I read today about several energy efficiency firms getting funding to expand their product development and grow their companies.  Good for them and I wish them the best of luck.  What was surprising to me was that these articles fit with an observation I made at The Indus Entrepreneurs (TIE) Southern California Chapter meeting last Tuesday.  The meeting focused on the Smart Grid. While the keynote speaker, Dr. George Arnold from NIST,spoke about Smart Grid and the upcoming investment needed, the additional panel members were either from companies that were build products and services for “outside the meter” or VC companies that focused on companies building products for “outside the meter.”

I have stated in the past that I believe that there are great opportunities for collaboration between Utilities, Telcos and the Smart Grid.  That conviction has been the Telcos can help build the communications networks needed for the Smart Grid to be successful.  From what I observed last Tuesday, that conviction is blurring a bit. It is interesting that the Entrepreneurial spirit of small businesses and start-ups are more focused on the end-user and more ICT than infrastructure. More importantly, they represent an equal or greater opportunity when their customers are included in the market size.  This revelation has me thinking in another direction regarding what might be the “cloud” opportunity for the traditional Telcos…

Perhaps the best opportunity for creating a great value in the “cloud” for Smart Grid is hosting the myriad of start-up and small companies that provide energy efficiency applications and services to business.  From a Telco point of view, a program focused on this part of the Smart Grid could provide a valuable (read revenue generating) service to an entire ecosystem.  This is not to say that helping the utilities with transforming their communications networks for G/T/D activities is not a good idea. Instead, greater focus can be placed on building a support infrastructure for “outside the meter.”  There is more entrepreneurial spirit out there, Telco traditional customers (residential and business) are there and frankly, the revenue models are likely to be simpler (i.e., less intercarrier compensation and less contentious SLAs).  It also fits with most Telcos’ long-term strategy to be more about content, applications and services over the bandwidth provider model of the past.

For the Telco, this potentially means that product development efforts will need to include building an incubator environment to cultivate the apps and services or at the very least partner with an existing University incubator to get the project off the ground (some Telcos have already started this for other areas thus not a “one-off” effort). It will also mean continuing to shift their business model towards facilitation rather than carrier transport.  In my opinion, not a bad thing as the Telco has the embedded knowledge in their workforce to be successful with this change; the question becomes will they seize it at the appropriate time and succeed?