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The November 16, 2003 Issue Provided by System Dynamics Inc.
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Spain Plugs Into Broadband: A Guest Article by Antonio Gomez

Note from the Editors: During our trip to Spain in May, we had the opportunity to meet with Antonio Gomez, Jaime Estalella and Steve McCarthy from Tecnocom, a Madrid-based systems integrator and PLC technology pioneer. We are pleased to continue our series of guest articles by broadband experts with this contribution from Tecnocom, which has been engineering PLC networks for more than two years and participated in extensive trials of voice and data transmission over the electrical grid in Spain, Portugal, Latin America and China. Their projects in Spain have included both the Zaragoza pilot and the deployment of Iberdrola’s commercial offering.

Antonio Gomez joined Tecnocom in 2001 as Managing Director for the Broadband Technologies Business Unit. Throughout his twenty-year professional career he has constantly been involved in cutting-edge technologies. Antonio worked with IBM from 1982 to 1993 in the Development, Product Management and Technical Support groups in Spain, France, the Netherlands and the USA. In 1993 Antonio joined Cisco Systems Europe as Technical Consultant, in 1998, he became General Manager for Cisco's Services Division for Spain, Portugal and Africa and in 2000 he became Operations Director for Cisco Systems’ EMEA Services Division for Emerging Service Providers. Antonio holds a BSEE from Rotterdam University.


Introduction

Advances in Power Line Communications (PLC) technology allow for high-speed, broadband communications over medium and low voltage lines, providing unprecedented market opportunities for utility companies. Early in October, 2003, the Spanish Telecommunications Market Commission (CMT) granted Endesa, Iberdrola and Union Fenosa, the country’s three main electric companies, licenses to offer voice and data services over their grids. Using PLC technology, these companies have begun bundling packages to offer a serious alternative for broadband services to their customers in Spain. The fundamental importance of PLC is its dual role as a competitively-priced broadband alternative and as a new driver in the digitalization process of the country.


General positioning of electric utilities in Spain

PLC allows electric companies the possibility to increase revenues in an otherwise stagnant market, using their existing fixed assets. The electricity sector is in the midst of a liberalization process which will lead to increased competition and threats to margins. To improve their positions, electric companies are seeking to diversify and enter into new market opportunities. PLC offers the opportunity for these companies to diversity their product range without large infrastructure investments. By turning their electric grids into telecommunications networks, electric companies can generate incremental revenue and improve the financial yield of their transport networks and bolster customer loyalty in their increasingly competitive markets.

For the moment, the Spanish electric companies have chosen the strategy of becoming PLC providers for other telecommunications operators, without entering directly into public service. These power companies provide the last mile access infrastructure and offer commercial services through the telecommunications operators in which they are stockholders. The table Electric Company Ownership of Telecom Operators shows the relationships between the electric companies and the telecommunications operators they are using to promote broadband.

Endesa and Fenosa are both negotiating collaboration with Auna to commercially launch voice and data services over the electrical grid and Iberdrola has already launched broadband Internet services through its telecommunications operator Neo-Sky.

In the case of Endesa, Spain’s largest electric company, voice and broadband access is being offered in Zaragoza through company affiliate "Endesa Net Factory" and Auna, the country’s second telecom operator. Endesa’s commercial offering comes on the heels of a massive successful pilot in the city of Zaragoza. This pilot, which began during the first part of 2002, helped to confirm the viability of PLC technology. The commercial offering designed by Auna includes telephone service and Internet access at speeds of 128, 300 and 600 Kbps. It also includes a free first month and sign-up along with a telephone terminal.

PLC services in Zaragoza will take advantage of the 20,000 home network that was rolled out for the pilot. A second phase is planed for January, 2004 which will see commercial launch of PLC services in Barcelona.

Union Fenosa has also conducted pilots in Madrid and some outlying suburbs. A spokesman for Fenosa has told Reuters that the company is in preliminary conversations with Auna about utilizing Fenosa’s electrical grid to offer PLC services, but emphasized that the exact date (which is believed to be first quarter 2004) has not been set.

The present model, in which the electric company provides the infrastructure and the telecom operator markets the telecom services to the end users, could change in the future. The utility companies can easily obtain the type of license needed to “go it alone”. For the moment, these utilities seem to be playing it safe by making their networks available to their commercial partners who already have experience marketing advanced telecommunications services to end users.

However they choose to move forward, the utilities have to get moving as the CMT has determined that these companies must offer service to at least 40% of their customers prior to October, 2005.

In addition to the operator licenses granted by the CMT, the three utility companies have also received approval from Spain’s National Energy Commission (CNE). The only requirements of this Commission are that telecommunications services are marketed by affiliate companies, that separate bookkeeping is maintained and the corporate name of the utility company is not used in the service offering.


