Tesla’s First Lithium Agreement

Last week, Tesla announced they have made a deal with two companies for a mine in northern Mexico to mine Lithium products (Lithium Hydroxide, 29% Li by weight, and Lithium Carbonate, 18% Li by weight). The companies involved still need to get funding to build the mine and commence operations, but it should be a bit easier for investors know they have a deal lined up with Tesla Motors to buy all that lithium that will be mined.

The deal starts with 35,000 tonnes of Lithium initially, and may scale to 50,000 tonnes of Lithium as the production at the plant scales up. So how many kWh does that translate to?

Lithium Ion batteries vary in their amount of their elemental lithium (vs. lithium hydroxide or lithium carbonate) based on the type of chemistry and other materials present. The NCA cells found in the Model S use about 300 g of elemental lithium per kWh. This translates roughly into either 1.67 kg of Lithium Carbonate (LI2CO3) or 1 kg of Lithium Hydroxide (LiOH).

Let’s assume that its a 50/50 mix of both Lithium products, which yields a requirement of 1.33 kg of Lithium products per kWh of battery produced. At 35,000 tonnes of Lithium, that is 26.3 GWh of manufactured cells, assuming that there is no waste product from the lithium coming into the factory (this is not likely the case, so the 26.3 GWh will be the upper bound for our 50/50 assumption). The maximum initial production would be 35 GWh if 100% of the supplied lithium product was Lithium Hydroxide, and the minimum initial production would be 21 GWh if 100% was Lithium Carbonate.

At the contract maximum of 50,000 tonnes of Lithium product, you’re looking at a minimum of 29.9 GWh, a midpoint of 37.6 GWh, and a maximum of 50 GWh of battery cells for the Gigafactory.

So given the inputs and assumptions, we can estimate 26.3 GWh of battery cells to start with, and 37.6 GWh of cells at the top end of the range. If 75% of the cells manufactured go into cars, and the other 25% of the cells go into Tesla Energy products like the Powerpack and Powerwall, it would mean a production of between to 350,000 and 500,000 55 kWh battery packs for the Tesla Model 3 (55 kWh is my estimate for the average pack size sold).

Tesla’s initial stated capacity for the Gigafactory is 35 GWh of cells (and 50 GWh for battery packs – meaning 15 GWh of finished cells are delivered to the plant). However recently Elon has stated that the manufacturing capacity may be even higher than that, as they seek to more efficiently use floor space in the manufacturing process. Tesla may be able to build the same sized building, but rather than get 35 GWh of cell manufacturing capacity, they could get 50 GWh or more. Its currently unknown how much additional capacity they might be able to get, we won’t get our first look until the first phase opens in the first half of 2016 for Tesla Energy cell manufacturing.

(part of this post cribbed from my own Ars Technica comment on this same story)

As a postscript, I’m disappointed the company I had money invested in, Western Lithium, was not Tesla’s first choice for Lithium for the Gigafactory, despite that the mine for the Lithium was in the same state as the Gigafactory and less than 200 miles away. It might be that Tesla needs more than one lithium supplier, and there is still a chance for Western Lithium. And Tesla is not the only game in town either – other battery factories like LG Chem also need Lithium.

Tesla will miss their Model 3 $35,000 target price, but not for *that* reason

Tesla will likely miss their $35,000 target price tag for the Model 3 due in 2017 or so. But not because the batteries cost too much, or production costs are too high.

Rather, demand will be what keeps prices higher.

It is my opinion that the demand for a 200+ mile range, well-designed, luxury Tesla EV will be so huge that Tesla simply raise the price to match demand with what they can supply. It might end up happening in a similar way to how Tesla cancelled the 40kWh version of the Model S. It might be bad PR, they might shrug their shoulders, but its smart business.

The initial roll out in 2017 or 2018 won’t feature vesicles at the $35,000 base price tag – in the pattern of the Model S and Model X launches, we’ll see the highest margin units go out first – signature, largest battery pack, AWD, supercharging, for around $50,000. It will be 6 months or more until they can start offering the lower priced cars (probably around 40K) that are the standard battery pack and trim levels.

Maybe after a year or so, they’ll get around to making the lowest margin units. But even then I don’t believe that Tesla will sell their base model for $35,000. Its likely that they wont get down to that point until about 2020 – after initial demand has been satiated and the Gigafactory is running full steam producing battery packs below $200/kWh.

Chevy’s 200 Mile EV

I’m quite happy to hear a mainstream automaker like GM will release a 200 mile EV that will be available for general sale (not limited to CARB states like CA, OR, NY) and it will be affordable. Its just their timing is bad. With gas around $2.75/gal around the country, people aren’t worried about switching to EVs. Its not until its back above $3.50 do people start to flinch and $4/gal is when they pitch a fit. We’ll see what gas prices are in early 2017 when the vehicle is released, and how that affects consumer behavior. I just don’t foresee a return to $4+/gal gasoline anytime soon.

I’ve been a proponent of raising the gas tax, and indexing it to inflation. I’d like to see the national gas tax raised 6c/gal, and then indexed to inflation. Boosting the current federal tax by 33% would allow the country to repair its deficient highway system, with the side effect of construction jobs.

Some notable pundits have suggested a “gas floor tax” of $3/gal, but that really wouldn’t work since oil companies, refiners and station owners would just keep the price at $3/gal and keep the profits for themselves, rather than sell it below $3/gal and turn the money over to the feds to bolster the highway fund. If you wanted to keep the price of gasoline elevated, you would need to create a supplemental gas tax that would index it to the price of a barrel of oil – an extra 25c the following month when the average oil price is below $60, 50c below $50, 75c below $40.

Ok, enough about infrastructure and gas taxes.

The other issue I have with this EV is that it’s built on the new Chevy Sonic platform. Which is pretty small. It’s almost as if GM is making a mistake putting 200 miles of range into a car that no one would be happy driving 200 miles/3 hours in. There is some amount of psychology built into that 200 mile number – people want to see a range number starting with a “2” before they feel comfortable buying an electric car, regardless of how far they drive it.

