• Thinking big may start with thinking small

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    foto Ben Kritz

    First, a minor clarification: In my column this past Saturday, I described the occasion being marked by an event hosted by Xen Energy Systems Inc. (XESI) and RCBC Bank on Thursday as the formal approval by the Energy Regulatory Commission (ERC) for the implementation of the Kuryentxt Prepaid Electricity service for customers of the Boheco II and Batelec I electric cooperatives in Bohol and Batangas, which was not a strictly accurate explanation of the ERC’s action. In fact, the approval granted by the ERC was an extension of the provisional authority by which the two cooperatives were able to “soft launch” live tests of the system for about 300 customers in their respective areas. The new authority is not ERC’s final approval of the system, but rather an extension of the provisional authority for three years, which allows the cooperatives to expand the prepaid program throughout their service areas at their own discretion.

    Which is still very good news, of course, but I am nothing if not obsessive about accuracy. Newspaper deadlines being what they are, Saturday’s column was actually written just prior to Thursday’s event, where I learned I was slightly off-the-mark in my understanding of what was actually happening. My apologies if anyone was misled by it.

    While at the event on Thursday, I was asked by my friend and occasional collaborator Richard Heydarian, who lectures at the Ateneo de Manila University and covers geopolitical and economic topics for The Huffington Post and The Asia Times, what I thought the broader significance of the prepaid electric program might be for the Philippine economy. It’s a fair question, but one that is not easy to answer because on the face of it, prepaid electricity does not appear to actually solve any of the Philippines’ larger underlying economic problems. It does not, for instance, help to solve the problem of a looming shortfall in electricity supply, nor does it do anything to moderate the extraordinarily high price of electricity for consumers. What it does is make those costs manageable for a segment of the population that is most vulnerable to them, and while that is eminently worthwhile, objectively it is not a “solution” but an accommodation.

    But the remarks of XESI President Ariel de la Cruz during his keynote address revealed that real solutions are not always obvious. While the prepaid Kuryentxt system is an innovative product, what may be the real value of the concept is how it ties together larger business systems—systems on a scale that actually does impact the wider economy—in order to deliver that product. Conceptually, the Kuryentxt prepaid system has three essential components: first, there is the technical infrastructure, the software-as-a-service, meters and associated hardware provided through XESI to manage the actual delivery of the electricity to prepaid customers; second, there is the communication infrastructure to manage all the information that starts at the customer’s prepaid meter and finally, there is the financial infrastructure to manage customer payments, load purchases by local sellers, and the accounts of the distribution utility. De la Cruz describes these as the “essential cogs” in the machine; if one is missing or not turning in perfect coordination with the others, the system simply cannot work.

    In order to make it work, XESI’s communications and payment system partners, Philippine Long Distance Telephone Co. (PLDT) and Rizal Commercial Banking Corp. (RCBC), had to apply some forward thinking to develop efficient large-scale applications to help provide a “tingi-scale” service. In PLDT’s case, it was the application of their “Call All” rate package (which is actually a consumer rate package) in a modified form to allow economical communication between the prepaid system servers and devices called concentrators, which collect the usage data from groups of prepaid meters. In RCBC’s case, it was the development of the payment resolution system that manages transactions that, in most cases, do not exceed P100. Either of these corporate giants could have easily declined to take part in a system that requires them to manage thousands of tiny transactions, and from a stakeholder perspective they probably would have been completely justified in doing so; cost-benefit economy usually follows scale, not volume. At the time XESI presented their business case, it was not actually certain whether the prepaid system would successfully navigate the regulatory process, and while consumer and distributor interest in the system has always been strong, “strong interest” does not always translate well to “reliable market estimates.”

    The risk accepted by PLDT and RCBC now looks as though it will be handsomely rewarded; XESI’s conservative estimate of the potential customer base for the Kuryentxt system is two million within five years. More importantly, PLDT and RCBC have provided new models for making fundamental economic improvements. Using the templates established by their application to the Kuryentxt prepaid electricity service, the communications and financial management models can now be applied to any number of innovations benefiting Pinoy consumers, such as prepaid service for other utilities or microbanking.

    It is not that the technology or processes being used are novel—in fact, they are not new at all—it’s the perspective that is. The Philippines’ “heritage of smallness” (in the words of literary giant Nick Joaquin) is generally criticized, and correctly, for being a significant handicap to the nation’s developing on the scale required to benefit nearly 100 million people. Large-scale development does take place—the expansion in recent years of sectors like banking and business process outsourcing are good examples—but do not register on the greater part of the population because they do not “reach down” to the small scale, and as a consequence, do not really improve the overall economy. By working in the other direction, finding a way to satisfy a consumer need at the level of “smallness” first and then consolidating that need into a profitable critical mass, XESI and its partners RCBC and PLDT have demonstrated a different paradigm; one that, true enough, does tend to perpetuate the “smallness” of most Pinoys’ outlook, but one that has more practical, immediate and wide-ranging impact.

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