[00:00:00] Speaker A: Overall, we think that there's definitely an opportunity for the metering as a service model, specifically in more fragmented markets and for smaller utilities. But strong partnerships with like local service providers that can be providing that on the ground support is going to be essential.
[00:00:23] Speaker B: I'm Rhys Tisdell and this is is the future of Water which we talk about all the ways which companies, utilities and people addressing the challenges and opportunities in water. This is episode 119. That's a big one one nine and as always, usually I have a good feeling it's going to be a great one. That's because today I'm joined by Bluefield analyst and colleague Christine Au.
Christine has recently led a deep dive into what one of the most pivotal and evolving, fastest evolving segments in the water sector and that is metering. Her new report she worked with others on global water metering outlook, evolving technology trends, business models, competitive landscape and leading companies.
She's put this together and it offers what we think is a comprehensive view of where this segment of the water market is heading and impact some big shifts. Hopefully on this podcast, quite honestly, and that's part of the conversation that is the transition from what are traditional billing tools to smart digital infrastructure. The metering systems have become an ecosystem until themselves in which a number of companies and players are sort of piggybacking on this segment how emerging platforms, analytics and AI are reshaping vendor strategies. And then lastly we're going to talk a little bit about the rise of quote unquote as a service models and so how these models are approaches to product delivery or redefining how utilities are approaching their operations, but also vendors themselves because they're the ones pitching these these services. So good conversation with Christine about that, I hope. And then why you should care. Well, really because water meters are they're no longer just the end points. They're becoming what we think is a digital backbone of utility networks. They are the key interface between the utility and the customer, whether it be domestic or residential, commercial or industrial. So in a 6 what we see as a $6.8 billion global market where utilities face aging infrastructure, labor shortages, rising customer expectations, smart metering really does offer a path to greater efficiency, resiliency and visibility into the network.
Super interesting conversation and I think this is going to be a good one. But before we get to Christine, you're going to have to bear with me just a little bit longer because this has caught my eye this past week. So in Washington, topic du jour earlier this week, the EPA has rolled back at least part of its PFAS rules, to be clear, is delaying compliance on PFOA and PFOS until 2031. So that's a two year pushback, but eliminating limits for four other chemicals that were laid out by the Biden administration.
And so this is creating some more regulatory reshuffling, if you will.
It's really also what we see as another inflection point for utilities treatment technology firms, liability exposed industries navigating what seems to be a politically volatile or uncertain landscape and legally uncertain landscape, to be clear. So why does this matter, at least from mine and Bluefield Research's perspective? Well, delay seems to be equal, a little bit more Runway for tech providers. The two year delay gives utilities time, quite honestly and opens up market opportunity for treatment vendors. You know, could be RO carbon, activated carbon companies, ion exchange players to pilot and sell modular PFAS solutions before full compliance inevitably kicks in. So I think, you know, a little bit of time gives people some space to figure out what's happening. Also find the money to pay for it, particularly on these two chemicals. In particular, patchworker regulation is putting strategic pressure on utilities. So while federal limits are seemingly weakened both in time but also in a cutback of what's being regulated, legal momentum does continue in state courts and clean up consent agreements. So particularly for things like Gen X, this is forcing proactive utilities to invest in broader PFAs, capture and avoid legal risk and reputational damage. Everybody knows about PFAS now. It's in the news seemingly every day, forever chemicals, pfas. Pick your name.
But I think end users, that would be residential customers, commercial customers, they're seeing it as well, and so they're asking questions about it. Then lastly, litigation and public scrutiny still remain high risk drivers. So despite the weak in federal enforcement, which is exactly what it is, I know the agency secretary, the EPA secretary or director had said that, you know, well, they could raise the limits, they could lower the limits. The bottom line is they're not going to lower the mcls. I think they're already fairly stringent. I think that's if anything the pushback in the market. It's also hard to monitor these chemicals at such a low level. So the reality of it is, my guess, if I had to make a bet, which I don't bet on anything, and that is I would expect any levels to go north as opposed to south. But I guess really what I was getting at is that there are $12 billion and more of legal sediments already on the table and ongoing lawsuits and state level Rules are keeping the pressure on manufacturers and utilities. So fighting standards in court while also claiming to safeguard drinking water is becoming a bit of a brand liability for public utilities and industrial operators alike. It is drinking water. We do all ingest it every day. Eight glasses, eight cups, whatever that recommendation is. But this isn't a clean break from PFAS regulation. So I think that's if that's a positive, take it for what it is. But it does put us still or keep us in a bit of a, I don't know, muddled holding pattern that rewards near term adaptability while increasing potentially the cost of inaction for later. So, hey, that's the American way. Kick it down the road and we'll figure it out later. And it may just cost more. So that being said, let's get to Christine Au and talk a little bit about global metering. I think this is going to be a great conversation.
