitive tactics against the electricity entrants.3. The organizations in charge of the electricity policy Policy Implications 85 . this thesis concludes that it is not likely that the government will impose strict regulation on entrants into broadband access business.1. Trade and Industry (METI). The following sections review several past cases to provide general image of Japanese antitrust policy on the bundled services.

complained that this competition would not be fair.S. Following this logic. 1-8.a. The government judgment was. 2003). the judgment so far has been in favor of Microsoft. Case study: bundled service (1) When NTT started a bundled service which offered the bundled service of the local telephone service and the ADSL service at a discounted rate. Ch. for NTT because both local telephone and ADSL markets were under competition and it was hard to anticipate how the bundling service would affect the ADSL market. Consequently. The point here was that the application software. eAccess.. Summary Japanese power companies might bundle their electricity service with the IPL service at a discounted rate like those in the above cases. in the U. Although still pending. However. 149). with its dominant personal computer (PC) operating system (OS). Because the liberalization of the power market has not been done for residents and small businesses.4. the story is slightly different from the cases above. According to eAccess. Part II. section 2 mandated 86 Chapter Five . The government decided to require NTT reporting of data on the correlation between the telephone and ADSL markets. 73% in March 2003 (MYLINE Carriers Association.1. Case study: bundled service (2) Similar to the previous case.). Chapter 31. IE. the bundling of service could be tying the monopoly market to a competitive market (Fig. Internet Explorer (IE). I conclude that the Japanese government follows the U. b. software industry. 3. Netscape. Sec. As the Telecommunications Business Law. the reasons were that it could not offer local phone service and that NTT had a dominant market share in the local phone market. Observing that there is no lawsuit related to the Microsoft’s IE case in Japan. Microsoft was sued for bundling its Internet browser software. the previous number one browser company. c. its ADSL competitor. judgment. After Microsoft bundled IE with Windows. lost much of its market share. 5. was regarded as a part of OS functions.S. however. Windows. power companies can say that a bundled service of electricity and IPL would not violate the antitrust policy if IPL is regarded as a part of the electricity services. the bundled IPL service might also be possible. and to monitor the markets for a possible policy revision (The Dispute Processing Committee.

a former natural monopoly of telecommunications business. subsidized from monopoly market. is regulated by the UNE policy.) Electricity + IPL (monopoly) (comp. The liberalization of the resident-level power market will be on the agenda in April 2007 (EBS 24). Local phone + ADSL (comp. Broadband Internet market This section discusses the issues related to Japanese power companies as entrants in the broadband Internet market. First. should be adjusted (JFTC and MPHPT 29). The main issue here is about unbundling distribution power networks.1. My hypothesis is the opposite of the above prediction.1. because cross subsid y by the power companies between their power businesses and telecommunications businesses is prohibited by the government. with IPL using the economy of scope. the discounted bundling of IPL service cannot be attained under the current environment. Consequently.2.4. Antitrust issues in IPL 5. power companies would also have to provide their distribution power networks to telecommunications competitors if power companies have a dominant market power in the Japanese broadband market.” Policy Implications 87 .2. The difference between the two cases Furthermore. 5. Considering that NTT. 5. the results of cost analyses show that IPL would not be as cost-effective as other technologies such as ADSL and cable modem in the current Japanese environment. though it is not clear whether the liberalization will be implemented or not. but dominant) (comp. the fair competition in the electricity market will be kept even if the IPL service is launched.that the price of discounted bundled service. that activity is prohibited under the current law. In terms of the “degree of influence on society.) Fig.

the observation of the recent broadband market shows that the cost is the biggest element to be considered, not the market penetration of the original networks. For example, the number of ADSL subscribers rapidly increased after its price became around 3,000 yen per month. In fact, the U.S. data show that the top reason why people in the U.S. do not subscribe to broadband Internet service is its expensive price, around $50 per month (OTP, 14). Moreover, IPL is at a disadvantage in that it is not a first mover in the broadband Internet market. Third, as for the possibility of cross subsidy from electricity revenue, the current regulation on TEPCO and Chubu prohibits cross subsidy between electricity and telecommunications services. Therefore, while the bundling of service would be possible, the discounted bundled service could not be offered. One potential rationale to reverse the cross-subsidy regulation is the Microsoft’s IE case, described in Section 5.1.2. For these reasons, I conclude that power companies would not have a dominant market power in the broadband Internet market even if they utilized their electricity networks, whose penetration is superior to any other network. Consequently I recommend that the Japanese government should not regulate power companies that offer IPL service as strictly as local telephone companies are regulated under the UNE policy.