The concept has a little crossover style to it, which means it’s likely the batteries are going in the floor like Tesla and the car is sitting up on top of the batteries, 4-5″ higher than normal. This is a good design in that you still get trunk space and seating for 5. It might be that this car has a much narrower appeal in the US (where gas is relatively cheap and people like bigger cars), and higher appeal in Europe and Asia which is OK with smaller cars and higher fuel prices.

Another factor is fast-charging. Tesla has their supercharger network they’re constructing, but its proprietary (for now). The 90kW CCS charging standard needs to take off before people start feeling comfortable buying EVs. The recharge time on a 90kW station from a near-empty 200 mile EV battery is rather quick – the first 75 miles will recharge in under 15 minutes, allowing people to get around and finish their errands.

Finally, price. $30,000 after the federal rebate is still too much for a Sonic-sized car. Even factoring in a $3,000 premium for it being a crossover and $7,000 in first five years gasoline vs. electricity savings. The base model at $30,000 is going to need to be very well equipped (LT model) if it wants to attract buyers. I don’t think we’ll see a lot of price cuts until the $7,500 tax credit starts to expire for GM and Nissan, and they have to reduce the price of their smaller EVs to around $25K before people get interested.

Southern Nevada Transportation: 2015 Edition

This week, the southern Nevada RTC released their transportation projects list, one of which was a subway underneath the Las Vegas Strip. I’ll touch on a few of the options they’ve mentioned.

Taxi stands: Taxi staging areas at casinos and the two airport terminals will need to be expanded as we build more casinos and more convention space. Also, with Uber coming to the state, how people bypass the standard taxi line and take an Uber instead needs to be figured out. You cant have Ubers in the taxi line, and most hotel porte-cochères don’t have lots of space for pickup and drop off needed to accommodate a massive amount of Uber vehicles, nor do they have waiting space for people in Uber cars to park and wait for their passengers to walk out of the casino and to the car (I’ve been yelled at before by hotel security waiting to pick up people in a drop-off area). You can’t walk out to Las Vegas Blvd and hail an Uber, that will be a disaster for traffic, nevermind that it’s illegal to hail a cab on the strip – you have to go to a casino taxi stand. So where do the Uber cars go? The parking garages at the casinos? The passenger pickup lanes at the airport? I can’t think of a good answer to this.

Pedestrian Overpasses: More of these are needed along the stip in the areas away from the major intersections. This one is a big “duh”, the most difficult is the massive amount of right-of-way needed on the sidewalks to land these immense structures and allow for elevators to be ADA compliant.

Las Vegas Monorail: The RTC suggests linking the recently expanded Mandalay Bay Convention Center with the monorail, and adding a stop at the Sands Convention & Expo Center. First and foremost, the monorail should go to the airport (notwithstanding the subway idea below). Thats job one, and if the taxi industry was defeated by Uber, then surely the Las Vegas Monorail group can stand up to the taxi lobby this time. Next, good luck trying to get Shelly to buy into the idea of putting a monorail stop near the Sands Expo – he rejected it the first time and I’m sure he hasn’t changed his mind. Until there is a new CEO of Venetian/Sands, there won’t be a monorail stop there. I love the idea of the monorail being upgraded to 1) support more passengers at peak times, 2) connect to the airport, and 3) connect all three major convention spaces in town. I just don’t think it will happen for reasons that aren’t related to funding and business plans.

Las Vegas Strip Subway: I like this idea. There are two major geotechnical issues with building a strip subway – the water table below the strip is shallow, so there will have to be a lot of effort into making sure that the tunnels don’t leak, and don’t fill up with water during construction. Geotechnical work will be the single largest factor in the pre-construction phase of this project. However, a few casinos have built underground structures (the Palazzo parking garage, for example) so its not unreasonable to think this can be done. The second is caliche, which is a concrete-like substance found in the soil in the Las Vegas area. Its expensive to go through, and I don’t know how deep it runs – it could be a foot or six feet thick. If you build the subway at a sufficient depth (below the water, sewer, gas and power lines underground) then you can get under the caliche and be ok, only needing to penetrate it at access points and passenger stops. Phase one should go up and down the strip from the old Saraha (now SLS) to the Mandalay Bay, which could do a better job connecting all three major convention spaces because the Rivera will become an extension of the LVCC, and a people mover system on LVCC property could move people from the strip to the main hall located a half mile away. Phase 2 would link it to the airport east from Mandalay Bay underneath the two north/south runways at McCarran Airport to terminals 1 and 3. Phase 3 extends north to the Arts District and Downtown Las Vegas.

I’ve taken light rail from SeaTac Airport to Downtown Seattle and I loved it. It was way better and cheaper than dealing with a taxi. Then I took the monorail from Downtown Seattle to the Space Needle. That was neat. I only had to rent a car to go north to the Boeing factory in Everett.

Express Exit Ramps and HOV/HOT Lanes: NO, BAD RTC! NO! The HOV lanes that are in place now don’t get used much (they already have pretty limited hours of operation for HOV use only), and building more ramps between highways or side streets isn’t going to get people in Vegas to carpool. This isn’t a business town where everyone works 8-5, this is a service industry town where everyone works different hours, can be let off their shift early if it’s dead or be asked to stay late if it’s busy. People just can’t carpool here without substantial risk. What they can do however, is setup a park-and-ride system that allows strip casino workers from all over town to park in their neighborhood in a parking lot, and then take a bus for the area they work in (downtown/north strip, mid-strip, south strip/airport) and be taken to work on mass transit, and be returned to their car when their shift is over (the busses would run 24/7).

US 95 (I-11) Interchange at Maryland Parkway: This is great idea, the downtown Las Vegas area needs more access from the highway, the one-and-a-half exists from the US 95 and one from I-15 isn’t enough to handle the large spikes in traffic from AAA baseball games and nights at the Smith Center, plus all the normal traffic from the very large outlet mall downtown.

