Utilities take caution before bundling up

By Dana Bacciocco, Associate Editor

Just because states are stepping lightly into deregulation and utility companies are not speaking out about changing strategies doesn’t mean bundled services are not part of the strategy. The push for differentiation through bundled services may not be apparent, but that’s because of tight lips.

“A lot of companies are being real close-lipped for the first time,” according to Michael Greeson, senior analyst and director of broadband research at Parks Associates and co-author of the study Bundled Services & Residential Gateways. “Before, they would tell us they’re not doing anything; but now they’re just declining comment. Which doesn’t lead me to believe it’s going to blow up into a huge market tomorrow, but the interest is there. A lot of energy utilities right now are observing what’s going on in the broadband space in general and trying to determine whether or not they want to get into the market.”

Although “utility retailing of ancillary products and services in North America has not evolved in the way many envisioned just a few short years ago,” according to Chartwell’s New Products and Services Report, utilities are cognizant of pending competition inside and on the edge of deregulated markets, which validates offering products and services beyond core capabilities.

On the flipside, potential customers of bundled services are receptive, and if gateway providers are any indicator, value-added energy related services have a market-to which active marketing can add impetus.

Bundled services and residential gateways go hand in hand inasmuch as they are a means to offer particular value-added energy services.

According to Parks Associates, customers are open to new services; especially notable are telemetry services. A survey of 2,500 U.S. households, part of Parks’ Bundled Services & Residential Gateways, found relatively strong levels of interest among consumers in regard to remote monitoring capabilities for energy usage and other home systems. The interest levels spiked in particular among households with broadband Internet access and/or a home network.

Energy information and usage data is the number one most common service utilities offer residential customers, according to the Chartwell study; 78 percent offer energy usage data. Chartwell also reported a decline in the rate utilities are offering telecommunications and television services, but providing Internet services is still on the rise.

“Energy providers are offering these products services where there are synergies between the product offering and the core business, which is providing energy,” said Dennis Smith, editorial director for Chartwell, an Atlanta-based utility industry research firm. “Take energy information services. Of the 78 percent of companies that told us they offer this service, the options may range from a simple bar graph on the bill showing the customer’s energy usage to a menu of internet-enabled charts and graphs coupled with a special pricing program.

“While examples of these more advanced services are few and far between, we do see a growing number of utilities beginning to investigate and test the technologies that make them possible,” Smith said.

Gateway connections are setting the pace. Hardware and software providers and appliance manufacturers believe there will be a need for these devices and they have them ready to roll, according to Greeson. These systems, outside the trio of voice, video, and data include security and home automation-services that energy companies may look to before going into traditional communications services. Coactive, Invensys, and Sage all have trials going on with energy providers, said Greeson. Coactive touts its Connector series of telemetry gateway links; Invensys, its ControlServer hub for smart homes and businesses; and Sage Systems has Aladn, an energy usage control system.

According to Greeson, research shows consumer interest in broadband, although many consumers lack access-marketing would add the impetus for stronger movement into broadband and bundled services. “In the consumer’s mind they still don’t understand the value of broadband. If the energy utilities could step into that space, effectively to communicate that value proposition, bring their prices in as slightly lower than the other broadband providers, I think they could step in and take up some of the market share,” said Greeson.

Chartwell’s study supports this indicating energy companies should spend time and money on comprehensive marketing databases, but cautions utilities to use the information and call the ball to either enter or abandon the market-no amount of research will “squeeze out all the risk.”

“There’s an opportunity here especially given what’s happened with the broadband market in general lately,” said Greeson. For example, recent actions by Sprint and SBC have opened market space.

“We’re noticing that a lot of the large telecom providers in the DSL space are beginning to slow the pace of rollout which will mean one of two things. One, that will result in a lot of missed market opportunities in general, and two, some alternative provider, like cable broadband or energy broadband company, will step in and pick up the slack,” said Greeson.

Greeson can be reached at greeson@parksassociates.com or 972-490-1113. Smith can be reached at dennis_smith@chartwellinc.com.

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