Taking a piece of the smart grid action

Tony Poulos
19 Oct 2011

Hot on the heels of TM Forum's Smart Grid Quick Insights report is the news that US utilities could spend $3.2 billion on telecom equipment and services this year. TelecomPaper reports that according to a study by the Utilities Telecom Council (UTC), this level of communications spending represents a 21% increase over the estimated $2.64 billion utilities spent in 2009 and at least a 3% rise over the $3.1 billion spent in 2010.

Maybe these figures will show just how important the utilities sector may become as a growing revenue stream for beleaguered communications service providers (CSPs). Chief among the categories of telecom-related spending is advanced two-way metering and associated networking, spearheaded, no doubt, by the millions of smart meters that will need machine-to-machine (M2M) connectivity back to base. The market opportunity has already been large enough for AT&T and Verizon to include smart grid in their strategies.

The second category is transport networks, with utilities expected to spend some $813 million on fiber, microwave, Wimax and other forms of transport technology this year. Spending on wireless communications as a proportion total spending could double over the next five years, growing from 28% of telecom spending this year to half in 2016.

Partner or rivals?

Although at the moment companies that run power grids tend to view CSPs as possible rivals, it would make sense to think of them more as potential partners. The two have a lot in common with the rollout of the smart grid being akin to the massive transformation the communications industry has and is going through in the move- to all-IP networks and converged services.

However, there remain a number of challenges facing smart grids. One is the massive amount of data they will generate - how will this be handled and by whom? Today's wireless technologies are not designed to support several hundred thousand devices simultaneously. Also, the networks must be designed to give voice traffic priority, especially in times of crisis when their traffic load is heaviest.

As the TM Forum report points out, new business models will likely emerge as part of this trend, including M2M - wireless operators, or M2M mobile virtual network operators (MVNOs). Utilities may find the option of becoming an MVNO - more economically viable than building an independent communications network and it would allow them to leverage the systems, applications and standards that CSPs have, but that they are not necessarily familiar with.

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