Thursday, March 3, 2011

Business Opportunities Beyond Traditional Telecom Services: The Smart Grid

The Smart Grid is a hot topic right now, and I'm planning to write several articles about smart grid opportunities for rural telecom providers in the near future, focusing on different aspects of this idea. I have personally been interested in the Smart Grid for a year or so, and then I had the pleasure of doing several smart-grid related projects for my previous job and in the Wireless Communications engineering class I took last semester. My focus has primarily been on using wireless networks for smart grid components, and which type of wireless networks are most appropriate for different utility operations--from smart meters to SCADA to critical infrastructure communications (smart meters in particular). Naturally, I was very excited when a new class was added to the University of Colorado Interdisciplinary Telecommunications Program this semester: Energy Communications Networks, focusing on all different communications aspects of the Smart Grid. I did not actually need to take this class for the credit hours or as a requirement, but that did not stop me from registering anyway because I am so interested in the topic. I would actually like to become somewhat of an expert in Smart Grid communications, for reasons I will explain momentarily. So far the class has been very interesting and I have been gaining some valuable knowledge about utility systems in general, a topic that is relatively new to me. There are just so many interesting aspects of utility communications, and the convergence of digital data communications with something as "old fashioned" and entrenched as the utility grid promises literally unlimited possibilities for utility providers and consumers, and new business opportunities rural telecommunications providers.

Yes, and telecommunications providers. Traditionally, the utility industry has not been very trustworthy of commercial telecommunications network providers. Utility providers want communications networks that promise the highest levels of reliability, security and resiliency, and this usually means building their own private networks specifically tailored to specifications and strict requirements in these areas. Utility providers want to have priority use of the network if "something bad happens," and utility providers also need network coverage in the deepest, darkest, most rural corner of their service territory--places that even the best telecom network providers may not reach easily or profitably with broadband. Although not every type of commercial telecommunications network is an attractive option for utility providers, I do believe that rural telephone companies and rural utility cooperatives should break down some of the traditional barriers between these two critical industries. Rural telecom providers are the most likely type of commercial telecom company to have broadband service that reaches far and wide in rural areas that are not considered profitable for larger telecom providers. It is a well known fact among the rural telecom advocates that rural companies provide far better broadband service in rural areas than their larger competitors, which has been an issue of contention in may recent FCC proceedings and will surely be brought up again in the CAF/USF Reform comments coming out next month. I suspect, and would like to further investigate, that many rural utility cooperatives and rural telephone companies and cooperatives have very similar service areas, where some real exciting business opportunities could exist for network sharing and shared investment in broadband facilities.

It is also a well known fact in the rural telecom industry that rural companies need to start looking at ancillary businesses and considering new ways to utilize existing infrastructure to increase profitability. With USF funding and access charges facing a dark and uncertain future, there is going to be a "survival of the fittest" situation in the rural telecom industry. The "fittest" are going to be the ones who jump on new business opportunities, possibly outside the scope of normal telecom services. Applications and content, particularly in video and social networking, are two obvious choices for expanded business models in hot current markets, but may not be practical or ideal for small rural companies. There is considerable pressure for utility companies to upgrade to smart grid capability--afterall, a frightening percentage of technology in the utility grid is already years past its expected useful lifespan of 30-40 years. Similarly, there is a huge push for telecom providers to upgrade to 4G, FTTH, and other broadband-capable technologies. See where I am going here? Utilities need to upgrade communications networks to broadband + Telecom providers cannot survive unless they upgrade to broadband = Business Opportunity for both parties.

There are many challenges facing any type of collaboration between rural utility and rural telecom providers. The lack of trust that utilities harbor towards telecom is clearly an issue, but I think there would be more potential for mutual agreement in a rural area, where the manager of the rural utility co-op and the manager of the rural telecom operator are probably neighbors, have kids on the same football team, or at least run into each other on a regular basis. This is one of the benefits of keeping rural services (be it telecom, utility, or grocery stores) owned and operated by members of the community. The business culture itself is more appropriate for collaboration across lines that are traditionally not crossed in corporate America, and each provider has a significant stake in the future of the community as members of the community themselves. The other major challenge is technology. Utility providers are implementing any and all types of communications networks in the migration to the Smart Grid, and often there are different communications technologies used by one utility provider for different segments of the grid. In general, wireless seems to be one of the best options. In the project I did for my wireless class last semester, I looked at the benefits and drawbacks of using public vs. private and licensed vs. unlicensed wireless networks. In a "perfect world" scenario, utility providers would probably want private licensed spectrum for most Smart Grid applications, but in a realistic world, there are actually many possibilities for using commercial and/or unlicensed wireless in areas of the grid that require lower bandwidth, less security, and low priority data transmission. Smart meters (or Advanced Metering Infrastructure-AMI) are an attractive candidate for using commercial spectrum because of these factors (low bandwidth, etc.). One possibility for a rural utility-rural telco partnership is in wireless broadband. A rural telco who already has (or is planning to deploy) a local wireless network like WiFi or WiMax could work with a rural utility co-op on network planning and capacity requirements, and could possibly even share the capital cost of the investment.  Collaboration on network planning could be very beneficial to both sides, and it could ultimately allow the telecom provider to reach more customers with wireless broadband.

Basically, rural telecom providers need to start looking for new business opportunities in the face of adversity and a harsh regulatory regime. In an industry where the actual service providers are being shadowed by devices, applications and content, rural telecom providers need to be getting the most out of their infrastructure investments or risk an unprofitable future in terms of reduced long distance revenue and customer migration coupled with USF uncertainty. There may still be many challenges to overcome before commercial telecom providers and utility providers are best friends on a crusade to increase broadband availability in rural areas in a mutually beneficial way, but I think the time has come for these two industries to look into convergence possibilities wherever possible. I am planning to do more research on this topic soon and will add more information and ideas about smart grid business opportunities for rural telecom providers.

Edit 3/8/2011: I was so excited to see this article today in Connected Planet: NRTC Lands Two New Smart Grid Product Offerings, about some new technologies that will provide infrastructure synergies for rural utility cooperatives and rural telecommunications providers. I am planning to investigate the technologies mentioned in the article from Sensus and Efacec as well as the potential for rural utility-telecom collaboration for a project in my Energy Communications class. The article also mentions that one rural utlity and telco have merged some operations to achieve Smart Grid goals, and I am very curious to learn more about this partnership-- Who is it? Have they been successful? What challenges have they overcome?

Cassandra Heyne
ruraltelecommentary@gmail.com

4 comments:

  1. Finally, something positive coming...

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  2. Thanks for explaining about smart grid.

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  3. Thanks for sharing your info. I really appreciate your efforts and I am waiting for your next write ups thank you once again.

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  4. Interesting and informative one,,thanks for share the blog,,really awesome collection you have,,i liked your blog!!! Business Telecoms Providers

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