Electric Jets?

I’ve been thinking a lot lately about electric jets. With all the purported battery breakthroughs, and a discussion of what aviation might be like in 2030, 2040 or 2050.

For the battery baseline, we’ll go with Solid State Lithium metal batteries. These batteries are completely solid, they don’t have a liquid electrolyte that can oxidize and catch fire. They are currently under development, and are expected to go to smaller scale commercial production in the 2016-18 timeframe. Dyson has invested in one of the leaders in the space, Sakti3, with the hope that Sakti3 can produce cells above and beyond current Li-Ion cells. The experimental values for the weight and volume that have been developed so far are about 800Wh/kg and 1500Wh/l, compared to 250Wh/kg and 700Wh/l for the top of the line batteries today. I would expect these batteries to be widely available and inexpensive by the mid-2020s.

I first looked at a Boeing 737, and whether you could build a similar size and weight, but replace the fuel tanks with batteries, and the engines with ducted fans, and see what that would give you.

Boeing 737-800 weight of max fuel: 24,025 kg
Boeing 737-800 volume of max fuel: 29,660 liters

Replace 24,025 kg of fuel with 24,025 kg of batteries: 12,813 liters of batteries (43% of original fuel volume)
Energy storage: 19.2 MWh

Replace 29,660 liters of fuel with 29,660 liters of batteries: 48,198 kg of batteries (200% of original fuel weight)
Energy storage: 38.5 MWh

You can only realistically use the smallest value of the two, since both volume and weight are limiting factors, its about which one you hit first. In this case, its weight limited. So our new aircraft has 19.2MWh of batteries weighing 24,025kg and taking up 12,813 liters of volume (less than half of the volume the fuel used up, so there may be opportunities to redesign the aircraft and reduce its overall weight). The power these batteries could generate based on the cell weight is a maximum power of 12MW, estimating 500W/kg of cells. This estimate is in line with what today’s batteries can produce on a sustained basis.

So what kind of demands are going to be put on the battery to propel the aircraft from ground to flight? Initial take-off thrust required will be high. The Airbus E-Fan demonstrator had hub-motors in the landing gear to help get the aircraft up to speed. This reduced the load on the engines to propel the aircraft up to take-off speed. If the aircraft is running maximum throttle, then the two engines are producing about 242kN of total force. Based on the E-Fan’s substitution of ducted fans, they have 30kW = 0.75kN, or 40kW = 1kN, which means the engines would need about 10MW of power over the course of about 45 minutes to get up to cruising altitude (using 7,500 kWh of energy). Cruise thrust is about 40% of max thrust (depending on altitude, air density, etc.), so energy usage per hour of flight is 4,000 kWh, and energy usage during descent is 25% for about 30 minutes (1,250 kWh). To have a three hour flight (plus 45 minutes of reserves per FAA FAR 121), you’d need about 18,750 kWh of energy, just under our estimated capacity of 19.2 MWh.

Turns out no matter how you run the numbers on any sized airplane, you really only get about 2-3 hours of operating the aircraft, which is bad for aircraft that tend to fly 2-5 hours (think B737 and A320). But, its good for regional jets where the longest flights are only 2-3 hour. It would seem logical to have Regional Jets be the first type of aircraft using batteries for propulsion. In order to have electric aircraft fly longer routes, you’d need to improve engine efficiency (use less kW to generate 1kN in thrust), increase battery weight and volume characteristics (store more energy per unit mass or per unit volume), or figure out a way to put a highly efficient generator on the plane along with a fuel source (e.g. a 5MW turbine and natural gas to provide power during take-off and in case of emergencies).

There are other side effects to running an aircraft on electricity – you’ll end up redesigning the aircraft since you can ditch the fuel tanks; you’ll be flying slower, probably M0.7 instead of M0.78 or M0.8 that current jets fly at, which means that three hour flight wont go as far as it used to; better protection against lightning; more efficient interior use of energy; and more. The ranges from various airport hubs (700mi) show that it’s range wont be a big deal (map from Great Circle Mapper).


Apple & Cars

So the latest rumor this week is that Apple is going to develop a car. They’re hiring automotive designers and engineers. Yes, it would be totally awesome if Apple came out with a car, and it kicked GM/Ford/Chrysler’s asses the same way the iPhone kicked Microsoft and Blackberry’s asses.

But can Apple fix any of the issues that currently face electric vehicles? Or will they just be a slightly different $100,000 Tesla, splitting the market that is not really that big in the first place?


As I’ve discussed before, the batteries in the new iPhones rival the batteries in Tesla’s Model S in some aspects, but fall behind in others. The six critical battery parameters are:

  • Cycle life: number of full battery charge/discharge cycles to 80% of its original capacity
  • Volumetric Energy Density: number of watt-hours of energy the battery can store per unit volume, usually measured in watt-hours per liter (Wh/l)
  • Gravimetric Energy Density: number of watt-hours of energy the battery can store per unit of mass, usually measured in watt-hours per kilogram (Wh/kg)
  • Power: the ability of the battery to generate or accept power, measured using rate-capacity defined as the C-rate – 1C is charging or discharging the battery in one hour, 0.5C is two hours, 2C is 30 minutes, and 10C is 6 minutes
  • Safety: how much torture can the battery withstand before it becomes a danger to the people around it
  • Cost: the price per usable kWh of battery capacity for the vehicle

Assuming the 1,000 cycle life promise Apple made when it went to sealed batteries is still true, that would provide for a long lifetime (for a 200 mile EV, 1,000 cycles to 80% yields about 180,000 miles on the pack before it only gets about 160 miles per charge).

The iPhone 6 and 6 Plus battery’s energy densities are quite good – 250Wh/kg and 575 Wh/l. The battery cells in the Tesla Model S are around 250Wh/kg and 700Wh/l. This means Apple’s equivalent batteries would weight the same, but take up 22% more space – this is a difficult thing to overcome, so Apple would need to be very creative on how they can come up with more space to store the battery pack relative to Tesla’s battery pack.

