According to new research from IDC, the worldwide Internet of Things (IoT) market will grow from US$655.8 billion in 2014 to US$1.7 trillion in 2020, with a compound annual growth rate (CAGR) of 16.9%.
As the Machine-to-Machine (M2M) and IoT markets continue this upward trajectory, one market with potential for strong growth is smart metering, which allows utilities to remotely monitor in real time or in intervals electricity or gas usage and conditions at a residence or business. In many regions, territorial and regulatory hurdles to enable smart metering have been cleared.
The European Union (EU), in fact, has mandated that the majority of gas and electricity meters be replaced by smart meters by 2020, as part of a move to address the challenges of climate change and the scarcity of energy resources. In China, Chinese state-run utilities continued their rapid replacement of outdated basic electromechanical meters in 2014, and that work continued in 2015. In the United States, several states are also mandating smart meters, further driving growth in this segment.
In a typical smart meter scenario, smart meters collect usage data and transmit it to the supplier back office. From this data, customer bills may be calculated and suppliers can gain a more immediate and accurate view of the consumption of energy. A two-way communication channel is established between the supplier back office system and the end customers premises (panel, smartphone, tablet), sending usage and billing information detailing energy consumption in an understandable format. Mobile apps can enable customers to view their usage profiles in real time and amend their consumption behaviour to reduce overall costs.
M2M technologies are key to real-time monitoring and alerts that help control consumption and report issues. However smart these meters might be, they all require two things: connectivity to and support from a communications network, and a new approach to service enablement, billing and management of these micro-transactions. What was once a very manual process for utilities—sending a meter reader to check actual usage or guessing on estimated usage—is now simplified through real-time monitoring and reporting.
However, although M2M may have simplified a process and reduced labor costs, the process of handling all of these little pieces of data is far from straightforward. Utilities have two choices: invest in new billing and business process management (BPM) systems themselves, or partner with a third party, such as a competitive service provider (CSP) who already has a strong relationship with the customer. CSPs already have a quadruple play of services—telephone, broadband, video and mobile—that they bundle to the end user. Can they successfully add utility billing into this mix?
In theory, it would seem to make sense for CSPs to enter this market. They are:
- Already part of the smart meter food chain, so to speak, because they are utilised to connect the smart meter with the utility
- Already have an established relationship with the user through the other services they offer
- Starting to understand the unique requirements that M2M services bring to the table in terms of back-office systems.
It would seem to be a natural fit for utilities and CSPs to establish partnerships to maximise their strengths and their revenue. In Part 2 of this article, we’ll look at the challenges to making this a successful union and what’s truly needed in order to effectively engage with customers on smart metering.
The author is Flavio Gomes, CEO of LogiSense
