European Commissioner Kroes has recently stated that “Interoperability encourages competition on the merits between technologies from different companies, and helps prevent lock-in. Standards are the foundation of interoperability.” But Maurits Dolmans emphasizes that care must be taken to balance between the two conflicting market failures which characterize the ICT sector: the “tragedy of the commons” and the “tragedy of the anti-commons”.

“Both of which must be resolved if IT innovation is to flourish and lock-in avoided. This involves a careful balancing of IPR protection and standardsetting, while avoiding hold-up and preserving opportunities for the significant innovation provided by the open source movement”.

On the one hand encouraging innovation by allowing for creators to recover sunk R&D costs, while on the other hand balancing the risk of patent thickets, and the modern day “commercial counterpart of Dick Turpin’s ‘Your money or your life’” – patent “hold-up”. The latter leading to the ubiquitous industry portfolio of countervailing patents – a cold war of sorts with patents as the proverbial nuclear arsenal.

However, Dolmans suggests that an established ‘common standard’ which is truly open allows the “best of breed” components from different manufacturers to be combined, with maximum efficiency. To qualify as “open” a standard must meet a number of conditions:

• Open access to the decision-making process
• Open (transparent and undistorted) procedures
• Open (published, pro-competitive) goals
• Open (published, objective, relevant) criteria for technology selection
• No over-standardization
• Open access to the standard:
…….o Open information on blocking patents
…….o No unjustified refusal to license
…….o Fair pricing

Moreover, the article suggests that while royalty-free licensing is advisable in the software arena – allowing both open source and proprietary software to compete on quality and functionality – the telecommunications sectors is best served by the use of FRAND licensing.

“Mandating royalty-free licensing would likely recreate a tragedy of commons and discourage innovation, while allowing IPR owners to charge at will could create a tragedy of anticommons. To strike the right balance, therefore, a contract of mutual restraint is necessary”.

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A Tale of Two Tragedies – A plea for open standards:
Maurits Dolmans (2010) @ www.ifosslr.org
http://www.ifosslr.org/ifosslr/article/view/46/72

The new policy “recommends that Government departments should wherever possible deploy open standards in their procurement specifications” and defines an Open Standard as a standard made “irrevocably available on a royalty free basis”.

The BSA (British Software Alliance), a lobby group which represent many proprietary software companies, commented:

“BSA strongly supports open standards as a driver of interoperability; but we are deeply concerned that by seeking to define openness in a way which requires industry to give up its intellectual property, the UK government’s new policy will inadvertently reduce choice, hinder innovation and increase the costs of e-government” (emphasis added)

Updegrove suggest that in theory the BSA’s objection may hold:

“that if patent owners could not charge for the use of their technology by the implementers of standards, they would quit participating in developing standards, or implementing such standards if they would be required to make their own affected patents available to other implementers for free as well. Standards development and implementation would therefore grind to a stop.”

However, standards do not describe products but instead product elements, functions or characteristics and typically exist at a lower, more fundamental level in the stack compared to software. Furthermore, in the ICT sector:

“The benefits of the network effect are so enormous that having even a slight advantage or head start, such as having your technology rather than a competitor’s included in a new standard, can greatly outweigh any royalties that might have been obtained under the old regime. Companies are therefore quite happy to compete to get their technology included for free.”

Do Royalty-Free Standards “Stifle Innovation?”
@consortium.org

U.K. Comes out for Royalty-Free Standards for Government Procurement
@consortium.org

However, recent developments in the NFC space which related to this first hurdle indicate that “Mobile Wallets” based on NFC technology could soon be a reality.

• Firstly, late last year Google released Android Gingerbread – the latest incarnation of their open source mobile platform – and the Nexus S, which both support NFC.
• Secondly, Apple’s next iPhone is expected to feature NFC support – having hired an NFC “mobile commerce product manager” (nearfieldcommunicationsworld.com)

With these two industry leaders implementing the technology across their product lines, it should not be long until NFC sees significant market saturation as the industry follows suit.

