Executive Summary

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.

For further information and detailed business analysis please contact Bill St. Arnaud at bill.st.arnaud@gmail.com.

Friday, February 24, 2012

A novel way to fund broadband FTTH Internet - converting old coax/copper into microgrids


[I have long argued that we need to find new business models to underwrite costs of next generation broadband – Fiber to the Home ( FTTH) if we ever hope to breakup the existing broadband oligopoly.
The lobbying powers of cableco/telcos are so intense and overwhelming that even the few community broadband initiatives that still remain are likely doomed from this relentless onslaught.

If we can find a business model that effectively makes broadband free, then we might be able to undermine the smothering of innovation and economic growth by the incumbents. A couple of business models that I have proposed to deal with this problem such as “homes with tails” – where the customer owns the last mile and/or “bundling broadband with energy bill” have failed to gain any traction for a number of reasons. But the overwhelming challenge in all these cases remains the high upfront capital cost due to the tyranny of the takeup.

Takeup rates are the single most important factor in determining up front capital costs: with a 100% takeup the cost per home of FTTH can be as low as $500. With 50% takeup the cost is around $1500-2000 per home and with 10% takeup the cost per home can be as much as $6000.

As noted by the International Energy Agency in Paris, in a report called “Gadgets and Gigawatts” the typical home consumption of power from digital appliances exceeds, in aggregate, the consumption of power from all the traditional appliances in your home. A good example is the set top box. A single DVR and one HD set-top box configuration can draw an average of 446 kilowatt-hours of power per year: slightly higher than that of a new refrigerator, according to a study from the National Resources Defense Council . The cableco/telcos, who provide the box, have no incentive to reduce this energy consumption, other than paying lip service about their ersatz commitment to the environment.

Digital appliances only draw a small amount of power, as opposed to traditional appliances which have short bursts of large amounts of power. But the fact that digital appliances are usually on 24 hours a day, or seven days week means that even though they are only drawing a few milli-watts at a time their annual power consumption can exceed that of traditional appliances. A good example is the clock in your microwave oven. According to the Economist magazine that little clock draws more power over a year than the microwave oven itself!

Given that typical household electrical bill is $1000-2000 per year, the energy cost of all your digital appliances in a typical western home is somewhere between $500 - $1000 per year.

Given this huge and growing power demand from digital appliances, many people have advocated more energy efficient products. But I am remain very skeptical that such a strategy will work for a number of reasons:

(a) Neither the manufacturers or incumbents have any monetary incentive to become more energy efficient, as the costs are totally absorbed by the customer. And in the case of set top boxes the customer usually does not have a choice of box they can use so they cannot purchase a more energy efficient box;
(b) The growth in the number of digital appliances in our home ( or elsewhere) is far out stripping any modest gains in efficiency;
(c) The Internet of things and embedded ICT will continue to spur growth and demand of digital appliances in the home;
(d) Most of the world has yet to catch up to western homes where energy consumption from digital appliances exceeds that of traditional appliances; and
(e) Jevons paradox will plays a factor in all of this where any gains in energy efficiency paradoxically promote energy consumption

The biggest problem facing this planet is NOT energy consumption. It is the type of energy we use. It is the energy from fossil fuel power plants that is producing CO2 which is destroying this planet. If we could convert all of our energy to renewable sources then we would not be contributing to global warming. If all of our energy came from renewable resources we need not be concerned about energy efficiency. Considering the fact that a couple hours of sunshine hitting the earth every day equals the entire ANNUAL energy consumption on this planet, one begins to appreciate that we have no shortage of energy.

So our biggest challenge is not to make these digital appliances more energy efficient, but to insure that they only use clean renewable power. Since digital appliances only draw small amounts of power at any one time it would make sense therefore to power all Digital Appliances from small renewable energy sources such as roof top panels or micro windmills. But what happens when the sun sets, or if the wind dies? How do you continue to provide power to all the digital appliances and more importantly how do you get the power from the roof top to the devices themselves? Various solutions have been proposed including use of Power over Ethernet (PoE) or 400/60 HZ (400/50 HZ in Europe) multiplex power systems on existing electrical distribution system. But another alternative power deliver systems is to use the existing coax cable and/or telephone copper wire in our homes and neighborhoods.

Coax cable and telephone copper wires are already used to carry small amounts of power to your home. They would also be ideal for the deployment of small power microgrids where neighborhood solar panels or windmills are connected to the copper/coax infrastructure to balance power loads for digital appliances across the neighborhood. Alternatively even the telephone or cable company could deliver renewable power from their head end over their old copper/coax infrastructure to the digital appliances in your home. Given that a typical home may spend over $500 year in power for their digital appliances, this would be a bigger revenue opportunity for the incumbents than delivering traditional broadband. There would also be then a big incentive for these companies to deploy much more energy efficient set top boxes and other devices, if they were also delivering the power for those devices.

These energy savings could also be used to underwrite costs of Fiber to the Home- FTTH. There are several publicly traded energy or green revolving funds who underwrite energy or green projects. Many utilities and municipalities also operate such funds. Funding the deployment of FTTH would allow the old copper and coax to be salvaged for a neighborhood microgrid for digital appliances. The payback to the fund could then be made through the energy savings from the microgrid. Some would argue that why not continue to use the old copper/coax to deliver broadband as well. But I suspect the power distribution network architecture and energy flows would make havoc with any existing broadband infrastructure.
The biggest challenge is that most people who work in the energy or utility field are, believe it or not, more conservative and hide bound than those who work in telecom/cable industry. Educating them on the energy costs of digital appliances and the fact that digital devices don’t require the same megawatt mindset solution of traditional power utilities will be a big hurdle.

A good place to test out the concept of such a FTTH/Micorgrid would be at our universities or colleges, especially that are partnering in FTTH trials such as Case Western, where they have extensive telephone copper networks owned by the institutions. – BSA]

Your set top box consumes more power than your fridge
http://www.pcmag.com/article2/0,2817,2387602,00.asp

IEA – Gadgets and Gigawatts
http://www.iea.org/Textbase/nptoc/Gigawatts2009TOC.pdf

Typical microwave oven consumes more electricity powering its digital clock than it does heating food
http://www.economist.com/node/5571582

Homes with Tails
http://free-fiber-to-the-home.blogspot.com/2008/11/home-with-tails-what-if-you-could-own.html

Bundling Fiber with cost of energy
http://free-fiber-to-the-home.blogspot.com/

Energy Revolving Funds
http://greenlivingpedia.org/Revolving_energy_fund
http://cec-mi.org/communities/services/revolving-energy-funds/?gclid=CNeL-emlt64CFS6FQAodvGtqog
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R&E Network and Green Internet Consultant.
email: Bill.St.Arnaud@gmail.com
twitter: BillStArnaud
blog: http://billstarnaud.blogspot.com/
skype: Pocketpro

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