My promised restructuring of Microsoft will conclude tomorrow but today I want to cover a news announcement from Google that I think is very important, yet that importance seems to have been missed by the mainstream and technical press alike.  My subject is the Google PowerMeter, which is far more strategic than Google is letting-on.

Not that the official PowerMeter story isn’t a good one.  Google has invented these devices that will be distributed to users to measure the electricity consumption of their homes or apartments in real time, encouraging residents to conserve power, which is good for everyone.  I’d love to have one of these gizmos, which in most cases won’t only report to the residents but also to the electric utility.  And eventually that utility may be able to directly control electric heating and cooling systems through the PowerMeters, turning them up or down as needed to reduce total demand during high-use periods, perhaps in exchange for lower electric rates for the consumer.

This power consumption shaping would be very similar to programs already in place with many industrial users, the idea being that if maximum consumption can be kept down below a certain level then the utility won’t have to fire-up expensive gas turbine generators that are often used for peak additional power.  And in extreme cases utilities might be able to forego entire power plants, saving in the case of nuclear plans, up to $3 billion in construction costs.  It’s a heck of a deal.

So this is Google doing its bit for the environment in exchange for which they learn even more about our behavior, right?

Wrong.  It’s much more than that.

Google’s PowerMeter is a Trojan horse – a way to become a de facto Internet Service Provider for potentially millions of homes.

Several years ago Google made a $100 million investment in a suburban Washington, DC company called Current Technologies, which is America’s leading provider of both smart electric metering services (that’s what the Google PowerMeter is supposed to be) AND power line Internet service based in part on the HomePlug networking standard.

Current’s business model was simple.  They’d give participating utilities a way to both measure and control local power consumption pretty much as described above.  Oh and, by the way, the meter connection could also be used to provide Internet service, potentially to 100 percent of a neighborhood since pretty much everyone buys electric power.  Throw Internet on the power bill, then maybe digital cable service, too.  Eventually the power companies would take on the cable and telephone companies to fight for broadband hegemony.

Only it isn’t really happening that way.  Current is doing deals with utilities, but most of those utilities AREN’T going so far as to offer broadband Internet.  They are just reading meters, thank you, which isn’t bad unless your profit is supposed to come from the Internet and cable competitor side.  So Current Technologies is struggling somewhat and Google’s investment in that company hasn’t grown as much as either company would like.

Enter the Google PowerMeter, which is both an intelligent power meter AND an Internet gateway, just like the original vision at Current Technologies.

Electric utilities are enthusiastically installing backbone capability to serve these smart meters.  And contrary to popular belief, the network on the power company’s side of that medium-voltage transformer on your telephone pole is usually optical fiber, NOT Broadband over Power Lines (BPL) which amateur radio operators hate so much.  The fact is that BPL has real distance limitations and it is just easier to string fiber alongside the medium and high-voltage lines.

So the utilities partner with Google to install these boxes, ideally in every home.  They install enough fiber for gigabit service to the medium voltage transformer with HomePlug or WiFi into the home.  And the whole thing interfaces to Google at the power company’s data center where Google will install proxy servers and routers and connect to the Internet backbone.

Eventually Google — not the electric utility — throws the switch on consumer Internet access, IP TV, and VoIP phones, which the electric companies could have done – should have done – on their own but generally couldn’t be bothered to.

Ideally Google lights the whole town with Internet with the utility happily picking-up most of the infrastructure costs yet with Google becoming the ISP.

Now THAT’s a heck of a deal.

Prove to me I’m wrong.