At the end of the day this is what it all boils down to, consumer demand. In essence, both barriers identified by Nav Bains are essentially one and the same. As more and more consumers adopt NFC compatible handsets, demand for the necessary infrastructure for their use will skyrocket. Regarding the infrastructure, Mr. Bains commented “typically the GSMA or the MNOs can’t do anything about it as it is typically driven by the Merchant/Acquirer relationship”. But in the end one would expect that they don’t really need to.

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As outlined last year, see www.talkstandards.com/nfc-technology-still-not-here, Mobile Near Field Communications (NFC) is a technology platform enabling short distance (typically within 4 cm, but can be up to 20 cm) wireless communication between different devices. The technology is covered by the ISO/IEC 18092 standard and the focus of initiatives such as the GSMA’s “Pay-buy-mobile” initiative.

The interview with Nav Bains is available here:
www.talkstandards.com/interview-with-nav-bains-mobile-money-director-gsma

An interesting overview of the underpinning NFC technology can be found here:
arstechnica.com/gadgets/guides/2011/02/near-field-communications-a-technology-primer.ars

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Metric System – 100 miles / 160 km

According to the CIA World Factbook , the metric system is the official system of measurement for all nations in the world except for Burma, Liberia, and the United States.

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Electricity – Wall Socket

The lettering system used in the above map is from a U.S. government document http://www.ita.doc.gov/media/Publications/pdf/current2002FINAL.pdf

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Electricity Voltage and frequency – 120v 60hz (US) / 230v 50 hz (EU) / etc

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Analogue Television – PAL/NTSC/SECAM

Although of less importance these day (and being phased out in many parts of the world), there are 3 incompatible standards used internationally for the broadcast of analogue television: the American NTSC (National Television Systems Committee), the European/Australian PAL (Phase Alternation Line rate), and the French-Former Soviet Union SECAM (Séquentiel Couleur Avec Mémoire).

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Time (12/24 Hour) –1:30 pm / 13:30

The map identifies for which countries the Windows localization automatically displays the time in 12 hour (am/pm).

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Long & Short Scale Counting – billion / thousand million

Long and short scale – the French “échelle longue” and “échelle courte” – refer to a common etymology for the named powers of 10. Examples of Short Scale (Long Scale) are listed below:

10^6 = one million (one million)
10^9 = one billion (one milliard)
10^12 = one trillion (one billion)
10^15 = one quadrillion (one billiard)
10^18 = one quintrillion (one trillion)

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Decimal Separator – 1,234.56 / 1.234,56

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Date Format – MM DD YY / DD MM YY / YY MM DD

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Paper Size – A4 / US Letter

The ISO 216 standard defines the A series as having a ratio of 1:sqrt(2) and each successive size having a wide that is half the length of the preceeding size’s length. Thus with A0 having an area of 1m squared, A4 measures 21×29.7cm – which is 6 mm narrower and 18 mm longer than US “Letter” paper.

Aside from the consumer welfare improvement stemming from the increased competition, what’s most interesting about this development – particularly from an international perspective – is that Verizon’s 3G network is based on the WCDMA/CDMA2000  standard which has thus far been unsupported by Apple’s smart phone.

It is also reported that (engadget.com) the updated iPhone 4 model to be released with Verizon will only support the CDMA chipset and as such will be incompatible with much of the world’s mobile infrastructure.

Now in the twilight of the third generation, it is clear that WCDMA has lost this generation’s mobile network standards war (see talkstandards.com/voyna-i-mir-in-standards). Having acquiesced and named LTE – of the GSM family – to be its successor, we are now on the cusp of 4G deployment (see talkstandards.com/the-next-mobile-frontier-heading-for-another-standards-war and talkstandards.com/the-state-of-the-lte-union)

Rather than looking forward and implementing LTE compatibility, it is a shame that Apple will now support this fading standard.

In an effort to ease the introduction of any interested parties who may have missed the original live discussion we have put the original article and resulting web discussion together in pdf form.

See here: www.talkstandards.com/wp-content/uploads/2011/01/Talkstandards-Indigenous-Innovation-and-Globalization-20110103.pdf

If you do get a chance to take a look a the discussion, please add any comments you may have to the original article.

