Wednesday, May 20, 2015

We Need More Disruptions!

Maybe it's just me, but it seems like consumers only get new and exciting products when a new company creates something that completely disrupts the existing models. I've written about this before, but lately I've seen some things that reinforce both sides of my position - it is only new companies that are truly innovating and existing companies are fighting those innovations tooth and claw, Tesla is introducing battery packs for home energy storage. Paired with the decreasing costs of solar panels, this is truly disruptive to the electric utility industry. Consumers now have the option to use solar-generated energy when the sun isn't shining. They can completely disconnect from the municipal electric grid if they want. On the flip side, electric utility companies are starting to feel threatened by the increase in residential solar installations and are taking steps to try to slow it because it may lead to a decrease in their profits - up to 15% by some reports. Case in point - SRP, the electric company in Phoenix, has implemented a $50 per month tax on customers with solar panels. This has already been met with lawsuits from the solar industry, claiming anti-competitive practices. It will be interesting to see how this pans out. Personally, I hope the $50  month charge is dropped. I would love to get solar installed on my house and this charge effectively negates any economic benefits of going solar - which was the point, I'm sure. (Solar installations have dropped by 96% since the tax was introduced.)

The other disruption I am seeing is in the wireless industry, where Google's introduction of their cell phone plan is likely to have a similarly disruptive effect on the wireless industry. Their new, and so far only, plan lets customers pay only for the data they actually use. You have a 2 GB a month plan, but only used 1.5 GB last month? You'll get a refund for that 0.5 GB you didn't use. This is fantastic for the consumer and no other wireless carrier offers this feature. The reason they don't is that they rake in tons of money from people paying for service they don't use. I hope this will cause other phone companies to offer something similar. This case is a little different than the solar case because customers aren't locked in to a monopolistic utility company and can choose from a variety of wireless providers, so I expect to see changes ripple through the industry quicker here.

It's an exciting time to be a consumer. Newer companies are finally becoming large enough to challenge existing entrenched companies. The result will be greater innovations for all.


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