Like many ambitious high-tech startup companies, Current Communications Group begins with an idea that is both technically advanced and yet brilliant in its simplicity: Why not offer customers broadband Internet access over wires that every home already has — its electric grid.

And yet, also like most technology companies, that simple idea has to clear a lot of complex hurdles — in this case, an already highly competitive and advanced marketplace for high-speed web connections, an uncertain regulatory environment and, most critically, the conservative, risk-averse nature of the big electric utilities the company must partner with.

But Current — which was represented at the recent Wharton Technology Conference 2007 by vice president J. Brendan Herron Jr., and two key investors — may have found the solution for breaking out of that box, and it could come from an unlikely source: rising concern about man-made global warming.

That’s because in addition to its main feature — BPL (broadband over power line) Internet service — Current’s technology also provides utilities with a service called Smart Grid, which uses a high-tech system of sensors to closely monitor both electric use and occasional outages, thus providing a huge savings in the need for new generating capacity.

As Herron told the audience during a panel discussion titled, “New Tech Startup: The Challenges and Opportunities of Successfully Growing a New Tech Company,” the twin realizations that power plants are the source of some 40% of greenhouse gas emissions in the United States, and that growth in electric demand continues to outpace the arrival of new supplies, have forced the big utilities to take notice. “They are faced with a dilemma: ‘What do we do as demand grows and supply doesn’t? The alternatives are: We try to build more plants in an uncertain environment, we take brownouts at a huge cost to the economy, or we use a Smart Grid to help facilities better manage the efficiency in the load.'”

The result is that the startup, based in Germantown, Md., has been able to attract some $130 million in venture capital — from backers such as Google, General Electric, Goldman Sachs and a couple of utility companies — and establish a small but growing record of attracting new customers in markets like Ohio and in Texas, where Current has a promising alliance with innovative electric utility TXU (recently bought by private equity firms Kohlberg Kravis Roberts & Company and the Texas Pacific Group, in a deal valued at $45 billion). 

That’s the good news. The potential bad news for Current is that other speakers and panelists at Wharton’s annual technology event seemed to unintentionally lay out the huge hurdles that Current will face in gaining Internet customers, as the dominant industry players — the cable and telecom companies — continue to win millions of new customers through elaborate bundling of services.

Indeed, at another panel later in the day — “Telecommunications: Convergence: Redefining Boundaries in the New Telecom Era” — executives from leading players such as Verizon, Time Warner Cable, Visage Mobile and Cisco never once mentioned BPL technology in a wide-ranging, 75-minute discussion of the ways that cable, phone, Internet and mobile services are increasingly bundled and already luring millions of potential subscribers.

That mountain standing in the way did not seem to scare off Herron, who is Current’s vice president for corporate development & strategy, nor co-panelists Richard Goldstein, a managing director of key investor Liberty Associated Partners who has also become a vice president of Current, and Scott Ungerer, a co-founder and managing partner of EnerTech, the firm that pioneered venture capital for new tech solutions in the energy industry.

A Winning Combination

The participants agreed that the involvement of major investor EnerTech has been critical to the growth of Current, because Ungerer’s firm has a unique ability to interest electric utilities — one of the most stable and non-innovative industries in America — to look more closely at what the startup is offering. “A great idea is simply the price of admission,” Ungerer told the panelists, noting that the big utilities look at the quality of the management team and the other investors, and also at whether a new type of technology can create real monetary value. He said that in the case of Current, its ability to team up with experienced industry hands has been essential for attracting investors.

“The hardest thing to do is learn from other people’s experience,” said Ungerer, who has seen startup companies focus too often on their idea and not on building alliances, sometimes with disastrous results.

In the case of Current, it’s clear that a mid-course correction in its strategy has also helped considerably. Goldstein, from Liberty Associated Partners, said his firm played an active role in creating Current at the start of the decade, as Liberty looked for the next new thing after some successful investments in cable and other communications-related ventures. “The best wire that exists in the world is the power company’s — because it’s so pervasive,” Goldstein said.

Indeed, Current sees several advantages to the consumer with BPL Internet access, which is competitive with high-speed cable and telecom DSL lines when it comes to price. One is plug-and-play Internet access, in which computer users can tap into broadband with a simple modem that also makes wi-fi unnecessary, since every room has electrical outlets. Also, Herron noted that the system allows users to send out large files, such as PowerPoint presentations, just as easily as downloading them — a capability other types of broadband do not have.

That said, Herron and the Current investors readily acknowledged that the later development of the Smart Grid features, and the improved metering and power-flow regulation ability that comes with them, were what made Current more attractive to utilities that just weren’t initially excited by broadband. “When the power goes out now, the only way an electric utility knows that is if somebody picks up the phone and calls,” pointed out Herron, who said utilities proved more receptive to the energy-saving benefits of the program than to offering web access. Current, he added, believes that smart-grid technology can reduce overall electrical demand by some 5% to 10%, and that, in turn, could make as much as $125 billion in new plant construction costs unnecessary.

As a result, Current is finally seeing some hard results. This month, Current and its Texas partner, TXU Electric Delivery, began installing the first of some 300,000 new high-tech meters in the Dallas-Ft. Worth metroplex, which will allow the utility to offer time-of-day electric pricing while phasing out its workforce of meter readers. As for its broadband service, Herron said the company has attracted about 10% of potential customers in the Cincinnati market where Smart Grid is in place, which translates to roughly 5,000 homes.

The problem, of course, is that for broadband, Current is seeking to enter a wildly competitive marketplace, as was made clear at a separate conference forum on the telecommunications industry. There, executives from top cable and telecom systems insisted that the future lies in connectivity, but in ways that seem to go well beyond BPL, at least in the number of services offered.

Losing Sight of the Customer?

The telecom leaders, including Verizon’s vice president of video network services, Nicola Palmer, and Richard Cho, director of voice product management for Time Warner Cable, both spoke of their aggressive efforts to bundle services with “Triple Play”-style combinations of television, voice and high-speed Internet, with mobile phones also ready to join the mix.

But moderator Martin Kon — the head of media, entertainment and customer analytics for Mercer Management Consulting — noted that getting to this point was not so easy. A number of similar bundling efforts in the 1990s crashed after tens of millions of dollars were spent to land a handful of customers, such as an initial $100 million flop by Time Warner. The picture improved when the technology for connecting to home and business users became more advanced and also more cost effective.

“Our ability to bring that pipe into your home is cheaper than it was yesterday,” said Kon, who noted that just a few years ago, technology companies like Microsoft were complaining that homes didn’t have enough broadband capacity to handle all their apps, while today the broadband providers are begging companies like Microsoft for new apps to match their expanded access.

One of the biggest problems for the fast-growing telecom industry, the panelists agreed, is that with the focus on adding so many new features and technology, it’s easy to lose sight of the customer’s actual needs. Said Ed Paradise, the vice president of Cisco who deals with the mobile wireless and broadband industries: “People just want to be able to do what they want. It’s very simple.”

For more than an hour, the telecom executives outlined some of the ways that they plan to meet those needs, with enhanced Internet capabilities over mobile phones, for example, or greater use of devices like Slingbox, which lets customers watch their home television programming on any device that’s hooked up to a broadband connection by using routers and software to redirect cable or satellite TV signals over the Internet.

On the one hand, it may sound extremely difficult for a new player like Current and its BPL technology to cut through all that clutter, but the telecom executives also found substantial room for any type of improvement. Said Time Warner’s Cho: “Are we fully connected yet? No, not when I go home and my phone rings and I can’t find it.”