It is almost exactly 25 years since the Commission issued one of its most important policy documents ever. In an ambitious and ingenious way the White Paper outlined both a strategy and an action plan for Completing the Internal Market (COM(85) 310 Final, http://europa.eu/documents/comm/white_papers/pdf/com1985_0310_f_en.pdf). This laid the foundation for what has become the successful implementation of a single market for industrial goods in Europe.

One of the key areas identified by the white paper was the removal of technical barriers; it stressed that the general principle should be that goods lawfully manufactured and marketed in one Member State could be sold freely throughout the community.

It recognized that “barriers created by different national product regulations have a double-edged effect: they not only add extra cost, but they also distort production patterns /—/ Until such barriers are removed, Community manufacturers are forced to focus on national rather than continental markets and are unable to benefit from the economies of scale which a truly unified internal market offers.”

The prescription that the White Paper identified was that “mutual recognition could be an effective strategy for bringing about a common market in a trading sense”. The Commission opted for this alternative despite the recognized problem that it might prove inadequate for the purpose of generating competitiveness based on a continental-scale uniform market. This was both brilliant and effective.

Today, 25 years later, Europe essentially has a single market for industrial goods that can circulate freely. This has generated large benefits for consumers and producers of manufacturing goods.

The same is unfortunately not true for public services. The European Union is fragmented and significant barriers remain for cross-border consumption of public services. This limits the mobility of European citizens and SMEs. It also adds costs and administrative burdens. Scale economies in development as well as production of services cannot be fully realized.

Stimulating and fostering cross-border production and consumption of public services in Europe is important. The public sector in Europe is a large share of the economy, both in terms of production and consumption (healthcare, education, childcare). Public transfer systems and insurances play a critical and complementary role to the private sector (unemployment benefits, pensions, health insurance). Mobility for citizens – students, workers – as well as companies selling services – professionals, consultants – requires cross-border solutions.

Interoperable ICT solutions play an increasingly important role in this context. But unlike private industry, national, regional and local governments do not naturally strive to create international services.  On the contrary, they are bound by geographical barriers. While multinational enterprises tend to see a business opportunity in global standards; the opposite is too often true for national and local governments.

The European Union can improve economic efficiency by reducing the scope for homemade ICT solutions and national regulations that obstruct rather than facilitate delivery and consumption on a continental-scale of European public services. The EIS and the EIF are steps in this direction. But, they are not likely to be sufficient.

The link below links to a brief report chronicling the 12 months from July 2009 to June 2010. Included are the most read articles, event summaries and site usage statistics.

www.talkstandards.com/wp-content/uploads/2010/12/Talkstandards-Highlights-2009-2010.pdf

We are currently putting together a 6 month follow-up which will document the second half of 2010 and the great progress we have made in that time.

MG: Is standardization for interoperability going to be conducive to innovation and entry so that we get benefits for consumers?

GA: I think that standards are critical as cost of energy goes up. And it will go up. Consumers are going to be looking for ways to help them conserve energy so they can spend less  on energy. Measures such as innovation in terms of new applications and smarter appliances, getting rebates from the utility because they have the ability – maybe through an aggregator – to manage some of the demand on the system, are all going to be necessary. We get the best solutions if we have a competitive market of suppliers who are competing with innovative applications and technologies to achieve this.

MG: Do you think that the conditions and incentives will be there to get sufficient returns on investment for entrants?

AJ: At this stage I think that there is clearly a lot of interest in the start-ups and people like that especially trying to do something. But I think we still need some more things before we start to see a big enough network or a big enough market. The bottom line is that standards are ways to create a market in some shape or form and of course we would not be here had we not this sort of push to create this kind of thing, because the reality is that it doesn’t necessarily have to happen. None of these people have to necessarily talk to each other.

But the reality also is that you need to obtain networks, look at telecoms and the simple upgrade to LTE and other 4^th generation technologies. Like George said, if you didn’t do it you would have more cost because the traffic has gone up and something has got to manage it. It’s all about networking needing to be upgraded to handle traffic.

MG: Are there any parallels to mobile networks in terms of risks and opportunities in the Smart Grid space?