5.2.2. Electricity market This section discusses the issues related to power companies as incumbents in the electricity market. Main issue here is whether IPL would hinder the fair competition in the electricity market.

a. Liberalized markets A part of industrial customer markets is liberalized now. If we can apply the NTT vs. eAccess case in Section 5.1.1. to these markets, power companies could offer discounted bundling service of IPL and electricity. Though electricity service entrants, which do not have distribution networks might complain of this matter, the discounted bundling service could be allowed unless the correlation between two services turns out to be strong. However, in order to achieve this service, the current cross-subsidy regulation on power companies’ telecommunications business should be loosened.

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b. Non- Liberalized markets Ordinary residential customer markets have not been liberalized yet. Therefore, the cross subsidy like a discounted bundled service means leveraging power in the monopoly market, the electricity market, into the competitive market, the broadband market. Observing that NTT faces the UNE policy today, I believe that power companies would receive more strict regulation if they try to bundle the IPL service with the electricity service at a discounted rate.

5.3. Other policy issues There are several policy issues related to IPL besides antitrust issues. This section discusses the issues as follows: • • • • Asset allocation (electricity or information), Rights of way (pole, conduit), Interference of radio waves, and Use of customer information achieved by electricity business.

Most of these issues can be solved if IPL is offered by power companies’ telecommunications, affiliates. Here, however, I try to assume that power companies directly operate IPL because the situation is more likely to happen in today’s environment. Many of the answers are shown by the government in the requirement to TEPCO, issued on Feb. 8, 2002 (MPHPT, Feb. 2002).

5.3.1. Asset allocation The use of utility assets for the commercial telecommunications service has complex jurisdictional and regulatory issues. The challenge will be about the distribution electrical wires, while the physically separated devices like an O/E device will be easily classified as a telecommunications asset. It will be argued how power lines would be valued when they are used for IPL service. Power companies could integrate an auto- meter reading service using the IPL service so that the IPL service could be regarded as an extended utility service. In Japan, for example, the asset of FTTH service has been separated from that of electricity service in the power companies’ account books because of the government requirement. The difficulty of IPL is, however, power lines cannot be divided physically like optical fiber cables because the same medium transmits electricity and data signals

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89

simultaneously. If distribution power lines are regarded as telecommunications asset as well as electricity asset, the power lines might be ruled by more than one regulator, i.e., MPHPT and METI, in the future, which would cause some confusion. This decision might also bring some organizational conflict inside power companies. For example, the maintenance workers of the distribution department in a power company will have to be trained to understand telecommunications technology. This means the extra work for the workers, and some resistance might be expected. As a result, the maintenance workers of the telecommunications department in the company might have to be trained to deal with electrical wires. In this case, the same resistance might be expected, too. As for the ratio of the telecommunication portion, one approach might be to estimate a rental fee of power lines, supposing that an affiliate offers IPL service borrowing the lines from the power company. Power companies could refer to NTT’s calculation of ADSL connection fee. The main portion might be the maintenance fee of a line. In summary, the following challenges are needed to be solved for this asset allocation issue. • Organizational conflicts • Internal conflicts between the distribution dept. vs. the telecommunications dept. External conflicts between MPHPT vs. METI

Legal and regulatory challenge Accounting

Different from that of Japan, this issue could be solved by regarding electrical wires as electricity assets in the U.S., even if they transmit the Internet data. Like the cable modem, IPL might not be regarded as the “telecommunications service” but the “information service.” Furthermore, IPL might be regarded as one of the electricity services by integrating value added services like the automated meter reading service. In fact, if the Internet service using electricity wires is approved as one of the electricity services, the bundled service of IPL and electricity would not violate antitrust issues, according to the Microsoft’s IE case, discussed in Section 5.1.2.

