Green Broadband

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= Free broadband Internet could be offered to consumers who are willing to pay a carbon premium on their gas and/or electric bill

Description

Proposed by Bill St. Arnaud at http://green-broadband.blogspot.com/:

"How does a network operator or builder hope to deploy a next generation broadband network and recover their capital costs when there will be little opportunity to earn revenues from their traditional services, especially if these services are freely available on the existing copper network?

One solution is a novel new approach under development in several jurisdictions around the world which is to bundle the cost of next generation broadband Internet with the resale of gas and electricity to home owners. Rather than charging customers directly for the costs of deployment of the high speed broadband network theses costs instead are amortized over several years as a small premium on the customer's gas and electricity metered rate for energy. Customers are then free to use the new broadband infrastructure to connect to service and content providers of their choice, many of which will most likely be free.

Gas and electric retailers are not to be confused with utilities who own and operate the electrical grid or gas pipeline networks. In Ontario alone there are over 50 registered resellers of gas and electivity. Resellers purchase wholesale power from generators across North America or from the energy wholesale market and then use the electrical grid or gas pipeline network deployed by municipal or provincial utilities to sell power directly to businesses or homeowners.

Consumers have a choice of purchasing a variety of power packages with different rates and terms. The typical arrangement is for a customer to sign up with a gas and electric reseller where they agree to pay a small premium on their per kilowatt or per cubic meter metered rate for energy, in return for a promised fixed rate for the next 5 years or other benefits. For example, environmentally conscious consumers can agree to pay a premium on their electrical metered rate and purchase power that is only generated through renewable resources such wind and solar power systems (Bull Frog Power, Wind Energy, etc)

Some electrical resellers are now also offering bundled services where consumers can purchase power combined with a variety of products from hot water heaters, to home renovations or telecommunication services.

First Utility in Switzerland for example is offering fiber to the home as one of its bundle packages that it offers to its customers throughout that country. Direct Energy, Canada's largest gas and electric retailer, had undertaken a similar business model where they offer 300 Free minutes long distance per month to customers who sign up for a 5 year deal on their gas and electricity resale offerings.

Clearly there is now an opportunity to use this business model to underwrite the costs of deploying the next generation broadband networks. No government financing is required. This is entirely a private sector market solution. As well no homeowner will be forced to participate or subscribe to such a program through municipal levies or taxes that often occurs with municipal run networks.

More importantly further inducements can be offered to the homeowner, by guaranteeing the continued delivery of the next generation broadband even if the customer reduces their overall gas and electricity consumption. In fact homeowners would be encouraged to reduce their overall consumption as part of their contribution to reducing global warming. As their reward they will continue to receive their next generation broadband delivery service without penalty. Hence the term "Green Broadband"

This novel business arrangement has many benefits for the network operator, the electric/gas reseller and most importantly the consumer. Briefly they are as follows:

For the network operator or builder they now have a guaranteed revenue stream for which they can underwrite the costs of deploying the next generation broadband infrastructure. Their revenue stream is protected regardless if profits from services such as telephony, cable TV and Internet trend to zero, as we are seeing happen elsewhere in the word. Just as importantly all billing, collection and bad debt is the responsibility of the local utility who bills the customer on behalf of the electric/gas retailer, who in turn pays a portion of their revenues to the network operator and/or builder.

For the gas and electric reseller, they now have a new sales tool to entice customers sign up for their gas and electric resale products. Currently the marketing strategy of electric and gas resellers is to guarantee a flat price for the gas and electricity rates over a 3 year or 5 year contract. As well the increased premium on the gas and electricity rates for the green broadband service enables greater arbitrage against the wholesale prices that the gas and electricity reseller must pay to the electrical generating companies which should enable greater profitability.

Both the network operator and electric gas reseller can also contribute to reducing emission of green house gases by encouraging customers to reduce consumption, but also protect their profits through intelligent arbitrage of their wholesale prices. And as we know from Economics 101 the surest way to reduce consumption of a precious resource is to increase its price. So the additional premium consumers would pay for green broadband would be a further incentive to reduce consumption, regardless of whether they believe in global warming or not.

Finally, and most importantly, the homeowner benefits through the availability of a low cost, or in some cases free next generation broadband connection, where they can also have a choice of service providers. This is especially important in communities where the economics of providing next generation broadband would not be possible with current business strategies of the incumbent carriers. In addition the homeowner, can make their own small contribution to global warming by reducing their overall consumption and yet not incur any penalty in terms of delivery of their next generation broadband delivery service. So customers can end up paying significantly less than they do today for their combined cost of gas, electricity, telephone, Internet and cable TV.

Finally governments can play a critical role by encouraging these new business relationships between network operators/ builders and the energy industry. Many electrical gas resellers are subsidiaries of government owned or controlled utilities. Governments can also accelerate the process by providing some seed capital as infrastructure loans for some early pilots and in rural or remote areas where the capital costs of deploying next generation broadband infrastructure are still daunting."

More Information

Other entries:

  1. Follow the Energy Computing Grids
  2. Bits for Carbon Trading

Also:

  1. For further information and detailed business analysis please see http://www.canarie.ca/canet4/library/customer/Green_Broadband.ppt
  2. or contact the author Bill St. Arnaud at [email protected] .