GA: I don’t really see it that way because this is an area in which when it comes down to it, you’re really supplying electricity. And energy has to obey the laws of physics and the laws of physics don’t differ from country to country. I really don’t see that standards are going be a real strong competitive advantage for one country.

MG: But still, don’t you think that standards could play a role in terms of creating say a potential for US exports of Smart Grid technology?

GA: I would say that standards enable free trade so that there aren’t barriers to accessing markets and that’s what we’re trying to achieve. I would say the standards create a level playing field which benefits everyone. I think the real competitive advantage is going to come through either lower costs or better performance in systems. Most of the suppliers in this industry are global companies and so it’s to their benefit to have global standards.

MG: Do you agree that if there is a parallel between the internet and the Smart Grid, this could really be a huge business opportunity for US innovative companies?

GA: I could. But it could also be huge opportunity for European, Japanese or Chinese companies.

MG: Do you see this kind of innovation taking place in Europe?

AJ: I don’t see that real top-down push in Europe. There is certainly a lot of talk and a lot of interest. But essentially I don’t see the funding we have seen in the US.

I think in terms of taking the opportunity, yes. Because those European companies are pretty global as well and we have so many names, such as Nokia etc. So I think that shouldn’t stop once you have enough of an open market place then anyone should benefit in the European market.

KD: To me it seems that standards enable things to happen, they don’t make things happen. To take that point and to put it in the context of what is going to make some winners and some losers out of entrants into the Smart Grid space, the fact that we have standards means that all of these entrants can play here, but it doesn’t mean that they necessarily will. There are other rules that control who win or lose in this game.

To give you one example: consider people that are doing in home displays and providing information to the customer. If we close off the access to utility information to those 3^rd party providers, they’re not able to send dynamic price signals through their informational display to the consumer, they lose out on a big degree of functionality when it comes to what they can provide to the consumer. This is a way of rigging the game to make them losers, whereas if the utility can provide that information to the customer, they have a competitive advantage. So just because we have standards where equipment and protocols are there so that things can speak to each other, doesn’t to me determine the competitive edge or contours of the playing field.

MG: Can you give us a final thought on why is it motivated to have this kind of special treatment of the Smart Grid and what is it exactly that explains this particular situation?

GA: Let me make two points on that. One, if I think of another infrastructure that is one of the great achievements of the last century, the telephone network, that infrastructure was developed largely by a regulated monopoly; i.e. AT&T. Bell Laboratories was the R&D outfit that did the systems engineering over many decades. When the industry got broken up in a new competitive model and much more fragmented, you had that starting point which provided a cohesive base from which things could evolve.

The same conditions don’t exist in the electric grid because there never was a regulated monopoly that had a cohesive standards based system. With two trillion dollars of investment that is going to have to take place over the next 20 years, we want to make sure that those investments which are going to be made by the private sector – the federal government has only put in around $11 billion in the electric grid – aren’t wasted in a hodgepodge of systems that don’t work together. Alternatively those investments could result in something that really allows us to integrate clean energy and increased efficiency. It’s just too great a priority to hope for the best.

It took us eight years to put a man on the moon. This is as difficult, and it’s going to take several decades.
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For the video of the discussion and profiles of discussants see here:
www.talkstandards.com/interview-with-george-arnold

Part 1 of the discussion can be found here:
www.talkstandards.com/the-us-smart-grid-future-part-1

Part 2 of the discussion can be found here:

www.talkstandards.com/the-us-smart-grid-future-part-2

Part 3 of the discussion can be found here:
www.talkstandards.com/the-us-smart-grid-future-part-3

Part 4 of the discussion can be found here:

www.talkstandards.com/the-us-smart-grid-future-part-4

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MG: There are no specific factors that suggest you need a hair dryer that works in the US but not Europe, but that’s a reality is it not?

AJ: To me I think the Smart Grid will be won or lost on the consumers. I had this very disruptive discussion yesterday when I said that you really technically wouldn’t need to go much beyond the smart-meter. For example, you could do a lot of what the demand-side and customer-side want to achieve can be done through normal things like HomePlug and other technologies like that, which is essentially connecting devices to the internet. But, you don’t necessarily have to go deep down into the energy networks at least in the first phase. And that could be very disruptive. I mean you could at least conceptually achieve what the customers want without getting too far down. But of course you need the whole vision of smart grid to get the wider vision, the green vision, the electric cars etc. But the consumer’s needs, to reiterate your point, are global. That is pretty much IT standardization which has been around for a while.

