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Jaanus Tiisvend: It will be most beneficial to build the internet network and power grid together

10.10.2018

Jaanus Tiisvend, Chairman of the Management Board of Elektrilevi

Lately, the name of the network operator Elektrilevi has been heard in fields, which are not connected to the current main activity of the company - the power grid. Elektrilevi is more and more associated with the construction of a high-speed internet network, the administration of the street lighting network, as well as with the charging network for electric cars.

Why is the company, which has so far acted only in the power grid business, targeting new areas? I claim that in the co-construction of large infrastructures, such as the power grid and internet network, all services benefit, and slightly paradoxically, a monopoly grid brings competition to the market and speeds up the development of the society.

A joint grid avoids wasting

The power grid is a natural monopoly both in Estonia and elsewhere in the world. Estonia has been divided into various market areas and there is only one neutral network operator, through the lines of which any electricity seller’s electricity is transferred, acting in each area. Elektrilevi has the largest operating area out of more than 30 Estonian network operators.

The reason why such service works as a natural monopoly lies in an economic use of resources, above all. Imagine a situation, for example, where we have several distribution network operators transporting electricity to homes in the same area: there would be a number of power mast rows running next to highways, instead of one, and in towns you need to dig up the street for each added line, the forest corners would be filled with bigger and smaller substations - all performing the same function but belonging to a different owner.

There’s big money at stake. Elektrilevi has 24,000 substations and 60,000 kilometres of power lines in Estonia with a total value close to a billion. The generation of competition in these volumes would be a clear waste. Natural monopolies are found elsewhere, too. For example, ferry traffic between the mainland and islands is also managed by a single service provider.

Therefore, a central grid, through which various electricity sellers can compete by providing their services, suits the electricity market best. We do not have such competition in the communications market today, although the nature of a communications network is very similar to a power grid.

How does wasting in the Estonian internet network take place?

The internet network, too, has masts and lines stretching across Estonia. The works performed at the construction and maintenance of the network are similar as well. In fact, they are often performed by the same companies as in the power grid. The only difference is what is running through the lines - bits and bytes instead of electrons.

The current internet network has been established separately from the power grid, and often we see multiple rows of masts by the streets of a town - one for electricity, another one for TV and internet. There are also street lighting poles and sometimes even a number of service providers. Each one pulls their own cables or even a row of masts.

In addition to littering the environment, it’s a senseless waste of resources, which takes place under free competition conditions. For the final customer, this does not always mean the best price / quality ratio, since service providers need to ensure profits next to this intensive use of resources.

Hoping that the network needed for the communications market to function would be built keeping in mind the commercial profit for companies only, we are witnessing a situation where a large part of Estonia does not have a high-quality internet connection. Just as if 60% of Estonians living in scarcely populated areas, where the return on investment without the support from densely populated areas would be more than 100 years, didn’t have electricity, The life of the network will have twice ended until it could earn itself back.

A neutral communications network brings new players

The internet network before year 2018 in Estonia was completely a communications operators’ area. Elektrilevi entered the field of activity in summer, when we started to establish the power grid and high-speed internet network together in Veskimetsa, Tallinn, as a pilot project.

In addition to being able to establish the internet network cheaper due to joining works with the power grid and building a communications line to existing electricity masts, the solution by Elektrilevi in its essence contrasts with the current Estonian internet network functioning principle.

We established an operator-neutral network.

In contrast to the current Estonian internet network market, where each service provider must have their own line, all operators can provide their services in the operator-neutral network - just as the electricity market functions today.

This way, also those telecom companies, who lack their own resources for the construction of a network, but still wish to provide customers with a high-quality communications service, would get a chance in the communications network. The construction of an operator-neutral network creates a favourable environment for the emergence of new service providers, and this way, revives the entire communications market.

Under the conditions of active and equal competition, the final consumers win the most. All options have been created for people at homes to get the best price / quality ratio. In addition, people could choose between several service providers, and switching between operators could be just as simple and fast as switching your mobile operator.

We see that in areas where Elektrilevi has “put their buckets down”, customers are provided with exceptional offers by other communications operators. The benefits from added competition can be clearly seen.

We are not inventing a bicycle

Economical and efficient operation becomes more and more important with each day, especially in the field of energy. Network operators across Europe are moving towards extending their fields of activity, similarly to Elektrilevi. The question - What kind of added value does the power grid provide us with? - becomes more and more important. How to accomplish greater synergy?

We can find several examples from Europe, where network operators are able to provide added value in other fields thanks to the power grid and its management experience. For example, Luxembourg’s network operator Creos has been developing the charging network for electric cars since 2015. Italian network operator Enel and Danish company Energi Nord have entered the field of communications.

There a even more well-functioning examples. We do not wish to re-invent the bicycle. Elektrilevi, as the largest network operator in Estonia, sees that they are able to provide bigger value than just assurance of high-quality electricity supply.

We have been managing the street lighting networks in Tallinn and Tartu for some years already, and from what we have experienced so far, we can assure that the co-operation of two networks saves costs for everyone. We see that extended use of electricity is also the future of the transport sector and will begin to significantly impact the power grid, too. Our contribution to the development of the field is only logical.

High-speed internet is an indispensable service in today’s society in creating equal opportunities for growth and competition all around Estonia. The charging network for electric transport, which has been developed to a contemporary level, has increasingly more potential considering global trends. I find that by the co-management and development of such large and publicly important networks, we can take the Estonian society forward faster. With a smart use of resources, Elektrilevi has the opportunity of providing the society with extraordinary value and increasing the competitiveness of Estonia, by developing large infrastructures together.