All right, so I'm joined here by Christine Au. Christine, how goes it?
[00:06:53] Speaker A: I'm doing good. Boston's really kind of come back alive after winter hibernation. Last week I was just at Somerville Porch Fest. Really exciting. And there's a bunch more of these like local music events happening. So I'm really excited to really get out there, enjoy the sun. It's a little rainy today right now, but, you know, lots of good music, lots of local art. Really excited but very happy to be on the podcast. Thank you for having me.
[00:07:16] Speaker B: Yeah, no, absolutely. I think, you know, as we, I think in the office yesterday someone was talking about how nice it was. It's really the only reason to live here. Right. Because there are about six months, as you said, that are a little tough. But yeah, music festival, Sports fest in Somerville I think think is it's definitely the biggest one I've ever been to and super fun. Last week when we talked about there's the other street festival called Honk Fest, or Honk, I think it's just called, and that's in the fall where it's just street bands that only play horns and they play on every street corner over the course of the day. So for any listener in Somerville, or it's actually, I guess technically in Medford for that one near Tops University.
That's a super fun activity. But.
All right, well, to the matter at hand, so the reason I wanted to bring you on is because you just released some analysis on the metering sector, the global metering sector, that is. And I think that the title of the report, Global Water Metering Outlook Evolving Technology Trends, Business Models, competitive landscape and leading companies.
And that's all the words I have for it in the title, but mouthful, but let's talk a little bit about it. What's the report about? What does it include? Why do we do it? And then we can sort of dig into some of the details and findings that you uncovered in the analysis.
[00:08:37] Speaker A: Yeah, for sure. The title is definitely a long one because we cover just so much great content throughout the report. But as most people know, metering really is this core piece of technology used by water utilities. And it's often considered both within the industry and as well as here at Bluefield, to be really one of the first steps that utilities take in their digital transportation transformation journey. In fact, metering technologies account for about 40% of our digital water forecast. So it's a very significant market that we pay a lot of attention to here at Bluefield. The last time we took a deep dive into the metering market was back in 2023 with our global Water Metering Landscape Report. That's also a title that's a bit of a mouthful, but it's been about two years now, so we thought it's the right time to metaphorically kind of open up the meter box again.
In this report we take a deep dive into this $6.8 billion global metering market with a focus on, as the title suggests, evolving technology trends, emerging business models, new players in the market. And we also conducted like a detailed analysis of the company's strategies of 20 leading metering manufacturers from all over the world. The report covers a lot of ground like I've alluded to. So we, we cover things from like policy shifts that are set to impact the market, such as the evolving tariff situation in the US, the AMP8 investment cycle in the UK, post Covid recovery funding in Spain. And we also get into different technology shifts such as the push for static meters meters as a part of the broader digital water software ecosystem that utilities have.
And the market has also seen, like I mentioned, entry from new players such as telecom firms leading smart meter replacement projects, particularly out in Europe, and service providers offering a range of support from financing implementation to customer management. We also looked at some industry hot topics such as metering as a service and AI. So lots of great stuff there.
[00:10:35] Speaker B: Yeah, I think one thing that's interesting you mentioned new market entrance, but then there also might be some exits. So I'll save that, save that maybe tidbit for later if I can remember to ask you about it or if anybody's interested, they could reach out There's a lot to unpack there. But what about company insights as well? You look at OEMs as well and what they're doing, right?
[00:10:55] Speaker A: Yeah. So on top of just kind of tracking these trends that we've seen in the market, I mean there are these. It's a. Metering is a highly localized market. There are these big names that are familiar to many of us. So the report also does this in depth analysis of 20 leading metering OEMs from all over the world that ranges from like Badger, Census, Neptune, which are based out here in the US all the way to some of the leading Chinese players. We've got their estimated revenues, their sales strategies, their relative kind of global market share. And we also detailed their expansion efforts through new products, strategic acquisitions. And all of these get synthesized not only in analysis, kind of comparing the players together, but also in these detailed company profiles. I've glossed over a lot of the details because there's just so much that's in the report. There's a lot of great insights. So I do hope that everyone has a chance to check out the report.
[00:11:46] Speaker B: Yeah, I think your point is, is a good one. Right. So if we're looking at 40% of the spend is going to metering, that just obviously makes, you know, good reason or gives good reason to focus on it. But I also think people understand it. I think people do know that they have water meters in their homes or most people do.
Whether they're paying attention to whether they're, you know, mechanical or smart or ami and so forth is a whole nother matter. But do you think people. And that's actually where the, the billing kind of, that's the mechanism where it takes place. Right. And so then that's how the utility monitors what's happening in the household, but also in the network potentially as well. But let's talk a little bit about how metering businesses or these companies and their strategies are evolving. When you were doing the analysis, what are some of the things that you uncovered? What are some high points?