The power output of the current iPhone batteries is unknown, rate capacity generally isn’t an issue for batteries in small consumer electronics. The iPhone and iPad batteries can usually recharge in about 1 to 2 hours, which indicates a C-rate of 1C. Batteries for EVs generally need a C-rate of 2C to support fast chargings and highway speeds in all conditions (rain, snow, headwinds, etc.).

Apple’s batteries are generally safe. The lithium polymer cells are a lot safer than the NCA chemistry used in the Tesla Model S.

Finally cost, Apple and Tesla produce roughly on the same scale now (see below) but Tesla has a much more aggressive ramp planned for battery production than Apple does. And the lead time on building new battery manufacturing capacity is pretty long.

Quantities, Oh God The Mass Quantities, of Batteries

Next I wanted to figure out how many kWh of batteries Apple sold in 2014. This is pretty difficult because Apple’s phone models have different cell sizes: 5/5S/5C varied between 5.45 and 5.96Wh, the 6 has 6.91Wh, the 6 Plus has 11.1Wh. So beyond that, the mix of how many phones sold is unknown, so thats another estimation we have to factor in.

Lets assume that for the first three quarters of 2014 (no iPhone 6/6 Plus), the average battery size per phone sold was 5.7Wh, and in the final quarter the average battery size was 6.5Wh. In the first three quarters they sold 118M iPhones, and in the insane fourth quarter they sold about 75M iPhones (mix of 5-series and 6-series phones). This results in 672 MWh of batteries sold in the first three quarters and 487 MWh of cells sold in the final quarter, for an iPhone total of 1,159 MWh of cells, or just over a gigawatt-hour of energy storage devices.

The iPad sold 63.35M units. We can judge from the average selling price of around $420, that a lot more iPad minis are being sold than traditional, larger iPads. If we assume that the mix is 4 mini iPads to 1 large iPad (either last gen or current gen), then the average battery capacity was 25Wh, which is a total of 1,583 MWh of batteries.

This brings us to an approximate total of 2.75 GWh of battery cells produced by Apple for just the iPad and iPhone line. This doesn’t include the batteries used in the iPod or in Mac laptops. Estimating the mixes and volumes of laptops and iPods is beyond my expertise at this moment.

Meanwhile, Tesla sold 31,600 or so cars. If the average unit battery capacity was 75kWh (3 85kWh units for every 2 60kWh units sold), that would yield about 2,370 MWh, or 2.37 gigawatt-hours. For comparison, the Gigafactory will be able to produce 35 GWh of batteries.

It is safe to say that Apple uses more batteries than Tesla in 2014. However, that may change in 2015, as Tesla will try to grow their overall production by 70%, increasing their total annual usage to about 4 gigawatt-hours. Apple, with iPad sales flattening or even declining, likely will not see a 45% increase in battery cell usage to keep up with Tesla.

(the logistics and supply chain people at Apple really do the Lord’s work, hats off to them)

Design & Engineering

I have no doubt Apple’s design team would have a field day with an Apple-mobile. I just hope its as practical as it is beautiful. One of the recent thoughts that has caught my attention is that the value in the car itself is changing. Thirty years ago, 0% of the value of a car came from the software. As the cars got better, engine computers became more advanced, and the infotainment systems in cars became more prevalent, the value of software has increased, from 10% to 40% over the next 10 years as cars learn how to drive themselves, manage their internal components, and become more “smart” in general.

This puts companies like Apple and Google ahead of the game, with their fleets of software engineers and development know-how. Ford, GM, and everyone else has to play catch-up. Can they offer sufficient amounts of money and incentives to lure developers away from places like Apple and Google, where they could invent and develop things to change the world, to Ford, where they will make another difficult-to-use in-car infotainment system.

One interesting aspect would be Apple deciding to take advantage of Tesla’s offer to release all their patents. They can use the same skateboard battery module design and powertrain to underpin the car, with a new design and Apple flair to the rest of the car.

Actually Manufacturing the Car

Tesla’s most recent quarterly conference call brought out the bears – they’re burning cash like crazy on capital expenditures in order to ramp up for an annual run rate of 2,000 cars a week (100,000 per year) as well as building the Gigafactory that could make cells for 500,000 cars a year in 2020, plus batteries for renewable energy storage.

However, all this spending – $5 billion on a battery factory and $2B or so more on its factories in California, is just petty cash for Apple. Apple currently has a $177B cash pile, of which $150B is net of debt. Apple could easily invest $5B in the facilities to build the batteries and the cars – its not a matter of whether they have the cash, its if its the right way to spend that money.

More Importantly, Supporting the Car

The genius bar is usually pretty good about customer service (I haven’t been in a while, knock on wood), even if the lines are horribly long. But how does that translate to getting your Apple EV fixed? Most Apple Stores are in malls, not a place you can drive your car into to get fixed. So what does Apple do? If they go with automotive franchises, they lose their exacting control over the process. Beyond that, they run into the same problem as Tesla with franchises – it’ll be multiple brands under one roof since they will be a small-time player to begin with, and its always more profitable for the dealer to sell a higher maintenance gasoline car compared to a low-maintenance Apple EV because dealers make their money on service, not on new car sales.

It would make a lot of sense for Apple to partner with Tesla on the supercharger network, and infuse a boatload of cash to expand it to support the number of Apple EVs made. Here there are a lot of brand synergies between Apple and Tesla.

But What’s the Sustainable Competitive Advantage?

Apple would only be thinking about becoming a car manufacturer (because eventually it will be more than one car – it’ll be a line of cars) unless it thought it could bring something to the table that all the other companies out there (Ford, GM, Toyota) can’t, and that it would have a long term sustainable advantage. They aren’t trying to be like Elon Musk, who just wants to advance EVs and save the planet from carbon poisoning.

Design? Apple has impeccable design under Jony Ive. The Model S has great design, but lacks luxury in many ways that show its newness to the car industry (the seats, the small visor), and those are being fixed, but it will take a while. Apple will likely have some of these issues out of the gate too, but they would likely be fixed within the first few iterations.

