By: Brett Feldman
Sunrise and transmission line
getty
I often hear comparisons between the telecom and energy industries in terms of history of monopolies and market deregulation. This analogy remains applicable as both industries are disrupted by innovative technologies that give consumers more market power.
The Verizon Case Study
I recently read the article, “Verizon Makes Statement with New Disney
DIS Deal: The Economics of Old Pay-TV No Longer Make Sense.” It noted how Verizon Wireless is offering the entire Disney streaming bundle (Hulu, Disney+, and ESPN+) for free to some of its unlimited wireless customers. Verizon basically acknowledges that the traditional cable bundles, such as its Fios offering, will go away. “The current value chain of the media business is not working. It’s broken,” said Frank Boulben, Verizon Consumer Group’s senior vice president of marketing and products, in an interview with CNBC.
So, the incumbent provider, Verizon, is being replaced by apps and the company’s subsidiary, Verizon Wireless. This situation should sound familiar to people in the energy industry. You can view Verizon Fios as the utility, Verizon Wireless as its deregulated subsidiary, and all the streaming services as distributed energy resources (DER). Fios (brown power) sales are declining while third-party vendors and resources (solar, storage, EVs) are proliferating. And the deregulated subsidiary is trying to be proactive, even while potentially cannibalizing the parent (consider examples such as Exelon
EXC
/Constellation
STZ
, Southern Company
SCCO
, NextEra Energ
NEE
y, National Grid, Enel, ENGIE, Centrica).
Facing Change, Incumbents Can Operate and Orchestrate
I won’t go so far as to subscribe to the old utility death spiral theory that was popular a few years ago. There is still a role for Verizon to provide internet service to connect all of the streaming services, similar to a utility continuing to provide transmission and distribution services and potentially operating a distributed energy resources management system (DERMS) to orchestrate the DER.
But the utility business model must change to survive. Survival will require regulatory shifts, grid planning adjustments, operational modifications, and customer engagement enhancements. I recently participated on a Smart Electric Power Alliance panel where we discussed these changes and the opportunities they might create.
Hopefully, this evolution will provide more potential revenue streams for the Verizons
VZ
and utilities of the world rather than impede them. If they don’t fight to maintain their incumbent monopoly model but rather embrace the disruption, these companies will discover where they can still play a valuable role.