[00:12:39] Speaker A: Yeah, for sure. So kind of to your point, Reese, meters are really, I guess, what we consider to be like a legacy piece of technology. It's something that's been around for a very long time. And meters are also used by other utilities like electric, gas and everything. So it's a very mature piece of technology that's been around for a while. But the business model that we've seen for vendors especially has kind of gone through a bit of an evolution as the technology has evolved as well.
So historically the prevailing business model were these one time purchasing agreements that happen every 10 to 15 years between vendors and utilities in line with just kind of broad meter replacement cycles. When a meter starts failing, it's time to replace them. The utility then goes to the vendor and say we need to make another kind of big purchase of these equipment to install into our network, et cetera. This was the case for manual read mechanical meters as well as the radio read AMR meters. But what really sparked the shift is when advanced metering infrastructure or AMI really came onto the market.
So just for everyone's information, AMI meters are these meters with endpoints that automatically transmits data across an RF or other types of communication networks. Initially, especially in the U.S. meter vendors were selling access to proprietary networks. So these are for example, Flexnet from Sensors, gridstream from Landis and Gear. So utilities had to purchase the actual metering devices. So that is the measurement equipment, the endpoint, but also the gateways to build these networks that they then have to maintain into the long term. So AMI yields a lot of benefits to the utility and that's something that's well recognized within the industry. It allows for more real time monitoring and it allows of water consumption and it also helps kind of strengthen customer engagement, customer relationships. But the truth is with the old model, with these proprietary networks, it's a bit cumbersome for utilities to have to maintain that infrastructure along with a bunch of their other assets. So it's not always been the most realistic option for small and medium utilities who might have more limited staffing resources.
Now vendors are increasingly actually offering non proprietary network options for AMI meters. So in Europe, for example, LORAWAN and MBI IoT are finding different country strongholds. And in the US LTEM has really kind of been the network of choice for these non proprietary networks vendors. So the OEMs are offering these options kind of as this network as a service solution, meaning that a utility pays a monthly fee to transmit data over the network. But the actual maintenance of the infrastructure is usually done either by the vendor or via like a local partner that they have.
This along with the subscription model used for vendors when it comes to their meter data management as well as their customer engagement software is creating this recurring revenue for companies, which is a marked shift from like the old one time payments that we used to see in the past. So that's pretty interesting.
[00:15:39] Speaker B: Yeah, no, it's super interesting. And I think as you talk about this and you talk about the number of the company's names, I mean we're not talking within the metering companies and the vendors themselves.
You know, in legacy terms, they're not a lot of them. It's pretty mature. Right. If you're talking about globally, you know, 20 players make up the lion's share of activity. What I think is interesting, and this really gets to my next question is these meters create a bit of an ecosystem in which other solutions, other companies, sometimes within the water sector, sometimes without, to my coming point, that they can play. Right. It is a pivotal piece of hardware, kind of like SCADA systems. Right. That would be another equivalent which I think also takes up a lot of the utility spend in our forecast as well. So like I said, what you're saying is interesting. But you mentioned radio frequencies and communications. Where do the telecom players or other communications players play in this market? Do they play a role?
[00:16:39] Speaker A: Yeah, for sure. I mean Reese, to your point. Exactly. Kind of metering as kind of an industry because it's been around for so long and for a while this piece of technology was really kind of, I guess there was a bit of a monopoly by the metering vendors and the OEMs themselves. But because there has been this shift to non proprietary networks where these are not networks that are designed, built by the vendors, it's really actually kind of opened up an opportunity for new market entrants. And precisely these telecom players are actually starting to enter the metering market. So for telecommunication players, they're really leveraging on this experience of maintaining networks for what we commonly use for like cell phones. So for example, players like AT&T and T mobile in the US as much as they don't market their kind of business, their metering side of the business as much, but they do have the technology out there to support companies who are or vendors who are seeking to tap into like nbiot or lte.
Over in Europe we have players like Telefonica, Vodafone and Arkiva who are also actually leading the smart meter projects in Europe. So for example, in the recent AMP8 investment period, Arkiva is actually supporting Anglian Water in their rollout of AMI meters. So we're seeing them really play a much bigger role. More so overseas. Not really much. Not really much in the US in the US telecom players I think play still a bit more of a passive support role. But it's interesting to see abroad that telecom players are really kind of leading these meter replacements rather than vendors which we typically think of.
[00:18:10] Speaker B: Okay, no, I think that's super helpful because like I said, I'm all about the ecosystem. And I think that's where water sits. I mean, one of the challenges that the water, or maybe society as a whole faces is that water touches everything. Right? And everybody's involved in it one way or another. And I think, you know, telecoms are a good example of, they play a role in what they do and they, they communicate that data increasingly because the network is getting smarter, the meters are getting smarter, they, they see an opportunity to play there that. I don't know if a lot of people think about that. They're probably just worried about their cell phone bill.