GA: To just add in to that point. We’re trying very hard to not just have US standards. We’re trying very hard to pick international standards because we want to see the market develop globally and the reason is very simple. Most of the suppliers in this industry are global companies and if they have to make needless adaptations as they move from market to market it increases their cost, making the equipment more costly for utilities and electricity more costly for consumers. So our view is that everybody wins if we have global standards. The area where that is going to be difficult is that we do have imbedded infrastructure in terms of 110 vs 240 volts, and so forth, that will probably never overcome. But when you get to the information overlay and energy management aspects of the Smart Grid there is probably no reason why the standards need to be different.

MG: But still, NIST’s work in this area and the Obama administration’s initiative to work on interoperability in the Mart Grid is a US initiative?

GA: We are very actively reaching out to other countries that are working on similar issues so that we can all be at the table as we work through the use cases and what the requirements are. We set up something called the Smart Grid interoperability panel that I think over time will become something like the internet architecture board is for the internet. We have the governments of Japan and Korea participating in that and we’re developing a relationship with the EU though CEN-CENELEC and ETSI. I think at the end of the day, everyone needs to look at what they need to do to serve customers in their country or state. But we can all work through the design of the system together and hopefully maximize the commonality.

MG: There are some that argue that the customer experience, or at least how they perceive the Smart Grid, is not all that great so far and there is an awful lot of criticism from the consumer side. What would explain this kind of sentiment and how is this problem going to be resolved. What is needed in terms of solving this problem?

KD: I think you’re right that it’s been a mixed reaction from the fairly embryonic roll-out to today from the consumer’s perspective and I think that there is a largely an experiential and educational deficit from the consumer’s perspective when it comes to Smart Grid. Which is to say that the value proposition for Smart Grid in terms of what it can do for the consumer both in terms of energy awareness and savings, when it comes to their utility bill, has not been fully explained or appreciated by consumers largely. And to some extent utilities are to blame for this, but to some extent their not because utilities themselves are going through the experiment of working out what this idea of Smart Grid means for the consumers.

There is also a kind of chicken and egg situation here too. For the consumers, in many instances, to fully appreciate the impact of what the Smart Grid can bring to them, you need to have some sort of dynamic pricing. In order to have dynamic pricing you need to have a sufficient number of consumers in a state participating in a program so that this makes sense.

So in many instances we have this experimental roll out of Smart Grid and we have some 3^rd party vendors that are trying to provide information to the consumer were we don’t have a full package where the public utilities commission has authorised a program of some sort of dynamic price signals so that people can really start to appreciate what those signals mean to their bottom line. I think this is going to happen in a haphazard, organic, incremental and somewhat painful way as we go forward, and there is no real way to solve that issue smoothly.

MG: I think there is one issue that I am struggling with and that is the fact that the Smart Grid may deliver great efficiency and benefits in terms of savings of resources that are not necessarily priced at the current state. For instance, if you take the impact of fossil fuels on the climate or on the environment, those costs are not priced within the current system. If the Smart Grid delivers a value in terms of saving those costs, it’s going to be of great benefit to society but it’s not going to end up in any substantial savings for the customer. How do you deal with the fact that the greatest benefit of the Smart Grid may well be something that is not showing up in monetary savings that is evident to the consumer?

GA: Well that’s an issue. There’s no question that having a price on Carbon will make the economics of the Smart Grid much more transparent and quantifiable. But I think absent that in the US, as Congress hasn’t done that, we do have the in most of the states in the US have set renewable portfolio standards. That in effect means that since most renewables are more expensive than traditional forms of generation, through these standards that they have set their not going for the least cost energy, their going for energy to meet certain environmental goals.

MG: How do you deal with the problem, that even if you distribute some of the gains to customers, it may well be so small that it is not material to the decision?

