My firm is completing in-depth research on Broadband over Powerline (BPL) for a private client. When I compare the data we have uncovered to the things I read in the press, I get worried that readers may go astray.

BPL is the use of existing power lines – the medium-voltage lines of a distribution system or the low-voltage lines in a building – to transmit data at high speeds  BPL is a great technology, but some analysts are naively predicting it has major potential as an Internet access vehicle for consumers.

In fact, Internet access will only succeed (in the U.S.) if it can tag along with the two *real* market opportunities.

Last year, research firm Telecomm Trends International predicted that the market for BPL Internet access would explode, with sales jumping from about $57M in 2004 to $4.4B by 2011. Their chart showed a classic hockey stick, starting at a small number and going up, up, up every single year without a hitch or a pause. Other research firms made similar predictions.

The hockey stick lie

Here in the real world, technology markets never go straight up. They inevitably suffer one or more setbacks. Sometimes they sink into oblivion (can you say artificial intelligence). Sometimes they revive again a decade or two. (Today’s tablet computers are achieving modest sales 15 years after disastrous first attempts from companies like Go Corporation and Microsoft.) Sometimes they go through three or four up-and-down cycles before achieving steady growth. (Think solar and wind.)

So if you’re making business decisions on the assumption that BPL access sales are headed straight for the stratosphere, let me share five points gleaned from our research.

1. BPL still has technical issues. To read the press releases, you’d think BPL has solved all of the technical roadblocks. In reality, it still has trouble handling “noisy” lines. Quality varies by vendor, of course, but in general it is still not reliable enough for voice or for mission-critical applications.

2. BPL still has installation issues. Every distribution network is different from the next. Thus, every BPL project requires custom design and engineering.

3. The overseas market will be stronger than the U.S. market in the short to mid-term. For a variety of reasons – some political, some regulatory, some technical – BPL has better prospects in Europe and Asia over the next three years than in the U.S. China, for instance, recently announced it will rely on BPL to provide Internet access to consumers and businesses in many cities. Companies counting on the U.S. as their sole market may not be around too long. Buyer beware.

4. Internet access is the wrong focus for the U.S.. The press touts BPL as a way to get broadband access to consumers. Yet it is nearly impossible to cost-justify a BPL installation in the U.S. solely on the basis of selling Internet access. BPL-based internet access may someday be a major opportunity in the States. It’s equally likely it will never take off. By the time BPL has worked out all the kinks, cable and DSL will have gathered all the low-hanging fruit. And emerging alternatives such as WiMax and fiber-to-the-home may be widely available.

5. Smart Grid and indoor powerline are the short-term growth opportunities in the U.S. BPL has its best shot at widespread deployment as a backbone for utility applications such as advanced metering and grid monitoring. It has a second opportunity as a technology to allow apartment and office buildings to provide broadband access to tenants without the need to rewire the building or to put up WiFi throughout. There are even signs residential customers may switch to powerline networks, which are easier to set up than today’s WiFi configurations while providing more throughput.

Both of those two opportunities are for real and showing signs of growth. In the U.S. at least, BPL-based Internet access will have to ride in on someone else’s coattails to see widespread adoption.