All right, so topic du jour. You've mentioned things like network as a service and you've talked about metering a service as a service. And as a service models are pretty popular these days as we all know from, I mean just food and beverage industry. You can get food delivered to your home every week to now you're talking about metering as a service. So tell us a little bit about that, how you define it, what you're thinking when you think about network or metering as a service.
[00:19:19] Speaker A: Yeah, we've definitely seen in the water industry kind of a takeoff of this as a service business model. Whether it's like startups or the incumbents that have been in the industry for a while, it's really just a means kind of for companies to generate that recurring revenue. And as I've mentioned with network as a service, what it essentially means is that a utility pays this monthly fee to connect their AMI meters to a communications network that could be proprietary, that could be a non proprietary option, and in this case a utility isn't responsible for building or maintaining the network, which like I mentioned earlier, can be a little bit cumbersome for some utilities with certain workforce constraints. Metering as a service is a more is an even more recent business model that we've seen and it kind of takes the idea of network as a service one step further in the sense that a utility pays a fee to access the communication networks, but they also contract out regular maintenance activities like meter asset management and even like meter data management.
Both solutions are meant to offset the upfront capex costs for utilities when it comes to meter replacement and especially AMI adoption, which can get very expensive just because it's a lot of meters. And even if they're priced at a certain amount, when you're at that scale, you're looking at multimillion dollar projects even for relatively smaller utilities or medium sized utilities.
So what they're trying to do with these models is to transfer at least some of the costs into OPEX budget. And the idea is that this will make the AMI transition more accessible to utilities who are smaller with more limited finances.
[00:20:55] Speaker B: I want to interrupt for two seconds because this has come up recently and I'm throw something at you think, you know, it's actually an interesting time as well, right. Where who knows what's happening economically. But. But I think it's even the case the more utilities can push into opex, OPEX or more those budgets oftentimes are, I don't want to call them recession proof, but they're more resilient or inelastic. Right. And so the demand is there. So the more you can do that I think would be better. But I guess one quick question is it sounds like the metering companies are also pushing these options, right? The metering as a service. So it truly benefits them because once the utility is on the hook, they're on the hook for the most part, at least over a period of time, correct?
[00:21:41] Speaker A: Yeah, I mean that's kind of the idea with metering as a service. You have this long term relationship where the utility is just kind of constantly in contact with the vendor or maybe it's a local partner or maybe it's a telecom firm. There are a lot of different companies right now who are off, well, I wouldn't say a lot, but there is this small collection of companies across kind of the metering ecosystem, I guess, who are offering metering as a service. So recently my colleague Maria and I actually recently wrote a research note about metering as a service. And we honed in on netmor, which is a Swedish Lorawan provider, which announced that they will be offering the metering as a service solution alongside their other offerings for water utilities. Another prominent proponent of the model has been camstrup. And so they're a metering vendor and as a company they've actually partnered with sustainability partners, which is more of this like service provider. They have a model that they call infrastructure services as a service, I believe.
Don't fact check me on that. They do it in the US and they've rolled out some of these projects primarily kind of for smaller utilities like Villages and stuff. So overall I think yes, this is just kind of another way for different vendors in the metering space to kind of once again tap into those OPEX budgets, those recurring revenues which are more resilient into the long term. But overall though, regarding metering as a service, as a model, we think that it's still very much in the early days. We haven't seen that many projects leveraging this model specifically. And based on interviews I conducted with utilities for the report, there is this hesitation, quote unquote, of losing ownership of one's metering assets and systems. I mean, utilities are very kind of traditional in the way that they think about their assets. So having this option where they essentially kind of relinquish control to some extent in terms of whether it's maintenance or the type of data that they're managing, it can be a little bit difficult. It's a conversation that vendors need to bridge essentially to be successful. So overall we think that there's definitely an opportunity for the metering as a service model, specifically in more fragmented markets and for smaller utilities. But strong partnerships with like local service providers that can be providing that on the ground support is going to be essential.
[00:24:08] Speaker B: Yeah, I think your comment about utilities, I mean culturally and we've talked about this a number of times, they're pretty conservative for obvious reasons.
They need their meters to work so they're not going to make decisions on a whim. I think that maybe. And they're used to meters, right? I think the bigger concern for them, I suspect, and you could correct me if I'm wrong, is that it's really when the smarter the meters get, it's really the back end, like what happens with the data, the data management, the data collection itself and how is that being managed? Because that's kind of, that's a different role, right? Then you start bringing in data analysts and maybe even outside consultants that are going to have to help or even the metering companies themselves that are going to help these utilities sort through these things. So I think that's probably the biggest sticking point. I think if, you know they're used to mechanical meters, right? I think they're used to, hey, if it worked and it was economically viable and efficient and the other options didn't exist, maybe. I mean the idea is to drive efficiency, whether it be in workforce and billing, collection, network monitoring. I think there's value there. One quick question I do have for you is you mentioned companies that do it and maybe once again a little naive, but I think this is what you're saying is it's not just the metering vendors, like let's say camstrup, you mentioned them, they may be offering this, but there are third party vendors or distributors like a Ferguson or a Corn Main offering these solutions as well. Or are they just a distributor?