Batteries? Could Apple be working on engineering and developing its own batteries? Not likely. As I illustrated above, Apple ships a tremendous amount of batteries every year. Is it enough to rely on the battery industry at large to continue to innovate in the battery space? Maybe not, but battery research is remarkably difficult – the annual improvement rate is only 7-8% and big breakthroughs are very rare, even if the scientific papers stack up to the ceiling. If Apple has something up it sleve to differentiate itself like working, mass-producible solid-state batteries that offer 700Wh/kg and 1300Wh/l, it would be a coup in the portable consumer electronics and EV worlds – phones as thin as 15 playing cards, cars that can go 400 miles without recharging. But this is very unlikely (I really hope I’m wrong but I doubt it).

Integration? This is always where Apple shines. Apple isn’t generally the first to move (they weren’t first with contactless payments) but they are usually the first to get it right from top to bottom, in a way that the user can understand. The difficulty here is that cars are a mature industry, very mature. Its easy to say that just about every company could do in-car computers better, even Tesla. Apple will show everyone how its done. But after that, and people understand the new paradigms for how people interact with cars, then what? This knowledge and innovation diffuses throughout the industry and becomes general knowledge in the same way physical keyboards went away and capacitive touch screens became the norm.

Self Driving? The individual automakers aren’t doing all the heavy lifting individually, automotive suppliers like Bosch and startups like Mobile Eye are the ones coming up with the hardware and software to solve pieces of the autonomous driving puzzle. Apple could either redo that work or simply integrate parts from suppliers into a self driving system like Tesla is. It’s nothing terribly novel or unique.


The problem to be solved with Electric Vehicles is batteries – weight, volume, range, cycle life and safety. All five dimensions need to be improved, plus the cost will need to come down dramatically before the general public adopts EVs over gasoline cars (especially in the current gas price climate).

What isn’t a problem is design or features. Sure, design can be improved and refined, but a better designed car won’t bring out customers in droves. An electric car fits very nicely with Apple’s sustainability goals – working to have a cleaner environment, but there won’t be that much of a market given the current limitations on batteries. This is the problem Fisker had – brilliant design but they didn’t solve the battery problem in a new or novel way – and now they’re out of business.

Its difficult from the outside at this early stage to determine why Apple would want to develop a car, along with the immense investment that would need to accompany development and production if it had honest aspirations of being a worldwide automotive manufacturer. For Apple to enter the market, there needs to be some long-term competitive advantage here. I just don’t see it right now – just designing a better looking or more user friendly EV doesn’t solve the major pain points consumers have right now.

The problems with EVs are battery range, recharging time, and battery weight and volume. And Apple isn’t more or less likely to be the company with a group of electrochemists that discover a breakthrough than any other company, large or small, doing battery research today. It is for primarily that reason that I think Apple would be a fool to enter the automotive space, specifically EVs, in the short term. As cars transform from machery we operate to automated consumer electronics on wheels, there is a space for Apple and others who want to move in that line of products, but that transition is 10-15 years away.

Broadband & Title II

The core problem at the center of today’s broadband debate: laying down fiber, or even hybrid fiber/coax or 75Mbps DSL, to everyone’s house is extremely capital intensive. It leads to mono/duopoly conditions because the more competitors in the market equals more ways you split revenue pie equals marginal investment is less attractive.

So what do we do? We can heavily regulate these monopolies/duopoly (Title II) but that doesn’t fix the lack of competition. Prices will still be high because you only have one or two companies providing “Broadband” (25/3) in a given geographical area. There is no incentive to price compete when there will never be new entrants & no substitute products (wireless broadband wont cut it). So we’ll be stuck with high priced broadband that doesn’t block Netflix, that’s OK for now, but doesn’t address long term competitive issues.

We could let local PUC/Corporation Commissions regulate price for broadband, same way they do investor-owned utilities. But lets step back and look at this from a least-regulation position. Mono/duopolies shouldn’t be allowed to do whatever they want. So lets try and get rid of the fact they’re monopolies in the first place.

How do we increase competition? Government can’t force laborers to work cheaper to install the fiber, nor can they make the materials cheaper, so capital costs remain high. If we force companies like Comcast or Verizon (I-ISPs) to open up their lines to competitors (C-ISPs), it will never be an even field. Comcast or Verizon will always slant things to benefit them, in pricing or response time to fix issues, and run C-ISPs out of business. You think Comcast treats their own customers bad now? Imagine being a customer of a C-ISP using Comcast’s pipes.

We need a company to lay fiber that will resell transport but not compete with its customers (the C-ISPs). A municipal agency (govt) that owns the fiber and maintains it would be a good option. Better than your city/county maintaining roads because its a dedicated agency and the money coming in from the C-ISPs stays in the agency for upgrades and improvements (the digital highway trust fund cannot be raided to pay for other things). Limited scope by govt charter, regulated by the state to prevent scope creep. One mission, one goal of building 21st century roads. The agency has a fee structure for (flat + per Mbit + per Mbit/sec) companies who want to sell access. Companies are free to add value (alarm systems, television, phone, etc.). The net neutrality issues go away because of the high degree of competition – if company A slows down Netflix, switch to B, C, D or E.

If we put this plan in motion, existing ISPs try to run other companies out of business. We need regulatory help to prevent that. The optics get difficult, “XXXX is responsible for your higher bills!” they’ll say, but ultimately its to prevent anti-competitive behavior by the large incumbents. Without it, incumbents will wage a price war longer than the government and the competitive ISPs can sustain, which would spell doom for the entire program.

Leaving AT&T – for either Verizon or T-Mobile

So I’ve decided that after 17 years, I’ve had it with AT&T and their now slower-than-Sprint LTE speeds in Las Vegas. So when the iPhone 6s comes out this fall, I’m jumping ship. So who should I switch to? Verizon is the gold standard for cellular networks, but it also has the golden price tag. But, with T-Mobile’s fastest data speeds and John Legere’s promises that they’ll have coverage nearly equal to Verizon by the end of 2015, they’ve become a contender. Like all things, it comes down to money. AT&T has decided that they’re going to increase their dividend by 4c/year per share, while cutting CapEx (how much they spend on capital expenditures, from new towers and equipment to spectrum acquisitions).