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Chapter Five

In fact.3.S. the cost analysis. charging nothing to electrical cables will give IPL a financial advantage over the other broadband carriers. is that an electrical cable cannot be separated physically as optical fiber cables can be. shows that IPL will not have a cost advantage over the other carriers even without the attachment fees with the current IPL technology. policy has brought about Policy Implications 91 . I do not think that this solution would be applied to the Japanese IPL case. Consequently the competition will not be fair. observing that the U. Second. an electrical cable of the low voltage distribution networks usually consist of only two electrical wires which would transmit electricity and the Internet data simultaneously.2. ducts. however. I try to solve this issue in the following way: first. and rights-of-way for communications purposes. If a utility starts the IPL service. Both power companies must put the fee in their account book of telecommunications business. The different approach might be possible using the same logic discussed in Section 5. Because the poles were built to attach electrical cables. Unfortunately. That is. Third. I recommend that the government should not require that power companies charge an attachment fee on their electrical cables unless a breakthrough IPL technology. the power lines can be regarded as telecommunications lines.S. will be developed. The situation will not be likely to change in the future.” by offering value-added services like the automated meter reading over IPL.3. however. That is. either. Rights of way (pole and conduit) In Japan. it might be possible for power companies to persuade the government that IPL is the “electricity service. For these reasons. which increases the number of homes per LAN. The problem. which can be subject to the same attachment fee as the one the carriers and the operators have paid.5. the purpose of the attachment fee is to prevent the free ride by carriers and operators. While each core can be determined as telecommunications use or electricity use in the case of fiber cables. the government requires that utilities provide telecommunications carriers (carriers) and cable television operators (operators) non-discriminatory access to poles. it is strange to require the same amount of attachment fees on the electrical cable s just because the cables are used for the Internet use. however again. use. the government requires that TEPCO and Chubu charge the attachment fee on their own fibers used for FTTH service. requiring the attachment fee will make IPL even less cost-effective.1. because the Japanese government does not use the same measure as the U.

Inte rference with radio waves Because the IPL system uses spectrum between 2MHz to 30 MHz as its carrier frequency. i. power companies’ attempts to charge different rates on the cables. the Japanese government tested the emission influence of expanding the PLT frequency to the range between 2 MHz to 30 MHz because the IPL implementation was one of the projects to promote the broadband Internet penetration in “e-Japan strategy” proposed by IT Strategy Headquarters. 92 Chapter Five . showed that the emission would heavily affect the existing wireless services such as broadcasting and amateur radio when electrical cables were within 3 meter distance from the target facilities (MPHPT. While it may be possible to suppress the radiation technically in the near future.3.some confusion among the players.3. telecommunications over power lines (PLT) are allowed in the frequency bandwidth between 10 kHz to 450 kHz with less than 10W power. however.1. In the year of 2002. The general use of 2MHz to 30MHz is shown in Fig. the radiated electromagnetic waves sometimes interfere with the waves of existing amateur radio and other uses. 5. 2002). The result. According to the Rules for Enforcement of the Radio Law Chapter 44.e. 9 Aug. an affiliate of Prime Ministry of Japan and His Cabinet. the following challenges are necessary to be solved for the rights-of-way issues. it might also be appropriate to investigate the current spectrum use and reallocate the spectrum among users.3. • Legal and regulatory challenge Accounting 5. In summary. over which the cable companies offer the cable modem services (APPA).

2003. and CISPR are working together to establish the standard of the radiation of the IPL system as well as that of the home-networking over power lines. “The public disclosure of the frequency allocation”) The government’s result also showed that the emission could be received even 100 to 400m distance far from the electrical cables. Fixed) Fig. German and the U. on August 9. using the interfe rence “temperature. Although the Japanese government also participates in Policy Implications 93 . In Europe.000 PLT MF HF VHF [kHz] [MHz] HF bandwidth is used mainly by • Maritime mobile • Amateur radio • Aeronautical mobile • HF-broadcasting • Others (Land mobile. the Japanese government decided to postpone the implementation of IPL in Japan until the emission issue is technically solved.10 450 3 3. which had been given a half year before for TEPCO and two months later for Chubu.S. 5. This decision did not affect the permission for the power companies to offer the telecommunications services. It is generally said that the order of the severity is British.” which measures the degree of interference of unintended radiated waves (Lyon.S. low. because the standard of the radiation regulation differs among nations. 10). several organizations. a unified standard is planned on worldwide basis through the International Special Committee on Radio Interference (CISPR). The spectrum map ranging from 1 to 30 MHz in Japan (Source: MPHPT. such as the European Telecommunication Standardization Institute (ETSI6 ). In the U.1.3. For these reasons. the IEEE Power Engineering Society Power System Communications Committee (PSCC7 ). Talking of the world movement. the FCC’s Spectrum Policy Task Force (SPTF) has been working on this issue..