[00:25:42] Speaker A: We haven't quite seen distributors start doing this model. I mean, we've talked about this in previous podcasts about how distributors are starting to kind of offer more than just selling the product to utilities. When it comes to meters, Corn Main and Ferguson both offer some sort of different types of support, whether it's like project management or support when it comes to meter installation. More so kind of on the services side side, the ones who are offering metering as a service are more so like the actual installers. So they are like another aspect of the ecosystem. Right. They're different from distributors necessarily.
One name that comes to mind is ums. They have it advertised on their website that they are able to offer this, like, metering as a service option. So, yeah, I guess kind of to recap what, some of the players we've seen starting to offer metering as a service are the actual vendors themselves. So that's like camstrup, there's Zenner. We see telecom firms like netmor starting to offer that. And we also have these installation firms like ums who are going to the market offering this. And like, in some senses, like I said, it's still very early stage. We don't necessarily know which player is going to kind of have the most strategic advantage. But the feedback we've heard, and I think logically what's really important is since metering as a service has that aspect of maintenance of the actual meter assets, a local presence is going to be very important.
If we think about it, this model is most well suited for probably rural and smaller utilities. These are the people who are not close to city centers. You need to make sure that there's someone that is contracted on the ground, relatively close by, such that if anything were to happen, you know, the vendor or whomever is able to honor the contract and is actually able to kind of fulfill their end of the maintenance side of this service. So, you know, having some sort of local partner, whether it's a local engineering firm, a local distributor, a local installer like that is going to be a really critical piece of the puzzle. So we're kind of like waiting to see how this continues to flesh out because like I said, very early stage, we're not seeing a ton of people necessarily do this just yet. But, you know, once it has legs and it's running, it's definitely going to be interesting as it's likely to be quite disruptive.
[00:28:00] Speaker B: Yeah, I think, you know, I also think of like O and M service providers, right? They've got boots on the ground, they're covering a territory. I think when you get into rural areas, the challenge you run up against is distance. Right. An economy scale. Right. Everybody wants to be able to go door to door to door. But you know, if you're in the middle of pick your middle of Texas rural community, maybe a little bit harder to do so. But I know that's a cost challenge for some, but that's why I was thinking of O and M companies. But I like this. So if I'm looking at the metering space, what are some strategic takeaways for companies that are looking to either enter the space, I mean, or expand in the space? What should I, if I want to do this, what should I be thinking about?
[00:28:45] Speaker A: Yeah. So.
Well, Reece, you are a water professional, so you're pretty familiar with the industry. But I think if you are an outsider looking to enter the metering market, you're looking at some pretty stiff competition. The 20 leading vendors that we profiled for the report account for around 76% of the global market share. And these are companies that have strongholds in their local markets and several have also expanded abroad as well. Case in point, Arad Group is a company that we profile and they recently celebrated installing 250,000 smart water meters in Tel Aviv which is in their home market of Israel. But they also have a leading position in the US through their subsidiary Master Meter. And they also have a position in a hard to enter market like China through their subsidiary ERA China.
So for those already in the metering space, I think there is a different consideration. Like I said, for those who are outside, you're looking at stiff competition. For those who are already inside, I think software and analytics is really the name of the game. Of the 20 companies we looked at, those which offer some sort of advanced software analytics solutions which use meter data to do more than just track consumption, really outperform their peers by approximately 40%. To give a couple of examples of these kind of analytics initiatives by different companies are, for example, Deal Metering. They established their analytics and service business unit back in 2022.
In line with that, they launched their water loss management platform which leverages DMAs to localize leaks. In 2024, Deal added AI and predictive analytics capabilities through their acquisition of Provincial, which my colleague Mike wrote a great research Note about. In 2024, Itron, another company, announced that it would be integrating genai capabilities from OpenAI to its itron Enterprise Edition MDM system, which will help make data queries a bit easier. And of course there's Senses, which is the metering company of Xylem and it offers a great gateway for utilities to Access Xylem's other highly sophisticated solutions like the Xylem View platform.
Last thing I kind of want to call out is that metering vendors are really evolving to do more than just metering, and they're expanding into their networks. And it's something that has been described to me as kind of a logical next step, in a sense. But what this means is that metering companies are now really competing with the traditional network monitoring and management players. And Badger Meter is a prime example of this. We've talked about them the last time I was on the podcast when they acquired SmartCover, which added significant wastewater monitoring solutions to their portfolio. And as I mentioned last time, SmartCover follows a string of other acquisitions that Badger has made over the past couple of years to really expand into the network. So that's like Serinix, Telog, Scan, ati. And this has really built out Badger's capabilities along the utility network. Other vendors like Mueller Water Products, Taggle and Itron, just to name a few, are also providing solutions for network management on the software side. So this is really coming back full circle, really, to how analytics has been this key growth strategy for metering vendors. And that's likely to kind of be a trend that we see persist into the medium and long term.
