The Telco-Intelligent Utility Parallel, Redux

Phil Carson | Jun 22, 2010


Ever since I attended UTC Telecom 2010 in Indianapolis just before Memorial Day, I've been struck by the degree to which various players in the smart grid space liken the current transformation of electric utilities to that undergone by telcos over the past decade or so.

Conversations on the parallels - real, imagined or self-serving - keep cropping up in different forms.

Vinay Mehta, senior vice president for global delivery and development at Convergys, is asking the same questions I hear from many quarters. While some of his points sound familiar, they bear repeating.

"How do you get a utility to evolve from a regulated to a deregulated market, speed up the introduction of new services and make the end-consumer a much bigger part of the decision-making process?" Mehta asked.

"In the old world, consumers were content with the services being offered," Mehta said. "In the new world, they are going to control a lot more of the decision-making about services and about what behaviors they will or will not change."

"Unfortunately, there's going to be a higher bar for the utility industry, in that there'll be times when there's not just a carrot - the inducement for changing behavior - but also the stick," Mehta continued. "There could be penalties in the form of higher bills, if your customer doesn't change behavior."

Engagement with and education of the consumer is no mystery, in Mehta's view. Listen to consumers, then formulate your message. And differentiate your messages to match various types of consumers. 

"Before you put a dime on the bill, what is your message? What is the behavior you want to change?" Mehta said. "Some people respond to price, some to environmental concerns."

Those messages can be matched with service offerings to improve the "customer-to-cash" opportunities in this new relationship.

If energy efficiency and basic energy management is the goal, utilities could decide to jump into the home area network business, or leave that to a third party. For homeowners motivated by price, perhaps a simple home area network with various functions prioritized and others available only when rates drop will answer the consumer's need to limit energy spending. 

"That's a bit futuristic for many people, but the basic IT plumbing will allow us to do that," Mehta said.

In terms of business models, Mehta offered another example that could transfer from the telco experience to the intelligent utility.

The example of wireless roaming, in which wireless minutes outside your established carrier's network is simply billed at a higher rate by the host carrier, could be extended to figuring out the billing for electric vehicle charging stations, Mehta suggested. (Yes, we've heard that elsewhere.)

The host utility providing the charging station recognizes the user and settles with that user's primary utility. Or the user could make other billing arrangements, such as using a prepaid card, a credit card or e-wallet.

Exploiting the "customer-to-cash" opportunities unleashed by smarter grids simply means expanding one's services to create new revenue streams outside the basic delivery of electricity, Mehta pointed out. (Again, a familiar notion in a new context.)

"That paradigm shift is important," Mehta said. "Energy providers must develop service plans with options."

Since we're all carrying cell phones, the telco parallel here is obvious. The major network carriers offer various rate plans, content, software applications and accessories - and, yes, in most cases, these offerings contend with third-party offerings. The telco fights to be more than the dreaded "dumb pipe" while the market nips at their heels or, in many cases, surpasses their offerings.

The AT&T partnership with Apple Inc. over the latter's iPhone and App Store shows the strength of synergy, while also exposing fault lines of competition. To wit: Apple tends to get credit for the successes while AT&T tends to take the brunt of fallout over connectivity and network reliability.

It all comes back to applying lessons from other industries to the evolving utility, in Mehta's view. Underlying it all is "listening" - market research - and sculpting value propositions for various consumer types. That is, before third parties do it for you and capture these new "customer-to-cash" opportunities. 

"If it's just a broadbrush message, such as apple pie and motherhood, that's not going to wash," Mehta cautioned. "Because it's very difficult and very expensive to take on that whole smorgasbord of every possible thing and try to capture your customer's attention and get them to buy in."

Phil Carson
Intelligent Utility Daily












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What will motivate utilities to fundamentally change?

Nice article Phil.  We need more telco redux. 

One concern is that competition created the force behind telcos willingness to transition.  For utilities, where competition is minimal, what will force utilities to reassess their culture and restructure their organizations.  These fundamental changes come with signficant pain and uncertainty.  What will balance this?  Great reward or the threat of death motivates competitive companies.  What will motivate utilities?

Telcos and Engagement

I don't disagree with much of what Mehta has to say, but there is one fundamental difference between electricity and telecom service that we do not want to lose sight of:  the ratio of fixed to variable costs in telecommunications is quite large, and our cell phone bills mostly recoup the cost of infrastructure.  Variable costs make up a larger share in electricity, and they do vary considerably by time-of-use.

Fixed price electricity plans, and roaming plans that rely on a customer's host utility pricing, are not in the cards any time soon.


Jack Ellis, Tahoe City, CA