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In the 1990s, Itron introduced new automatic meter reading (AMR) solutions to the North American utility market. AMR was revolutionary product in the that completely changed the challenge of reading electric meters. Prior to AMR products, utilities were forced to read meters manually, at a cost of approximately $1 per meter read. After the of AMR products, the cost of reading a meter release zero. Utilities faced steep switching costs for adopting AMR over manual meter reading methods. Installing an AMR module required a skilled technician to visit each home individually. Assume the cost to install an AMR solution is $50 per meter. For the sake of this exercise, assume the above estimates are accurate and the marginal cost to produce an AMR module is $12.

What is the annual cost per meter to a utility for manual meter reading? For AMR

Assume that utilities use a 6 percent discount rate to evaluate new purchases. Over the 10-year life span of an AMR solution, what are the cost savings per meter?

What is the price of the nearest comparable alternative to AMR for a utility?

What is the differential value of AMR to its nearest comparable alternative?

What is the exchange value of a standard AMR solution in North America?

In most of Europe, utilities read their meters only once per year. What is the exchange value of a standard AMR solution in Europe? Should Itron have pursued the European market in the 1990s?

Financial Management, Finance

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