[00:32:12] Speaker B: All right, so I have a couple comments. One is I just want to make sure for the listener. So you had mentioned that, you know, Arad Group and their subsidiary in the US Master Meter, they're a leading player. They're not the leading player. They are a leading player. Player, correct?
[00:32:25] Speaker A: Yes.
[00:32:26] Speaker B: I just want to make sure, because I know there are a couple other companies. We're going to get a phone call in about 45 minutes and say, like, whoa, whoa, wait a second. No, Master Meter is one of the leading players.
It's a pretty like. I mean, it really gets to your point. It's a pretty consolidated market in terms of number of players. It's not highly fragmented. I think the other thing I think is starting to escape me now, but that is the software and analytics. I think it's interesting, and this is apropos metering, and it has to do with Roper Technologies that owns Neptune. And I don't know if we'll get into that, but they've put Neptune seemingly on the block, or at least they're exploring a divestment of that. And part of that is Roper Technologies, correct me if I'm wrong, has shifted its focus or put an emphasis. Maybe that's a better way to put it on Software and analytics as far as their other services and what else they're doing. So maybe the metering business while. And maybe they're potentially selling it at a high point, that's less so. Am I correct in saying that?
[00:33:36] Speaker A: Yeah, I think when we first heard the news that Neptune might be sold off from their parent company, we were very intrigued. So we took a deeper look into it. And it does definitely seem that Roper is looking to kind of transform itself from being a more hardware focused company to be one that's really tapping into that software and analytics growth that they're seeing kind of across their portfolio. Neptune is, is a very, is a pretty massive subsidiary within their portfolio. They consistently performed pretty well. They have a pretty strong presence here in the US and over in Canada.
So. Yeah, but the nature of metering is that it is kind of a hardware oriented business. And I think this is something interesting that I recently heard on one of badgers like earnings calls. They, they really emphasize that for them like they are a hardware focused business, but the software is built off of the hardware. So it's really kind of the approach, I guess that companies are kind of coming at it. The truth is meters are kind of, like I said, it's this core piece of technology. They collect a lot of data. If anything, it's one of the first pieces of data that utilities often start to get because they need it for their billing, they need it for their revenues. But that data can do so much, we've alluded to this already. It can be used for lead detection, it can be used for customer engagement. You can really take that data and do so much with it. So there's always been an opportunity for analytics. But we're now finally at a point where the software has really reached a certain maturity, the utilities have reached a certain maturity when it comes to wanting to harness that data to do more. So yeah, it's a hardware focused software business, but software analytics is really kind of where players are going to start differentiating, I think.
[00:35:20] Speaker B: Right. And I think you also mentioned things like gen AI and things and obviously that applications for AI and collecting or understanding the data is going to be just going to come more ubiquitous, if that's correct way to say it. So you've laid out sort of the strategies, but what about on the market side? Sort of what for investors or utilities evaluating meter suppliers, what are some of the things they should look out for?
[00:35:46] Speaker A: Yeah, I think I would.
I want to kind of, I guess talk about the US market in particular. There are a lot of Policy pressures that are coming from like Build America, Buy America as well as the tariffs. And that's going to have a significant impact on vendors. It's going to have a significant impact on utilities. The EPA actually announced a temporary three year waiver for AMI meters from Baba. But the evolving tariff situation is going to have a very real material impact on vendor supply chains, kind of in a, in a more short term perspective. So particularly because metals and semiconductors, these are still largely sourced from other countries. So there's going to, going to be a need kind of in the medium to long term for vendors to reshore production, reshore some of their supply chains, supply chains, excuse me if they want to, to target the US Market. Tariffs are this evolving situation. But BABA has been around for a while and is probably here to stay. So I think that's important to, to keep in mind. I've been tuning in to earnings calls from different vendors recently and when it comes to tariffs, most are kind of taking this like wait it out approach just because it has been so volatile. But utilities certainly need to be prepared for price increases. Vendors haven't necessarily seen utilities kind of pull back from meter replacement projects though, because I mean, like I said earlier, when a meter breaks, it needs to be replaced, otherwise that's cutting into a utility's revenue. So I think we're going to still see these meter replacement projects. They're definitely still going to be around. The demand is definitely still going to be there. But utilities need to be prepared for prices to increase and vendors are going to have to kind of really look at their supply chains, figure out how to make them more resilient against like volatilities and demands from the US market.
