Smart Grid � What it Means for Service Providers

Lately, I’ve been writing about a variety of emerging scenarios that should be on the radar of service providers, such as hosted services, cloud computing and platform plays. I have a completely new scenario that you’ll be hearing more about from me – not just here, but elsewhere as well. 

I’m referring to the smart grid, and need to provide some context. Aside from this column, I wear a few different hats, one of which is co-founder of Intelligent Communications Partners. This is a new consultancy focused on smart grid, and we recently formed a partnership with TMC to address this rapidly developing market opportunity. Our partnership has two components – the Smart Grid Summit and the Smart Grid portal.

The summit is coming up quickly – Sept. 1 – and is co-located with IT Expo. Being a new event, it’s just one day long, but we’ve already put together a strong program, and have received enough support to warrant expanding this to a full scale event at the next IT Expo in January. If you want to learn more about what smart grid has to do with telecom, I encourage you to register and join us. To be around this caliber of people who you normally wouldn’t see at the IT Expo, coming to the summit will be time and money well spent.

For day-to-day coverage of smart grid news and analysis, our portal is the place to go. We’ve created a unique focal point for this space which includes breaking news feeds, exclusive editorial content from TMC, and various forms of thought leadership from me, my partner Shidan Gouran, and guest contributors. I hope you visit to see for yourself, and shortly there will be an eNewsletter you can subscribe to.

The summit and portal are both of interest in their own right, but are also relevant to what I try to cover in this column. Smart grid is once-in-a-lifetime opportunity to truly modernize not just our energy infrastructure, but the business of energy. I have long seen parallels here with telecom on many levels, and this is a key reason why I’m involved in these new initiatives. There is no shortage of smart grid conferences, portals, publications, etc., but most of them have a singular focus on utilities. 

We think there is a distinct value proposition to address Smart Grid in the broader context of communications, IT and the smart home. From our perspective, we are very well positioned to address this confluence, and believe there is a lot that utilities and telcos can learn from each other. To do this, however, the right type of forum is needed, and that is our thinking behind both the Summit and the portal.

While it’s easy to see why smart grid is a big deal for utilities, you may well be wondering why this should matter to service providers. I certainly intend to explore that in future columns here, and will simply set the stage this time around. Prior to 1984, of course, U.S. telcos were not much different than energy companies, as they were both highly regulated utilities. There is no turning back for telcos today, but with that come mixed blessings. 

Consumers and businesses have more choice than ever before, and with IP technology, telcos are now part of the broader service provider landscape that includes cabelcos, ISPs, CLECs, IM portals, etc. Before IP, the carriers held all the cards, but the balance of power has shifted to the subscriber, and with that, all kinds of implications for business models, pricing, value propositions, etc.

Smart grid is really no different for utilities, and this looks like IP all over again to me. Much of the activity around stimulus funding and green policy has been around modernizing the grid infrastructure, or T & D – transmission and distribution. Telcos never had these strong drivers to support the adoption of IP, and instead, early deployments were vendor driven, thanks to gobs of free money from VC’s who saw a gold rush opportunity. Government support is a safer bet long term, so smart grid is a matter of when, not if.

What is less understood is what follows once the grid is modernized, and that’s where things get interesting for my readers. As with legacy telcos, utilities hold all the cards in that their prime interface with subscribers is to simply deliver energy and bill it. A key element of smart grid is the ability to support two-way, real time communication with subscribers. For the first time, utilities can have not just meaningful dialog with consumers or businesses about their services, but intelligent communication with premises-based systems to better manage energy usage. In short, utilities can have both person-to-person and machine-to-machine communication.

This is really just the tip of the iceberg, since much of the smart grid communications infrastructure will be IP-based, and may well adopt some of the same standards and protocols used by service providers. When you factor in the ability of utilities to bill for services in very small increment, the duck analogy quickly comes to mind. If utilities start looking, walking, talking, acting like service providers, then what’s stopping them from being service providers?

Of course, broadband over power line – BPL – is one branch on this tree, but the broader scenario is one where utilities could end up providing a growing range of services that telcos offer today, as well as a whole new family of services strictly built around energy. I don’t think utilities want to be in the telephone business per se, but it won’t long for them to recognize they are another bona fide channel into the home or business for various types of communications services, many of which utilize similar technologies as telcos.

Step back further and bring the smart home into the equation, and it’s not hard to see where utilities can become the primary interface for managing home appliances, entertainment systems, and powering your plug-in hybrid car. While these are consumer examples, parallels exist in business environments, especially commercial or industrial operations. Regardless, there is no doubt that the overlap between what utilities can offer and what service providers do offer will only increase.

These scenarios have not played out yet, but they will. There is ample opportunity for utilities and service providers to both collaborate and compete. Smart grid is now in its formative stage, much like IP was around 2001. This means a lot of work needs to be done to develop standards and reliable technologies to deliver on the smart grid promise. Not surprisingly, many of the vendors who are driving IP forward with service providers – Cisco, Microsoft, Google, IBM, Alcatel, Siemens, etc. – are heavily invested in smart grid. 

I’m just touching on some core themes here, and hopefully it’s enough to demonstrate why service providers need to pay attention to smart grid. It’s too early to tell if this is good news or bad news, but there are both threats and opportunities for service providers, and I’ll do my part in future columns to address each. Otherwise, I urge you to follow our portal regularly and come out to the summit if you can.