Tapping into public connectivity - why utilities are becoming ‘asset lighter’

A recent Ericsson smart meter deal highlights a trend to sharing communication networks to cut rollout costs.
Published: Thu 31 Aug 2017

Ericsson is to collaborate with Kuwait telecommunications company Zain on one of the Middle East’s largest utility digital transformation projects.

A consortium involving Ericsson will deploy an 800,000-strong smart metering solution to make it easier for Kuwait’s Ministry of Electricity and Water (MEW) to bill customers, collect payments and provide users with real-time information about their water and electricity use.

The Ministry says undertaking the multi-year modernisation project will enable it to distribute energy more accurately long-term.

It can also plan for growth in a sustainable way – critical in a country which doesn’t have any permanent rivers and relies on energy-intensive water desalination plants to filter salt water into fresh water for domestic and commercial use.

Utilities and network operators’ collaboration

The consortium is rolling out a smart metering solution using connectivity from Zain’s telco network – a move by the Ministry to use telecom infrastructure, thus avoiding both the upfront investment and operational outlays associated with building and managing its own communications network.

Mireille Harvey, Technical Subject Matter Expert for Enterprise and Cloud Billing (ECB) at Ericsson, says utility companies today more frequently rely on partner connectivity to deliver their services as they recognise the cost and efficiency benefits.

“It’s not so important now for utility companies to own the assets, and certainly not important to own the connectivity assets,” says Harvey. “The utilities companies’ core business is about providing energy, so they can concentrate on that with a partnership agreement to use public, or semi-public infrastructure for connectivity.”

Harvey says: “The investment for the connectivity side is more often than not the responsibility of the telco operator. The smart meters are compatible with the network, so why not use the infrastructure that’s already there?”

Plus, she points out, when the telco modernises its network, “the benefit is immediate for the utility company”.

In its 2016 list of five disruptive trends reshaping the utility sector, KPMG picked up on a move towards ‘asset-light models’.

The consultancy noted that while the utility market has traditionally been heavy on physical assets, it should follow the example of successful modern tech disrupters Uber and Airbnb, and look to manage distributed assets that it doesn’t own.

The report says: “Expansion whether by acquisition or by building new capacity needs significant capital expenditure. Players within the [utility] sector are looking at models that if not asset-light are ‘asset-lighter’.”

It also adds the development of smart grids also “allow more effective use of existing grid capacity thus making more of existing assets”.

Internet of Things connectivity

As part of the Zain and MEW deal, Ericsson will supply services around customer care, post- and smart prepaid services - “which are globally becoming more in demand”, says Harvey, referencing a new smart prepaid research paper - performance management and network data analysis, as well as manage Internet of Things (IoT) applications around the smart devices.

Analysts forecast 29bn connected devices by 2022, of which around 18bn will be related to IoT. Naturally, both utility providers and network operators view this as a potentially lucrative revenue stream, and as demand for smart devices increases, it’s likely there will be greater collaboration between the two industries in the future.

Pointing to the cost of building or upgrading existing infrastructure, analyst Clive Longbottom at technology consultancy Quocirca notes that connectivity for IoT devices requires intelligent grid capability, otherwise “two-way interactions between the utility company and the various types of consumers will be difficult to implement and manage… This requires massive investment from either the utility companies or the government.”

Consumers may allow an energy services supplier to control smart devices in their home if they are paid for their consent, but the right infrastructure must be in place first. Using public infrastructure overcomes this significant challenge previously faced by utility providers.

The MEW project points to a future where more collaborative efforts will help utility providers, and ultimately society, benefit from better utilisation of shared infrastructure. While consumers will gain from more cost-effective and seamless access to innovative new services enabling them to become smarter citizens.

Read more about the largest utility transformation project in the Middle East.

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