On top of the price for service and a single line for T-Mobile (or adding a second line to my fiancee’s Verizon plan), there is also the cost of upgrading to a new phone every year. Previously with AT&T, I was able to use other family member’s upgrades. But that wont be happening in either case.

Figuring out which plan is cheapest for me is way more difficult than it should be. I’ve got at least four scenarios: with Verizon, either traditional subsidy with paying to upgrade the phone every 12 months (paying for a device in full every other year), their Edge program which now requires 75% of the device to be paid off before I can trade it in for a new one; T-Mobile Jump/installment plan or purchasing the device outright. Purchasing the device outright on Verizon is a horrible deal – they still charge you the full $40/mo (which includes a roughly $15-25/mo subsidy that you aren’t using) even though you bought your phone.


Going with T-Mobile’s Jump plan, its $27.08/mo for the device and $10 for the mandatory Jump insurance ($175 deductible). Already we’re up to $37.08/mo. You also have to pay $99 upfront for the 64GB device, as well as the sales tax on the full amount ($60), so we’re up to $160 in up-front costs and $37.08 per month. With the $60mo data plan, the total annual cost is $1,324.96. With the Jump plan I get to trade my phone in for a new one (plus $160) every 12 months.

Buying the device outright, the base price of the 64GB iPhone is $750 plus tax, about $810 in my area. I upgrade my phone every year, so that’s 12 months of usage and depreciation. If I can sell my year-old phone for about $4001, that leaves me on the hook for at least $410. To make things more equal between the Jump plan and this option, lets add in AppleCare+ on the purchased iPhone, $99 to cover the phone against accidental damage ($79 deductible). With the $60mo data plan, the total annual cost comes to $1,229, or $95.96 less than the Jump plan, plus a much lower deductible in case something were to go wrong.


Verizon’s subsidy plan means paying $323 up front for the 64GB device every other year (on subsidy) and $810 ($750 + tax) up front every other year (not upgrade eligible), but being able to sell the phone every year for around $400. Purchasing AppleCare+ would be an extra $99 per year. This works out to an average of $166.50 per year for the hardware. The monthly line access would be $40, and the marginal cost over my fiancee’s data plan is $30, so the total cost runs about $1,105.50 per year (higher in some years, lower in others).

Verizon’s Edge plan is a worse deal. While you don’t pay anything up front other than tax ($60), the monthly device payment is $38.40 (phone payment and insurance) and the monthly line access is $15/mo (on 10GB+ plans) and the marginal cost over my fiancee’s data plan is $30. The total cost so far is $1,060.80. But in order to upgrade, you have to trade in the phone and 75% of the device cost has to be paid to Verizon. After 12 months I’ll only have 50% paid off, so I have to cough up another $187.50 to trade in my phone and get the new one, bringing the total annual cost to $1,248.30, $142.80 more than the subsidized plan.


The benefits of going with Verizon here are obvious – being on a multi-line plan is cheaper than two individual line plans. The Edge program is a bad deal, but not by staggering margins. My fiancee might stay on the Edge program since her Android phones only make it about 18 months before becoming very slow and annoying, which fits the current Edge rules very well. As long as she can manage to not damage her phone too badly.

The biggest variable is the resale value of the iPhone after 12 months. If its only worth $300, then the Jump/Edge plans start to look much more attractive because the carrier is taking the resale hit, not the consumer. I think its OK as long as I stick with Apple devices since they seem to have higher resale values than Android devices.

Barring any substantial improvement from AT&T (not likely since they are cutting Capex), I’ll likely be leaving for Verizon when the iPhone 6s comes out. I’ll have to pay AT&T an ETF but I’m OK with that.

  1. right now, Gazelle is low-balling me at $345, so I figure 10 more months of use plus factoring in their low-ball price is around $350-400 

Next Batteries

I decided to pick out four up-and-coming battery companies to highlight the companies that are trying to break in to the battery industry with breakthrough innovations. Keep in mind – they can get all the way to cell commercialization, but to compete in the EV market they will go up against the highly integrated cells Gigafactory Tesla is building on cost, a very tall order.


Lithium Sulfur cells have an excellent energy to weight ratio, but have struggled with energy to volume ratio and cycle life. The upside is that Li-S is a relatively safe chemistry, so car companies will be able to reduce the amount of safety equipment integrated into the battery pack, increasing the percentage of pack weight and volume dedicated to battery cells.

Sion Power: Recently broke a record for longest unmanned aerial flight of an all-electric UAV (14 days) using solar power and their 350Wh/kg batteries to store energy during the night.

Oxis Energy: Recently announced 300 Wh/kg, in a 25Ah cell. I’m guessing their Wh/l figure is quite low, but they are working on increasing that aspect as well as getting to 400Wh/kg by 2016 and 500Wh/kg by 2018. Their EV cell target is a 95Ah cell with 450Wh/l and 400Wh/kg.

Lithium Solid State

Solid State batteries have been a holy grail for batteries for a while now because they can be form-fitted to fit spaces. They have high volumetric density and cycle life, but have issues with Li-Ion conductivity through the solid electrolyte (low power, slow changing current).

Sakti3: On a recent episode of Autoline, the founder and CEO of the company stated they had achieved over 1,100 Wh/l in a battery cell. No mention of weight of the cell, but she expressed her optimism that they could be in consumer electronics in two years (late 2016).

Solid Energy: Recently demonstrated a cell with 1,337 Wh/l. Expresses confidence that they will be commercially available in 2016.