I think, I guess moving on to the vendors themselves, a key differentiator is really what companies can offer beyond measuring water consumption. So metering companies, I've alluded this to already kind of, they're really becoming these digital water multiplayers with solutions that target pain points beyond water consumption.
They're able to offer solutions in network monitoring, leak detection, even predictive asset analytics. Because meters are this core piece of digital technology that most utilities have. Vendors already have these robust existing relationships which they can really leverage to upsell. Advanced metering solutions, but also adjacent offerings that they would have in their portfolio. And this is very interesting, and this is very interesting in and of itself. But also what's fascinating is that there is very distinct brand loyalty when it comes to metering. We've definitely heard sometimes when talking to utilities that they're like, we've gone ahead with this vendor for our replacement because we've always used this vendor. So in some senses, metering vendors are really primed to take advantage of this brand loyalty, these relationships to play a bigger role in a utilities digital transformation. And finally, I guess on the software front, as utilities embark on this digital transformation journey, practically they're having to manage multiple platforms, multiple vendors. Synergizing these systems have really become a key challenge. So metering vendors who are able to offer solutions that are either interoperable with other systems or offer platforms that help integrate and analyze utility data, I think that these players are really going to have a strategic advantage.
[00:39:21] Speaker B: I'm thinking that your point about loyalty, do you think that because of the rollout or growing applications for software and analytics built off of the metering so smart meters, simply put, I think that's going to make them more loyal, is it not? Because then the back end becomes even more complicated because they're not.
They're the same, but they're not the same. Right. They're providing similar information. So I wonder what it looks like on the back end. And do you think that makes them more loyal because the back end is tied to some software solution?
[00:40:02] Speaker A: I think for sure. I mean, like as a meter is collecting more information, there's just so much more data that's coming in. It's, it's probably easier to just kind of go with your meter vendor for the software platform because you know for sure that it's going to connect well, it's going to make sense. And to some extent you might be familiar, you might feel more comfortable kind of asking these like hard questions about how to use the platform. But what's interesting, I think is that because it is a software piece, this also kind of opens up the world for other players or for other metering vendors who are offering more kind of vendor agnostic platforms. So I'm thinking of Itron, for example. Their Temetra platform is market as being vendor agnostic. They can connect to the meters of all of their competitors. So this is kind of where like metering vendors are really going to have to be on their toes and making sure that their software platforms are meeting customer demand and are able to offer the functionalities that the market is looking for so that they can maintain and retain those customer relationships. Because it's a bit of like a you snooze, you lose kind of situation at this point. Like this is also, you know, an opportunity for startups or smaller players to come in to be like, oh, we can Integrate your data. And we are not kind of burdened by the fact that we have this like hardware portfolio or something like that. So it's a bit of a double edged sword. But I mean, once again, brand loyalty, the way that the market is, when it comes to being a bit more slow moving, really kind of it's a very people business. Like they trust the companies that they've worked with for a very long time.
Vendors are definitely in a very good position to use your software solutions to enhance those relationships. But that doesn't mean that they can get complacent or careless when it comes to these relationships because you never know that a client could be swept up from right under you.
[00:41:45] Speaker B: Yeah, no, I think that makes sense. That's super helpful.
So let's look ahead. So we've sort of looked at the market. We've got the market share, we know the size of the market, we forecasted it. But I think, you know, beyond just the forecast themselves or itself, what does the future hold for order for metering? But also how will the market, how do you think it's going to evolve over the next five to ten years? New players, new tech, new what do you see?
[00:42:14] Speaker A: Yeah, I think something for sure that's probably going to be happening in the medium to long term especially is I think static meters and especially ultrasonic meters are really going to see an acceleration in adoption. That's something that we've already kind of anticipated in a lot of the research that we put out in terms of our forecasts. And most vendors out there already offer a version of this technology.
And they also have just these key advantages which make them a very attractive solution for utilities.
So because there aren't any moving parts in these static meters, many vendors are offering integrated sensing capabilities for leak detection, temperature and pressure monitoring. And I think this really relates to kind of what I've been alluding to or what I've been talking about throughout the podcast about how metering companies are becoming these multiplayers. Their devices and their solutions are doing more than just measuring water consumption.
Historically, pricing around static meters has been kind of a little bit prohibitive for most utilities. It is a newer piece of technology, is a very sophisticated piece of technology. So it's been very expensive, typically and early adopters have largely invested in static meters and ultrasonic meters, more so for their large commercial and industrial connections, because they want to make sure that those bills are as accurate as possible, just to make sure that their revenue is, you know, is, is well maintained from those customers. However, there have been signs that they're the cost gap between traditional mechanical meters and static meters, especially static meters that are made with plastic. We're seeing signs that that difference in price is actually starting to narrow. So as static meters become more affordable, there really is that possibility in the near future that particularly in more mature markets like north and Europe, the use of static meters will soon overtake that of mechanical meters. I've mentioned them a couple of times throughout the podcast already, but telecom players I really think are going to continue to expand their presence in the metering market, especially as utilities continue to prefer non proprietary communications options. I've mentioned Europe earlier already about what telecom players are doing in terms of those projects, but we're also seeing this in other countries, particularly developing countries like like we're seeing case studies of Namibia, South Africa, Brazil, Mexico. Telecom companies are really the partners that utilities are working directly with for smart meter adoption. So that's another point that I want to call out and the last thing I want to mention, and I think I talk about it a lot, which I guess makes sense given my role here at Bluefield as a digital water analyst. But it's AI. We are seeing a range of AI applications for metering.
