One of the significant challenges facing network operators today is the high capital cost of deploying next generation broadband network to individual homes or schools. Fiber to the home only makes economic sense for a relatively small percentage of homes or schools. One solution is a novel new approach under development in several jurisdictions around the world is to bundle the cost of next generation broadband Internet with the deployment of solar panels on the owners roof or through the sale of renewable energy to the homeowner. 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 discount on the customer’s Feed in Tariff (FIT) or renewable energy bill. There are many companies such as Solar City that will fund the entire capital cost of deploying solar panels on the roofs of homes or schools, who in turn make their money from the long term sale of the power from the panels to the electrical grid. In addition there are no Energy Service Companies (ESCOs) and Green Bond Funds that will underwrite the cost of larger installations.
Tuesday, September 2, 2008
The business model — or ground-floor opportunity, as Mr. Montie put it — is not unlike Amway, Nu Skin and other multilevel marketing businesses: Average Joes and Janes sell friends a product or service (who, in turn, sell friends a product or service) with each seller getting a slice of the recruit’s spending in return. Only instead of pushing soapsuds or vitamins, Ambit evangelists sell gas and electricity.
The approach is a novel and perhaps inevitable byproduct of utility deregulation that began a decade ago, with broken-up monopolies now facing competition from alternative energy service companies, known as ESCOs. Hundreds of ESCOs have sprung up — and some have folded up — in recent years, promising to supply gas and electricity cheaper than giants like Con Edison, which still delivers the power. In New York City and Westchester County, ESCOs have nearly 600,000 customers (Ambit officials refused to say how many customers it has locally or nationally).
Direct Energy Services, IDT Energy and many other ESCOs — eager to capitalize on fears over high fuel prices — use mass mailings, Web sites and door-to-door salespeople to recruit customers from Con Ed by promising they will save 7 percent on their supply cost for the first two months, and avoid taxes on the delivery of that supply. Direct Energy reckons that customers in a typical New York City apartment can shave about $6.50 off their monthly electric bill.
Companies offer perks, too. Energy Plus gives customers bonus miles on various airlines for every dollar they spend on electricity.
Ambit, which was founded in Texas in 2006 and came to New York in June 2007, is one of a handful of ESCOs experimenting with the network-marketing model, betting that people are more likely to buy electricity from someone they know than from a stranger at their door (and that sales agents who earn residuals from those they enlist will be more motivated than those who work for a salary or straight commission).
Mr. Chambless declined to discuss Ambit’s finances because it is privately held. But he said he and the company’s chief executive, Jere W. Thompson Jr., had a lot of experience in deregulated markets. Mr. Chambless added that Shell Energy Trading, a subsidiary of Royal Dutch Shell, had also agreed to sell energy to Ambit, a major endorsement of the company’s prospects.