Broadband in America – We’re doing it wrong

For the last six months or so, the focus has been on Netflix and net neutrality. Should ISPs be allowed to rig their high speed networks, through various means like traffic shaping, peering and interconnection decisions, etc., to purposefully disadvantage or advantage an internet-based service or experience. The majority of the users on the internet seem to think that no, they shouldn’t. But corporations and corporate apologists seem to think that without giving high-speed internet monopolies or duopolies the freedom to do whatever they want will mean an end to broadband investment, and a loss of competitiveness as a whole.

First its important to note why regulation is so heavy-handed in this market. Its all about competition, or lack there of. The barriers to entry for building out a wireline or wireless high speed data infrastructure are immense. And those high barriers to entry mean there is a lack of competition. And that lack of competition means that the competitors who are established in the existing market environment need to be regulated to ensure that the consumer is protected, especially with a product especially as important as internet access.

The current broadband situation in America isn’t great, its not even good. We have more than one problem, even if the Netflix/Comcast issue is the most salient issue right now. Our issues are…

  • Speed: our speeds are slower than most other developed countries around the world, and even some developing countries have faster, cheaper internet in their cities than we do in the US
  • Usage Caps: most large ISPs that offer fast speeds have or will soon have data caps to prevent users from downloading a lot of data (read: protect their expensive TV packages from over-the-top competition)
  • Open access: companies like Comcast and Verizon have decided not to increase their network interconnect capacity with certain companies to keep Netflix traffic slow. Level3, a tier 1 ISP, even illustrated the habit of ISPs creating congestion to incent data providers to enter paid-peering arrangements.
  • Strategy Taxes/Internal conflicts-of-interest: companies that provide internet access have their own vested interests (television, phone) so they have internal conflicts of interest to providing an open, unfettered, fast internet experience
  • Lack of competition: it costs a lot of money to build a broadband network from scratch, so there is not a lot of incentive to enter a market to create an additional competitor, especially if a regional or nationwide competitor can create a price war locally until you run out of cash and go bankrupt.

How can we solve all five of these problems? New rules for Net Neutrality, or regulating ISPs as Common Carriers under Title II don’t solve all the problems. We’re still left with the monopoly/duopoly with companies we have now. They’ll begin work immediately to lobby for loopholes in the rules or legislation, while working to undermine the enforcement through lawsuits, and finally by getting people friendly to them in the regulator’s chair to keep the rules from being enforced.

It turns out our approach to internet access its entirely wrong-headed. Infrastructure should only be built once and from there, upgraded over time to meet demand. Otherwise we’re just wasting money. Let the market compete on top of the infrastructure, not by building separate infrastructure networks and selling proprietary access to that network.

But we can’t just throw it all out and start over.


The internet is most often referred to in analogy as a highway network. Billions of miles of fiber optic cable criss-cross the globe carrying your request to watch that funny cat video for the 100th time.

There is robust, healthy competition at the “Tier 1” level – that is, the worldwide backbones that carry traffic all over the world. But when it comes to your metropolitan area, that last few miles of connectivity are often dominated by one or two competitive ISPs1, in the same way your local roads are maintained by your local municipal agency (whether its a city or county).

This infrastructure is expensive. Its expensive to build – which is why we have so few options in the first place. Its expensive to maintain – everyone keeps using more and more data, and it costs money to add capacity to the network. So why are we building redundant infrastructure in many places?

Does it make sense to build two power grids to provide some fig leaf of “choice” for consumers, while the fixed costs of building and maintaining two separate power grids are factored into everyone’s monthly bill? Does it make sense for your community to build two sets of roads for the same purpose2.

But with our current state of broadband, its not as straightforward as that since the cable and phone networks were originally built for other purposes, and were re-purposed for internet access. Phone lines are inherently more handicapped than their coax sibling – DSL speeds are pretty much always slower than cable. But phone lines are more ubiquitous, usually required by regulation. Cable companies can pick and choose who they serve – if you’re not sufficiently urban or suburban, I hope you like DSL and Dish/DirecTV!

Wireless-only options are a very distant third place in the broadband game, encumbered by very low monthly data transfer caps, high cost, and questionable signal strength3.

So we are left with different kinds of monopolies in the two different situations – in exurban and rural areas, DSL is your only option because you are unserved by cable; elsewhere cable ISPs can offer much faster speeds than DSL can manage and its really a not much of a competition4.

Even in the best case (fast cable and fiber-to-the-home from the phone company), we’re left with duopolies that have similar products (triple play bundle of TV, phone and Internet). This means that, in the case of Verizon and Comcast, they have no incentive to help Netflix or future over-the-top video providers eat away at their revenue for entertainment services. Which means we still lack a competitive environment, as long as the ISPs have something else to sell you that could easily be provided over the internet in general?5

Loop Unbundling

One option for solving the problems would be to force loop unbundling on the cable and phone companies, requiring them to lease their own lines at competitive rates6. This would allow other companies to sell internet service over the hosting company’s coax or fiber-optic network. These companies would be responsible for their own transport out of the network to whatever Tier 1 ISPs they purchase transport from, and all of the technical support, billing and usage information, etc.

Loop unbundling works well in Europe, but their business environments are drastically different than ours in the US (PDF), and I fear that between the relentless lobbying budgets of the cable and phone industry, the bad-faith dealings and legal shenanigans that would occur against those who want to come in and resell transport, it would not be a profitable business. In the same way we see cable and phone companies working hard to prevent municipal broadband, we would see an even more rigorous offensive campaign against loop unbundling before, during and after its implementation.

Heavy Regulation

Another option would be heavy regulation of internet service provided by wireline companies. This regulation has been happening at the national level with the FCC, but maybe that’s the wrong place for it. The best option may be with the local and state agencies like Corporation Commissions or Public Utilities Commissions. In the same way electricity rates or phone companies are regulated by a PUC or Corp Comm., so would the internet access. The Department of Energy in DC doesn’t regulate your electricity rates, so why does the FCC want to regulate broadband with the goal of making it more affordable and ubiquitous? The local solution may be much more effective because local officials are much more responsive to citizen complaints. If everyone is complaining that Netflix is running slow on Comcast, or that Verizon is intentionally letting its copper-based infrastructure degrade, the PUC may be in a better position to force Verizon or Comcast to deal with it than a gridlocked FCC or Congress.