Major roles of PLC in Spain

The major roles of PLC in Spain are as a competitive alternative to ADSL and as a potential method of bridging the digital divide. This divide is illustrated by the fact that the highly-populated cities of Madrid and Barcelona currently account for 2 of every 5 broadband connections, whereas the smaller cities and towns have generally not yet experienced the value-added services that higher speed Internet offers.

The number of ADSL high speed internet connections in Spain is just over a million and a half as of the end of October, 2003. At 45 euros/month, ADSL in Spain is the most expensive and slowest in Europe, and is prohibitively expensive for many users. Inflated costs are being blamed on high last-mile access fees which are almost exclusively the domain of Spain’s ex-monopoly telecom operator Telefónica.

PLC’s potential is attributed to the fact that there are three times the number of electricity users as there are fixed telephone service users in Spain, according to a study from the University of Oviedo. From a purely economic standpoint, this potential is debatable, since only those users with a fixed telephone line connection are “worth the trouble” in economic terms of serving with advanced telecommunications services. The table Broadband Speeds and Costs demonstrates PLC’s role as a possible alternative from a social impact point of view for those regions which lack telecommunications infrastructure, but do have an electrical infrastructure.

PLC technology is seen as a new driver in the digitalization process in Spain because Internet access via power lines is fully competitive with other options currently available on the market and because better pricing will help to increase the demand for broadband access. Additional advantages of PLC from the users perspective include symmetrical sending and receiving speeds which better address today’s user patterns and a greater capacity and potential for varied in-home applications, since any power socket is able to connect to the Internet.


Roll outs

Just two weeks following Commission approval, Iberdrola, Spain’s second electric company, was able to start making broadband Internet access commercially available. Iberdrola’s offering is initially directed at 30,000 inhabitants in two densely-populated districts in the north of Madrid. It will be extended throughout the city according to demand. Acknowleding Tecnocom’s contribution to the quick rollout, its Technical Assistance Center Manager, Humberto Encinas, who lives within the coverage area, was Iberdrola’s first paying customer for PLC Internet access.

Iberdrola is marketing two types of services, under the slogan “Internet at the Speed of Light”:

  • PLC 600 with a symmetrical speed of 600 Kbps for sending and receiving (more than double the standard ADSL on offer) at a cost of 39€/month, and;
  • PLC 100 with a symmetrical speed of 100 Kbps for 24€/month.

These services include initial connection, installation and a free first month of service plus five email accounts of 25Mb, 10Mb personal web page and maintenance of previously existing email accounts. Iberdrola will offer similar flat-rate services gradually expanding into other cities around Spain.

Tecnocom’s critical role in making Iberdrola’s service commercially available included planning, network design, support and operations services, technical training and network optimization.


The Technology

Iberdrola PLC network --> Click for larger picture

Iberdrola’s commercial PLC network contains technology and equipment based on the DS2 chipset and manufactured by the Japanese firm Toyocom. Tecnocom is a 'Global Preferred Partner' of Valencia-based DS2, leader in the development of high performance, low cost PLC chipsets and software.

DS2 is a fabless silicon design house and a leading supplier of silicon and software for PLC. The data rate of the DS2 chipsets is currently up to 45 Mbps (27 Mbps downstream and 18 Mbps upstream). 2 or 3 chips can be used in parallel to reach speeds up to 135 Mbps; new chipsets are in the works that will reach speeds of up to 100 Mbps.

PLC network with DS2 technology --> Click for larger picture

DS2 chipsets are incorporated into nodes to provide backbone communications over the medium-voltage grid; into repeaters in the low-voltage access network; into gateways that connect buildings to the access network; and into CPE devices such as modems and set-top boxes that plug into wall sockets in people's homes.

The three main utility companies in Spain have used various PLC chipset providers for their pilot tests:

  • For its pilot tests in Barcelona, Seville, Santiago de Chile (Chile) and Zaragoza, Endesa used both ASCOM (Switzerland) and DS2.
  • For its pilot tests in Madrid, Toledo and Valencia, Iberdrola has used NAMS (Israel), ASCOM and DS2.
  • Union Fenosa used both Main.net (Israel) and DS2 for its pilot tests in Guadalajara and Madrid.

Conclusion

PLC is the third broadband access system available in Spain, after ADSL and cable. The news of its commercial launch has created great expectations because of its attractive pricing and speed, as compared with current Spanish ADSL offers.

For the moment, rollouts are limited to geographical areas covered under initial pilot test areas. Depending upon take-up of the offer, PLC will gradually be offered throughout the major cities in Spain. Massive acceptance of the technology will allow for equipment pricing to drop, and the electric companies' business models for offering PLC services will be justified.

Perhaps for Spain and beyond, the most important long-term aspect of PLC is not better pricing and higher symmetrical transmission speeds, but the possibility for broadband services to be offered in areas where ADSL and cable services are not offered. As such, PLC will represent a giant step in the digitalization process of Spain and around the world.

( www.tecnocom.biz )