Are utilities companies sitting on a passive infrastructure goldmine?

The energy market is undergoing a transformation. The rise of platform competitors and disruptive technologies is forcing 86 per cent of players in the space to remodel their business. To keep pace with this new data-driven market and retain customers, profit and market share, suppliers need to prioritise innovation and capitalise on existing infrastructure. As such, for energy suppliers, investing in connectivity presents a clear opportunity to do so.

Between July 2019 and March 2020, 10 energy suppliers exited the market. With the industry undergoing change, more traditional providers are facing additional competition from brands who are branching out into energy, connectivity and diversifying services. Tesco, for instance, a brand with huge pull, created both Tesco Compare (a utility comparisons site) and Tesco Mobile. Similarly, technology giants including Google and Amazon with their smart home appliances are becoming more commonplace in the home.

At the same time, there are huge technological changes taking place which are putting pressure on the energy sector. The demand for renewable and more sustainable energy use has led to the development of Internet of Things (IoT) solutions in the home. Smart meters and other connected devices allow occupants to manage their energy use from anywhere, placing power into the hands of consumers. They can use this data to monitor and manage their energy consumption, reduce how much they use and, ultimately, shop around for the best price possible. In 2019, 49 per cent of customers switched suppliers or tariffs – the high churn of customers presents an opportunity to attract new customers, but there is also the threat of existing customers being headhunted by a competitor. Providers can’t afford to become complacent.

With this in mind, consumers are now proactive, engaged and looking beyond the traditional supplier for their smart home products. This could account for why Google and Amazon are becoming key influencers in the space, offering energy-saving solutions alongside shopping and entertainment services. What’s more, controlling the flow of such data puts the provider in a position of considerable ascendency as data is big business. 84 per cent of the UK energy sector is currently pursuing (or planning to pursue) opportunities which increase the amount of data services they provide because this information is likely to be used as the source of all measurement and analytics in the future.

Although neither the technology giants nor the supermarkets have firmly set their sights on the utility sector, there is an increasing demand for platforms to become a one-stop-shop for consumers, providing a number of services to make lives easier and save money.

Existing infrastructure provides new opportunities

A tumultuous market and proactive, engaged consumers create an opportunity for suppliers who are forward-thinking and innovative to increase customer retention and “stickiness”. For example, offering more than the traditional wares by branching out into battery storage and electric vehicle markets, as well as home service solutions, satisfies changing customer needs and allows utility companies to get ahead of the evolving competition.

Another clear opportunity here is through connectivity, with ethernet and broadband. As our lives increasingly become technologically driven and interwoven with data, connectivity has become an integral part of the home infrastructure alongside water, electricity and gas; it is the fourth utility.

However, unlike the former three, connectivity has only come to the fore in recent years. Not every home has reliable internet access and a lack of connectivity has been troublesome for those in rural areas. The lockdown has demonstrated how reliant we are on broadband connectivity to work, learn and play from our homes. This, of course, has an impact on the widespread adoption of smart connected devices in the home too. Put simply, without a solid internet connection, IoT-connected devices won’t work properly. That’s why universal access is critical.

One way of achieving this is through unlocking the potential embedded in passive infrastructure assets and moving away from siloed operations to collaboration across all utilities. This will aid the delivery of smarter energy operations and improve efficiency. It will also reduce costs which would allow innovation to flourish and appease consumers who have a tight grip on the purse strings.

The question is, who is better placed to take advantage of this gap in the market than the traditional utility providers themselves? With access to the necessary pipes, tunnels and access to homes and businesses already at the fingertips of utility companies, partnering with connectivity providers and expanding the services offered is a potentially lucrative opportunity.

Talks led by the DCMS are already underway as part of the review of the Access to Infrastructure Regulation (2016), which could see ‘gigabit-capable’ operators sharing infrastructure facilities with other providers, opening up miles of passive infrastructure including manholes, cabinets and antenna installations. Collaborating across the industry will reduce costs and enhance efficiencies, with the National Infrastructure Commission estimating that companies deploying gigabit-capable broadband could save over £8 billion by reusing existing infrastructure, which would accelerate the deployment of telecoms infrastructure to thousands of homes and businesses.

The connectivity goldmine

Energy and utility companies that shy away from developments and don’t evolve are liable to be left behind. It’s no longer enough to provide single services in the same way they have been delivered for decades. Altering consumer needs and the rise of platform competitors have changed energy consumption patterns. Traditional providers need to engage with technological developments, offering solutions for the smart home and products which generate meaningful data, in order to future proof their offering.

One option for energy providers to access this potential is partnering with a wholesale connectivity provider themselves for either fixed, mobile or both, to deliver connectivity to customers. MVNOs (Mobile Virtual Network Operators) provide connectivity services via the UK’s mobile networks and through partnerships both parties gain access to the other’s infrastructure and capabilities, boosting the opportunity for platform services. Examples of MVNOs in the market are Utility Warehouse, Tesco mobile.

Connectivity remains an untapped goldmine for utility companies and access to vast swathes of existing infrastructure means they are best placed to capitalise on this opportunity, partnering with a Wholesale Provider or MVNO is just one way to do so. The internet has never been more important and diversifying services through adding connectivity capabilities is something providers cannot afford to overlook.