The Cellular Smart Grid: Can You Hear Me Now?

Will the fight for utility smart grid customers become as cutthroat as the battle over cellular subscribers between cell phone companies? Verizon Wireless (s vz) today is touting its smart grid network product for utilities in partnership with Itron (s ITRI), Ambient Corp. and Qualcomm (s qcom). While Verizon has been advertising its smart grid offer for months, AT&T (s T) has until now been the most aggressive cell phone provider for the smart grid market. Verizon’s increased efforts shows the growing opportunity and competition over smart grid services between cell phone companies.

So called “machine-to-machine communications” like the smart grid don’t include consumer customers and cell phone accounts, and run data over networks used by devices (see our new report on machine-to-machine networks at GigaOM Pro, subscription required). Consumers can be fickle when it comes to cell phone companies, resulting in churn and continuous upkeep. A smart grid utility deal, or a machine-to-machine service, in contrast, can be relatively low maintenance. Machine-to-machine services can also diversify cellular networks and the smart meter traffic on the wireless network. Real-time pricing, but perhaps also demand-response events, will likely be pretty minimal compared to, say, a wireless video stream.

As the market for smart grid networks — which Cisco (s CSCO) is claiming will be larger than the Internet — grows, cell phone companies see the massive opportunity. Utilities, like Texas utility Texas-New Mexico Power (TNMP), work with cell phone companies because they don’t have to put down the capital expense of building out and operating a network, but can, instead, rent space on an existing one. Cellular operators can also offer the utility the same tech advances that the large telecoms can deliver.

Startup Smart Synch has built a business off of working with AT&T and T-Mobile to offer utilities cellular smart grid networks. Network builder Silver Spring Networks announced a partnership with AT&T in December. Verizon, as detailed this morning, has its own partnerships and plans to launch its faster 4G Long Term Evolution (LTE) wireless network nationally, which it says can be used for the smart grid. But I have yet to hear of many utilities that have signed up to use Verizon’s smart grid service.

Utilities are also opting to build their own networks. Owning the network gives the utility control and avoids having to share bandwidth with other telecom customers. In addition, regulated utilities get to earn profits on capital expenses like building their own networks.

It’s still up for debate — at least in my mind — what method (build or rent) is more beneficial and cost effective. It seems like there’s major advantages for really large utilities to build their own networks, as well as for municipal utilities that can build networks and sell other services like broadband access. Smaller utilities, which have less access to capital, are probably better off renting the smart grid network space.

Regardless, the battle seems to be heating up between the two largest U.S. cell phone companies over which will convince more utilities to pay them to use their networks for the smart grid.

For more research on machine-to-machine and smart grid check out GigaOM Pro (subscription required):

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New Opportunities in the Smart Grid

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