If the market power is far less dominant than that of existing competitors. there has not been appropriate investigation of the power companies’ market power in new markets like the broadband Internet market.4. it looks difficult for the Japanese government to reallocate the existing spectrum map because of the strong resistance from the organizations such as the broadcasting stations and the amateur radio communicators.3. For exa mple. • • • Organizational resistance Existing frequency users vs. 43). the FCC limits the Bell Operating Companies’ use of customer information obtained from their regulated market for the new market (Gray.CISPR. In fact. 9). the competition of local phone market. However. JFTC proposes that the government should investigate the market only if something wrong occurs there. Therefore. However. it should be analyzed thoroughly 1) whether it is possible for the entrants 94 Chapter Five . purpose (JFTC. enabled it to pursue this strategy. It says that the current permission system of TYPE 1 not only gets rid of entrants’ motivation but also tends to reflect someone’s intention. JFTC proposed that the government should minimize the advance regulation on entrants. Nov. 1999. In summary. 2002. The technical solutions were shown in Chapter two. the similar rule has also applied to electrical power companies which offer FTTH service recently. as for MYLINE competition. In Japan. because severe regulation on entrants in advance would reduce the entrants’ motivation. Recently. which its competitors did not have. including CPNI. the entry by utilities in other public industries is expected to bring about competition based on facilities. Use of customer information obtained by an electricity business About the information known as customer proprietary network information (CPNI). NTT’s rich CPNI. the following challenges are needed to be solved for the emission issue. using CPNI could be justified to achieve perfect competition. power companies and the Japanese government Technical challenge Development of the emission suppression Regula tory challenge Relocation of the existing spectrum map 5. NTT won the game because it created and offered various price menus. which reflected customers’ preferences on the telephone. while the abuse of the market power in the area is concerned.

e..4. when the government determines to put some limits on the entrants’ activity in terms of secure of fair competition. Simulate the outcomes of the asset allocation policies thoroughly. i. Policy recommendations From these analyses. and 3) whether the advance regulation is appropriate to secure fair competition. TC has the same opinion (TC. Policy Implications 95 . Do not charge the pole attachment fee on the electrical cables until the breakthrough technology will be developed. In summary. 9). Support the development of the technology to suppress the radio-wave emission. Allow power companies use their customer information obtained from their electricity business unless the obvious problem is found.to abuse their dominant market power in their area also in telecommunications area. I recommend the following policies related to the IPL implementation: • • • • • Do not impose the UNE policy on power companies because of the little possibilities of violating antitrust issues. the following challenge is needed to be solved: • Regulatory challenge Permission of the use of CPNI 5. 2) what kind of harmful effects will be brought about. the cost-effective bypass-transformer device. specifically about the organizational aspects and the accounting aspects. The “Final report on how the competition policy in telecommunications should be in order to promote IT revolution” reports that the government should investigate how the CPNI in other market influence the telephone or Internet market.

7 the IEEE Power Engineering Society Power System Communications Committee (PSCC). See < http://www.html > 5 Agency for Natural Resources and Energy (ANRE).go.jp/english/index. 96 Chapter Five .go.jp/e-page/f_home. See < http://www.etsi. Posts and Telecommunications (MPHPT). Trade and Industry (METI).jp/> Ministry of Economy.go.soumu.meti.jp/english/index. See <http://www.org/soc/pes/pscc/>.go. Home Affairs. See <http://www.meti.jftc.enecho.Endnote: 2 The Japan Fair Trade Commission (JFTC).org/>.htm > 6 the European Telecommunication Standardization Institute (ETSI).ieee. See < http://www. See < http://www.htm> 3 4 Ministry of Public Management.ewh.

Aggregating four or five LV-LANs will capture the necessary number of homes per LAN. For example.000 yen per month. discussed in Section 2. 6. and that the OPEX is around 2. i. Finally. Furthermore.2.3. first. Then it suggests the further research.. 80 homes per LAN.000 yen per month under the same condition.1.1. it cannot be said that IPL would be as cost-effective as other broadband methods. the followings are found: • IPL would not have a dominant market power in Japan under the current situation. Conclusions 97 . Summary of key findings 6. the IPL cost increases to around 6.Chapter 6.000 yen per month on the likely condition that the number of home passed is 20. it concludes with the policy recommendations.500 yen per month. I conclude that IPL would not have a dominant market power in Japan under the current situation. If the cost of the bypass technology decreases to the affordable level and the bandwidth limit of the power lines is technically solved. the monthly IPL cost will be 4. Key findings from the cost analyses From the cost analyses. this option would make IPL more cost-effective. • It might be cost-effective if IPL could technically increase the number of homes per LAN in the future. The cost analyses show that IPL would not be as cost-effective as other broadband methods such as ADSL and cable modem. Considering that the retail prices of the other broadband methods are around 4.e. Because the market window of IPL is also shrinking faster.1. and that the IPL penetration is 20 percent in the intermediate case scenario. One way to increase the number is to adopt the MV & LV line network architecture. if the Japanese reality is taken into account. Conclusions This chapter summarizes the key findings of this study.

