AT&T and Silver Spring Hook Up Over the Smart Grid

One of the largest smart grid infrastructure players and one of the largest U.S. phone companies are linking up. AT&T (s T) and Silver Spring Networks, a 7-year-old company that sells smart grid networking gear to utilities, have announced a deal this morning by which Silver Spring will be able use AT&T’s network to connect its smart grid gear to the utility back office (in geek terms that’s called backhaul). The financials of the deal were not disclosed.

This isn’t the first smart grid deal AT&T has done to use its third generation or 3G network for utility services. Back in March AT&T said it had started working with smart meter technology maker SmartSynch to provide its wireless network for residential installations using SmartSynch’s smart meter technology. That deal was an expansion of a similar relationship between AT&T and SmartSynch for commercial installations, and SmartSynch says it is working with AT&T to connect 100 different utilities’ back offices.

Phone companies have been looking into creative ways to use their 3G networks for “machine-to-machine” services like the smart grid (which don’t include consumer customers and cell phone accounts). Consumers can be fickle, with churn and continuous upkeep — in contrast, a smart grid utility deal can be relatively low maintenance — and machine-to-machine services can diversify their networks. The smart meter traffic on the wireless network — largely real time pricing, but perhaps also demand response events — will also likely be pretty minimal compared to say a wireless video stream.

It’s unclear to me whether or not it will cost more for companies to use cell phone networks for smart grid services (the company essentially rents space on the network), or if it will cost more to build out smart grid services on their own networks. Utilities and vendors have told me different and conflicting price comparisons on this. I’m thinking the costs vary based on geography, the utility, etc. But clearly if a company like Silver Spring is adding cellular network capability, there’s a benefit to using already-available networks. Silver Spring says its all about creating “the broadest ecosystem.”

Silver Spring’s phone company announcement is also interesting in light of some news from SmartSynch last week. SmartSynch, which has been positioning itself as the phone company smart grid firm, made an announcement last week that it is selling an open Internet Protocol router that can connect disparate and proprietary smart grid gear. All-IP and open networks has long been Silver Spring’s marketing, so the firms seem to be crossing more into each other’s territory.

CEO Scott Lang also told Bloomberg this summer that Silver Spring hopes to hit $200 million in revenues by 2010, and the writer suggested that the company could hold an IPO “in the next year or two.” The writer isn’t the only one thinking along those lines. As we recently reported, investor Steve Westly, former California state controller and founder of the Westly Group, speculated that Silver Spring would be one of three companies that would go public in early 2010.

There has been much discussion about a Silver Spring IPO next year. Silver Spring is now competing with some of the larger IT networking companies like Cisco for utility deals, so it will need capital and size to stay competitive — utility firms mostly prefer to work with large companies.

Image courtesy of arbyreed Flickr, Creative Commons.