The following post was submitted by Albert D. Kallal.
This concept of selling what some new technology provides as opposed to selling the technology to the end user is not new at all. In fact this is TYPICAL of technology adoption.
Recall in the past when many towns had just received electricity and refrigeration. Often in the central hotel or central market building you would find in the basement a LARGE commercial refrigeration unit which would power “many” home sized fridge boxes that locals would rent out. In other words, you did not own your own refrigerator, but rented out one in the basement of a building.
And we saw the same thing occurring when Laser printers and desktop publishing appeared for personal computers. Up sprung a whole bunch of business that had Laser printers that you would USE! So you would bring your document to that small business for printing. As Laser printer prices and desktop publishing software become wider spread, then MOST of these corner based desktop publishing and Laser printer shops went out of business.
To be fair even today many a small business will STILL go to Office Depot or Kinko’s etc. for some of their printing needs. This is due to these “service providers” having equipment that is STILL beyond the practical needs and cost of small business. So parts of this “printer service” business model exist, but such providers are offering FAR MORE then JUST having a laser printer for you to print on. Thus these renaming business are nothing like the original boom that occurred in desktop publishing in which one could simply purchase a few laser printers and you are off to the races with a new business model.
Rossi is really following the “same” above progression of technology. So if there is not the technology for affordable home refrigeration unit, then you rent out some boxes that are cooled by your LARGER commercial refrigeration system in the basement of that commercial building.
The additional beauty of the above business model is, if next year you increase the performance of your system, then you reap the profits (not your end users!). In other words if your refrigeration becomes 2 times better (cheaper) then last years model then then you now can provide your services for HALF the cost, but in most cases you can be charging the SAME price!
And same goes for personal computers – as they dropped in price, you would thus benefit from the increased value of that computer (businesses ONLY purchase equipment like computers because they produce MORE wealth then they cost).
So as a business, you are FAR BETTER off to own the technology, but only if such technology can be purchased at a reasonable cost.
So with Rossi’s model, or other early technology examples, It is the provider of the server who reaps the most rewards, and even more so when the performance of whatever it is your service provides.
So be it computers, refrigeration, or LENR, all have early examples in which it was MORE practical to SELL THE RESULTS of the technology then that of selling the actual system to the end user.
This business model will of course change over time as the technology becomes more widespread. However given Rossi’s lead time, this model could be around for 10 years unless competitors can catch up.
Of course many a businessman, seeing what personal computers could do for a business thus concentrated on looking for businesses that had not been computerized. You introduce computers and that business would often take off, or see very healthy profits. You could often easily double the value of a business in less then 5 years by adopting this approach. So you purchase a business for say 5 million dollars, introduce computers and the increased profits will EASILY allow you to sell such a business for now say 10 million! Smart businessmen can EASILY see how such math works!
So many a market play for LENR will be smart businessmen that look for business that will benefit by such lower energy costs – however, you only going to get REALLY reduced energy costs if you’re allowed to purchase a LENR plant in place of the current model of purchasing the energy. In fact this allows the owners of the LENR technology to purchase business that would not be profitable otherwise! (huge oppoturitiines exist for such owners of new technologies).
Remember the only real issue here is delivering energy costs for less then what competition can. The ACTUAL COST of the energy is moot!
A good example is to imagine that a star trek transporter was just created by you. You could thus transport a person from LA to New York for say $5 of electricity. However, you do NOT sell rides to New York for 20, or even $100?
Current flight rates from LA to New York (market value rate) are about $400. So you price you transporter “flight” rate below that of cars, but STILL at current market rates! This is in fact how and why technology can make your business money (you reduce the cost of delivering something at current market rates).
The result is you do NOT get a flight for $5 from LA to New York despite that being the cost! (you will pay near $300 dollars!!!).
Until such time that you can purchase your OWN transporter, which is the time that your realize such lower costs.
So LENR is in much the same boat as above – you will see reduced energy costs – but only a reduction that has enough incentive for you to switch and consume that energy. The higher profits margins will thus be realized by who OWNS the heating plants. Such heat will be sold at near market rates.
The only way you realize lower energy costs is as the technology becomes more widespread, and hopefully lower cost units start being sold to business as opposed to purchasing the results of the system from the owners of the plant.
Albert D. Kallal
Edmonton, Alberta Canada