it is uncertain how dominant the market power of power companies in the broadband market will be with the IPL service. the IPL would not have a cost advantage over other broadband methods. the UNE policy would bring about the complex operational issues of distribution networks. As JFTC states in their report. the power companies with IPL are not first movers.1. Third. • The power companies should be allowed to use the customer proprietary network information (CPNI) obtained from the electricity services.• It might not improve the cost advantage to let IPL customers purchase the IPL modems. though the criterion does not have a quantitative measurement. 6. Finally. it is impossible to offer the discounted bundled service of IPL and the electricity service. because the cross subsidy from the electricity revenues is prohibited. Because the retail prices of other broadband methods also decrease by the similar degree. The reasons are as follows: first. Rather.2. Key findings from the policy analyses a. in order to stimulate 98 Chapter Six . • The Japanese government should not impose the UNE policy on power companies which offer the IPL services. Although the penetration of cable television is one of the few quantitative measurements. this measurement alone will not tell the market power of the entrants. Second. the followings related to the Japanese broadband market are found: • The “degree of influence on society” is the criterion to determine whether to regulate the entrants. this option is not effective to improve the cost advantage of IPL. The Japanese broadband market From the policy analyses.

if the LV distribution network assets are partially regarded as telecommunications assets.. The Japanese electricity market From the policy analyses.e. increase the number of homes per LAN.3.further competition. Because IPL would not have a cost advantage even without the pole attachment fee. Considering that the IPL technology is also expected to be used in the home-networking in the future. the relocation of the spectrum should be investigated sooner or later. • The Japanese government should not impose the pole attachment fees on the electrical cables. used for the IPL purpose. there would be organizational conflicts not only the inside a power company. the followings related to the Japanese electricity market are found: • The IPL service would not hinder the fair competition in the Japanese electricity market. As discussed in Section 5. which would improve the IPL cost structure. b.. though the work would not be easy. the Japanese government should not impose strict regulation on power companies unless they turned out to have dominant market powers.1. it is recommendable for the government not to impose the fees on the power companies unless power companies develop technologies. Conclusions 99 . but also between the regulators. • The asset allocation issues need to be analyzed further. i. • The Japanese government should reconsider the allocation of the spectrum as well as assist the development of the IPL’s emission suppression technology.

which is adopted by Amperion. The sensitivity analysis in Section 4. However. like using IP-based devices. this thesis recommends the following policies: • The Japanese government should not impose the UNE policy on power companies. 100 Chapter Six . I recommend further researches on this topic. because the current regulation prohibits incumbent power companies from offering the cross subsidized bundled service of IPL and the electricity service. In order to benefit such areas. specifically WiFi technology.4. 6. the IPL service by the incumbent power companies would not be an advantage over other electricity entrants. Suggestions for further research The recommendable further researches are as follows: • The cost reduction analyses of pole equipment. where the deployment of the broadband infrastructure is slow.3. This thesis made several assumptions related to the O/E device at a pole. might be a good substitute for fiber-based architecture. this architecture deserves considering for power companie s which seek for the entry into telecommunications business. Because the pole equipment cost occupies the larger portions of the cost of implementing IPL. MV & wireless architecture. Second. • The cost analyses of the different network architectures. the relatively expensive IPL service would not attract the electricity customers. IPL is still expected in some areas like rural areas. Policy recommendations Although the market window for IPL is shrinking recently. Considering the recent spread of wireless technology.2. such cost-effectiveness might be possible under different assumptions.3 shows that it is a challenge to make IPL as cost-effective as other broadband methods under the assumptions I made. 6.First.

The Japanese government should consider the revision of the existing spectrum map. I believe that this study based on the engineering cost model would contribute to the further effective policy implementation in the broadband market as well as the electricity market in Japan. The Pole attachment fees should not be charged to the electrical cables unless the IPL service will be profitable. and Power companies should be allowed to offer the bundled IPL service with their electricity service at a discounted rate to the liberalized electricity customers.• • • • Power companies should be allowed to use their customer information obtained from their electricity business. Conclusions 101 .

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