This would put some burden on the telecommunications companies because its more government they have to deal with. In my case with my ISP (Cox), they seem very receptive and integrated with the local community7, so I don’t believe that for companies like Cox it would put an undue burden on them, but for large companies stuck in that unaccountable monopoly mindset like AT&T, Verizon and Comcast, it would be more difficult.

Municipal Broadband Networks

One option that has had mixed results so far is municipal broadband networks, where the local government agency owns and runs the ISP. Unfortunately, approximately 20 states have legislation that prevents or has halted the growth of these types of networks. The FCC is looking into creating regulation that would overrule states’ abilities to pass laws against them.

The existing companies have one legitimate issue with municipal broadband networks as competitors – these private companies have invested billions and billions of dollars in infrastructure and they don’t want the government to offer a subsidized competitor with the community’s tax dollars making up for the financial losses. However, that is not an excuse for the banning or restriction of municipal broadband networks. The community’s side is that broadband is (in their opinion) more expensive than it should be – see Chattanooga’s successful $70/mo Gigabit internet service – and nationwide ISPs are unresponsive or just don’t see the return on investment needed to build out or improve service. Ultimately, the benefits of municipal broadband networks is that, as taxpayer-owned agencies, they are ultimately responsible to the people they serve through the feedback look of their board of directors being locally elected officials. Short-circuiting the dysfunction in the marketplace and in Washington DC through local elections.

Municipal broadband networks aren’t always successful though, either through internal mismanagement or being undercut by a national competitor (who can sustain losses in one region) for a long enough period of time to lead to financial ruin for the publicly funded network.

Building a True 21st Century Broadband Network

The goal would be to build a network that combines the advantages of the methods described above, while trying to do this as cheaply as possible and without building a redundant network.

Eminent domain

Eminent domain is essentially creating the municipal broadband network while removing the threat of a private broadband company attempting to undercut and destroy the effort8. Customers can continue to use their existing ISP under a temporary management agreement until the necessary infrastructure upgrades can be made to support Loop Unbundling.

Network Migration & Loop Unbundling

Eventually, all devices on the network (Internet, TV, Phone) will need to be IP or have a set-top-box for incompatible devices. This would be the most difficult aspect – you would need either affordable devices that can authenticate themselves to the network and then broadcast the subscribed set of channels over the customer’s home coax, or you would need even cheaper boxes for people to hook up to individual TVs and output the broadcast signal over RCA, S-Video or HDMI to the TV.


The new network would be managed by a regional “Broadband District” for a metropolitan area. That BD would issue bonds to purchase the physical infrastructure from the cable company or phone company (whoever has the best infrastructure) by force at market value under eminent domain. Once the network migration is complete, it would be opened up to anyone who wanted to run their own ISP.

Eventually the goal would be to use the local fiber loop purchased by the government agency to provide everyone fiber to the home, and then allow everyone to have a competitive list of broadband providers to choose from.

Successful Business Models

The unbundled nature of the network would provide for real competition, ranging from little value-add (here is your internet service, have a nice day) to high value-add (on-location tech support, home networking, security, phone, TV, whatever else they can think of) at various prices.

Companies like Google or Facebook could offer subsidized service that, in exchange for your browsing habits, phone records, TV watching habits, dignity, and whatever shreds of privacy you have left, give you a discount on service.

For economically disadvantaged areas, instead of providing fiber to the household or multi-tenant building, offer WiFi services and prepaid broadband cards for a fixed amount of data transfer (1GB, 5GB, 10GB) sharable amongst a number of devices. This way, even those with only a basic smartphone could still use the internet for essential tasks like applying for jobs or requesting benefits.


First, we need to remove redundant investment. We don’t have competing road networks, power grids, or water systems9. Why do we have these expensive, redundant last-mile communication networks? Because of some historical legacy? Time to ditch them and have one broadband infrastructure for all Americans.

Next, we need to figure out where competition works – clearly its not working in its current state as prices climb and the US lags in broadband penetration. Letting companies compete over a shared infrastructure will work – it works every day as companies compete with each other while driving over our shared roads, utilizing the power grid and water and sewer networks.

Finally, costs need to be managed as we convert the proprietary networks of today to the open networks of tomorrow. We can’t have gold-plated equipment blowing up the budget. Any agency willing to do this would need to be responsible and disciplined in its conversion to eventually opening the network up to other companies to compete on.

  1. I moved recently, and actually lost my phone company – when I moved in, Centurylink wasn’t able to provide DSL at my house, so my only option is Cox 

  2. By this, I mean having two driveways, two street addresses, two non-interconnecting local streets that both connect to the highway network 

  3. Masayoshi Son’s fevered dream of using Sprint’s 2.5GHz spectrum to compete with wireline home broadband is laughable – its a simple matter of physics, even 120MHz of shared wireless communication at QAM64 isn’t able to compete with 200MHz of coax bandwidth operating up to QAM4096 (the DOCSIS 3.1 spec) to offer 10Gbit speeds to your home 

  4. My Cable ISP’s two main tiers are now 50Mbps and 100Mbps, while the fastest the DSL company can go in most locations its 10Mbps 

  5. Cable and phone companies have started to get into the home automation and alarm markets lately, does that mean that AT&T should be able to handicap their internet traffic from ADT and alarm.com to harm competition? 

  6. Which probably would not be competitive, but what are you going to do? Sue them and their lawyer army in court? How profitable is that? Its just cheaper to put up with their uncompetitive rates. 

  7. Even though they raise my cable and internet bills by 10% a year, 3-5x the rate of inflation 

  8. This isn’t socialism or communism — as long as the assets are purchased in the public interest (to provide faster internet at cheaper prices) for fair market value 

  9. Even in the great free market of Texas, there are multiple energy companies, but only one energy transmission company – why? Because infrastructure is expensive!