This doesn't affect the wires' ability to carry power: The powerline network signals are in the 4- to 21-MHz range, enormously far away from the power grid's normal operating frequency of 50 hertz or 60 hertz. In this way, an electrical system can simultaneously deliver power and data over the same wires: Powerline networking devices can see and decode the networking signals, but standard electrical devices -- lights, motors, etc. -- don't even know the network data signals are there, and continue to operate normally.
Real Advantages
Second, and again like wireless networking, powerline networking spreads the signal around: Once the network signal is injected at any point into a wiring system, the network can be accessed from almost anywhere on the same electrical system. This means you can move from room to room or floor to floor in a building, and still be able to access the powerline network from any ordinary wall socket. In fact, because electrical wires carry signals very well, a powerline node actually can have greater range than a wireless access point, and also avoid many of the problems of wireless signal loss caused by thick walls or other obstructions. Anywhere the electrical wires go, the powerline networking signal follows.
There's a third major advantage of powerline networking because its signals stay within the wires: Unlike wireless networking, which creates a wide bubble of connectivity in which anyone, authorized or not, may be able to detect the network and try to log in, a powerline network's data signal remains confined to the physical wires: It doesn't broadcast into the surrounding empty space. This means a potential electronic eavesdropper can't drive by on the street or sit in the parking lot and hack a powerline network, for example. Practically speaking, the only way to access a powerline network is to have physical access to an electrical outlet that's part of the network. In this sense, powerline networking can be more secure than wireless networking. In fact, security issues are worth a closer look.
Security Issues
If you're the sole occupant of the building, the transformer effectively isolates your data from wider distribution, so people down the street (for example) can't read your powerline network data, and you can't read theirs. Thus, powerline networking gives you a reasonable degree of intrinsic security.
But there's a catch: If you're in an office complex, apartment building, condo, or other situation where a number of different occupants all may be on "your" side of the electrical transformer, then they could, in theory, see your data stream, if they plugged an appropriate powerline networking device into their wall socket.
To counter this, most of the current generation of powerline networking adaptors use automatic on-the-fly data encryption (usually 56-bit DES) and other methods to prevent unauthorized network access. For example, the powerline devices may limit access only to other devices whose serial numbers, media access control ("MAC") numbers or other unique identifiers are known to the network administrator. (And these security options are on top of whatever intrinsic security -- passwording, software access permissions, and such -- that's incorporated into the network itself.) The end result is security at least as good -- and, I think, often better -- than that of many wireless networks.
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Powerline networking has two enormous advantages over traditional wired networking. First and foremost, like wireless networking (a form of radio), a powerline network requires no new cables or special wiring: Any building that has normal electrical service already is wired for powerline networking, with no need to snake cables through walls or under floors, and with no need for drilling or other structural work.
You may be thinking: If a powerline network signal follows the wires, doesn't that mean that the network traffic gets broadcast across the entire regional electrical network? The answer's no: Powerline networking data signals cannot pass unchanged through electrical transformers. This means in most buildings, the powerline network data signals become unreadable at the point where the building connects to the regional power grid -- usually beneath the street or on a utility pole in front of the building.
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