For example, Sunchuan Wisdom, which is a Chinese metering company that we profile in the report, they actually developed a AI module with China Telecom in 2024 to diagnose faults and optimize power consumption for its metering devices. Australian engineering firm ghd, they've partnered with French field operations automation company Dep? O Matic to use AI for real time meter installation audits. So essentially using that tool to kind of view like photos and videos when meters are installed to make sure that they're installed correctly. And I mentioned this earlier as well with what Itron is doing in terms of leveraging generative AI to make it easier for utility users to really do complex data queries. And as with most things with AI, the sky in some ways really is the limit. Meters are a great use case for it just because of the amount of data that it collects. And with ami, they're collecting it at a higher frequency. With static meters they're collecting more data. So I'm really excited to kind of see how AI innovations will continue to come into disrupt and kind of change and evolve the metering space.
[00:46:10] Speaker B: All right, so let me get this straight. So you got static meters as one, you got telecom players the other, and then obviously AI and AI is going to probably play a role in all of the above, like you said. So I Think those are good ones. I think it's interesting you call that Namibia just for.
For those little nugget is.
It's kind of fun. Well one, hardly anybody lives in Namibia. For anybody who's been there, it's pretty, pretty empty. I think it's probably the least densely populated country in the world after I think Mongolia. But they're also way out there. They adopted direct potable reuse system in Windhoek, I think like 20, 20, maybe 25 or 30 years ago. I can't remember the exact date. So it's interesting that you bring that up. So no, I like this and I think it matches well with what you already told us early in the conversation about these players and look forward to seeing how it unfolds. But before I let you go, I do want to ask you what are you working on? It sounds like you got maybe a research. Collaborating on a research note with someone on something.
[00:47:15] Speaker A: Yeah. So I mean recently Tetra Tech made an acquisition of an Australian automation company that's also doing some interesting work in terms of AI advanced data analytics for Australia, Australian utilities. So I'm working closely with our colleague Mike Miroff to get that off the ground, hoping that that will be published very soon for everyone. I think we have really interesting insights in there and it comes off. It kind of follows really well to the recent report we put out about EPCs and their different strategies.
Another thing I'm working on for the digital service specifically is we are looking into the world of asset management. The last report we did for this topic was back in 2018. So it's about time for us to kind of open the box again. Similar with this metering report, but this time we're really getting more specific. We're looking at it from the angle of optimization. So having lots of really interesting conversations to really beef up that report. But yeah, lots of things. Lots of exciting things happening at Bluefield. It's the summer, so. Or summer's around the corner, so conference season is happening and so many of my colleagues are going to be on the road. So it's going to be an exciting time.
[00:48:22] Speaker B: Yeah, no, I think that's great. I think everybody's looking forward to that. If anybody's listening and you're curious about asset management or you want to provide some opinions to. Or at least maybe some perspectives. Yeah, that's a better way to put it on, you know, that it would help our research and help us help you. Definitely let us know what are
[email protected] and just shoot us a note and Christine, I'm certain will be be willing and able to get back to you on that. All right. Well, Christine, thanks a million. Despite for those listeners out there, you don't, you won't even notice because of great production from people like Mike Gaylor. But there were some fits and starts in this conversation that we seem to have pulled together. So thanks a million, Christine, for jumping on and thanks for the patience, of course.
[00:49:08] Speaker A: No, happy to be here.
[00:49:10] Speaker B: All right, take care. Talk soon.
All right, well, that's it for today's breakdown. If you want more intelligence like this, head over to bluefieldresearch.com I am Reece Tisdal and I'll catch you next time as we keep watching the water sector one signal at a time. Thanks for being part of the journey. And what's turning out to still be an interesting 2025? It's still uncertain. There are a lot of questions out there.
But before we sign off, give you a couple things. I don't say this enough. I want to thank all the people involved in making this podcast, Future Water and all the other conversations happen. A lot goes on behind the scenes that you may or may not know.
But the people to thank that I'm thanking, they include Mike Gaylor, who I already mentioned, Ryan Sullivan, Kelly Talbot, Steph Alldock.
They put up with all my nonsense, so I would be talking myself if it weren't for them. So if you get a chance and see them or talk to them, thank them as well.
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[00:51:04] Speaker A: Of.