GA: This is where the business model and the regulatory model are going to have to adapt to the future. In many of the Smart Grid investments, the entity that has to make the investment is not the one who reaps the financial reward. So you don’t have the right incentive to make the investment. One of the benefits we have in having fifty different states dealing with this is that their trying different approaches to find the right way to provide the economic incentives to do the right thing. And we do have an organization where the state regulators get together and discuss best practices.

MG: Isn’t there a risk that some of these states will then invest themselves into something that is really suboptimal or inferior?

GA: Well hopefully they will find that out before it’s too late by looking at the results of other states that are taking different and perhaps better approaches.

KD: I think that your point as to the fact that some of the savings of customers’ perspective are going to be fairly small and whether that is enough to really incentivise them to participate fully in the Smart Grid is a very good question. Which is to say that we still haven’t worked out the business model from an average consumer’s perspective of: these are the gains you’re going to make for Smart Grid, and given those gains, how much time and energy are you willing to invest in making sure that your energy is managed optimally?

That said I think that it would be a mistake to cabin all of the benefits of Smart Grid into financial remuneration from a consumer’s perspective. There are lots of non-financial reasons and drivers of why a customer would want to participate in Smart Grid. Some of this has to do with these larger global or national externalities which you were talking about, that don’t reside on any specific consumer but reside on the shoulders of all of us. Whether it’s a public consciousness or a zeitgeist, there are lots of other reasons to participate in something like this, in terms of managing their own energy.

AJ: I’d just like to add to this thing about this value. I mean in a sense of where I the value created in many ways for the customer or somebody else. While the Smart Grid is a new type of network, networks themselves are very old and they behave in a very predictable way, basically by getting value to the edge of the network. You see this in telecoms and in IP and so on and so forth. Where I think this would be interesting is that somebody who is an innovator would be kind of utilising the Smart Grid to create something that none of us would see today.

This is my point. About three weeks ago the Sony Walkman was discontinued after 20 years, and today Apple is the dominant player and Apple is not exclusively hardware unlike the Sony Walkman, Apple is hardware plus software. So clearly the value created by these players is the mixture of the intellectual property plus the physical stuff. And that is because you then have this network and these players who are creating new innovation. I think that the whole question of value when it comes to Smart Grids has to also consider the side of these new 3^rd party players who are actually software players or integrated players or innovators or start-ups. You can call them many names but that is the value to society and the community and the grid itself.

GA: Getting back to the economic picture from a consumer’s point of view. You have to look at the big picture and consumers are going to have difficulty in grasping this because in the US the asset face of our utilities currently about a trillion dollars and over the next 20 years, to replace retiring coal plants and upgrade coal plants to produce cleaner energy – investments in transmission and distribution, etc. – something in the order of two trillion dollars will have to be spent. That is a huge number especially when you consider that there a trillion dollars in assets today.

The result of this is that there is going to be upward pressure on electric rates just to keep the lights on, it’s inevitable. So if we don’t have the Smart Grid, the costs to consumers are going to be increasing much more than they would otherwise. So if we had a Smart Grid that could shave 20% of the peak generation that’s needed as we retire coal plants, perhaps some of them don’t need to be replace. The Smart Grid would enable that. Consumers are not going to want to hear this, but the fact of the matter is that the Smart Grid will result in rates going up but less than they would otherwise, just in order to keep the lights on.

MG: So essentially what you’re saying is that the price per kilowatt hour may go up, but the total cost may go down?

GA: It’s not clear that the total cost will go down because the rates today are based on an asset base which is very largely depreciated. Transformers are typically about 40 years old. Coal plants are nearing the end of their lifespan and when you’re operating on rates based on fully depreciated assets, that really understates the cost.

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The discussion is continued in Part 5 which can be found here:
www.talkstandards.com/the-us-smart-grid-future-part-5

.For the video of the discussion and profiles of discussants see here:
www.talkstandards.com/interview-with-george-arnold

Part 1 of the discussion can be found here:
www.talkstandards.com/the-us-smart-grid-future-part-1

Part 2 of the discussion can be found here:
www.talkstandards.com/the-us-smart-grid-future-part-2

Part 3 of the discussion can be found here:
www.talkstandards.com/the-us-smart-grid-future-part-3

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