BPL BONANZA and BLUSTER

by Roger Conrad
Editor, Utility & Income
March 17, 2006


“I don’t know if you own any telecom stocks, but I know this: If you do, I highly suggest you get out now,” blusters the latest promotion of a prominent newsletter editor. His reason: a “breakthrough 120-year-old technology” that “will turn every electrical outlet in the world into a high speed Internet connection.”

Marketing promotions are designed to appeal to greed and fear. And after six years of near-depression--following the spectacular peak in early 2000--widely held telecom companies are particularly easy targets for fear-based promotions.

It’s rarely a good idea to follow investment advice based solely on a promotional letter designed to feed on your emotion. That’s almost certainly the case here, with the outlook for communications companies brighter than it’s been in some time. The surge of private capital chasing communications assets around the world now--with the idea of selling them for a big profit later--underscores the industry’s growing recovery. So does the takeover of BELLSOUTH (NYSE: BLS), whose shares have risen by nearly a third since AT&T (NYSE: T) called a couple months ago.

It would be an equally large mistake, however, to completely ignore the technology in question, Broadband over Power Lines (BPL).

Without getting technical, BPL is basically transmitting data and voice signals over the same lines that currently deliver electricity to homes and businesses. As such, it represents a potential third wire into the home in the communications business, along with telephone and cable television.

BPL would make power companies’ networks infinitely “smarter,” enabling them to limit wasted energy, better match supply and demand in times of peak usage and ultimately develop a bevy of new services to help customers better monitor their own energy usage. The almost certain result is lower costs, lower rates and fatter profit margins for utilities. That’s in addition to being a potential competitor for a range of communications services in competition with Big Tel and Big Cable.


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BPL BONANZA and BLUSTER