Someday in the future, we’ll all look back at the triple play service as a relic of another age, like beepers or Blockbuster. Instead, the trio of phone, cable and internet will expand to quadruple and maybe even quintuple plays. It’s already happening in Australia, where one utility, ActewAGL, is bundling up to seven services to save customers money. It’s also starting to happen here in the U.S.
Central Indiana Power, a small co-operative in the suburbs of Indianapolis, has merged with a local telecom, Hancock, to offer electricity, phone, broadband and home security services through one company now called NineStar Connect. The deal isn’t exactly Duke Energy merging with AT&T, but it is the first example (outside of a very small co-op in Alaska) in the U.S. of a trend that other small utilities are watching carefully. It also moves the industry one step closer to checking something off of Greentech Media’s wish list: Communications carriers and computer companies offering energy management services as part of their service package. (We'll be discussing the utility of the future at the Networked Grid conference on May 3 and 4 in San Francisco.)
The idea to get cozy with Hancock first occurred to CIP when it was investigating a smart meter project. The telecom already had fiber to many of the homes in the electric utility’s service territory, which has about 12,500 customers.
“With the broadband capability and how could we use that, we looked at it and said ‘hey, this is pretty interesting,’” said Jeff Myers, Engineering Manager for NineStar Connect.
The executives and engineers at the utility saw meters as the first step into smart grid, and from there they hope to do voluntary demand response and dynamic pricing to give customers more options. Eventually they are planning upgrades for distribution automation and load transferring. CIP has had radio-controlled demand response for decades, but the utility doesn’t even know how many switches are hooked up, and so the upgrades will allow it to bring demand response into the 21st century.
A new study from Accenture indicates that consumers might view the trend favorably. The firm found that 73 percent of consumers would consider buying electricity from companies other than traditional energy providers with 22 percent willing to buy from their cable or phone company.
90 percent in China, South Korea and Singapore would buy from non traditional sources.
It sounds like a win-win for CIP, but what’s in it for Hancock? “The goal there is to get more subscribers,” said Myers. The telecom will also get to expand its fiber network to additional customers now that it is merged with CIP, which will add even more potential customers as it competes with big boys in the space such as Comcast.
The two companies merged at the beginning of this year, and even more than a reshuffling of offices, it has been the mixing of two very different corporate cultures that has shaken things up the most for the workforce. “On our side,” said Myers, “we need to understand the competitive marketplace.”
Although it’s early days for the merger, Myers and others in the business are starting to think of premium services that could include deals for electric vehicle owners. Unlike ActewAGL in Australia, they do not have bundled packages that offer lower rates if you wrap your triple play in with electricity, “but that’s a really interesting concept,” said Myers, “That might be something to do in the future.” The two divisions have already married together their call centers. For some other issues, things get a little trickier. Utility folks aren't used to having to make sure someone is home to get into the house, whereas the cable guy needs you to usually take the day off of work if you need something done.
For the rest of the melding, the two sides have put together cross-functional teams to work through logistics and new ideas. “It’s going to take some time,” Myers admitted.
Myers acknowledges that they are at the leading edge of this front, but expressed doubts about how far it will go. In Indiana, the state legislators had to overturn a law that forbade telephone and electric co-ops from merging. The one single vote in opposition questioned whether big players, like Duke Energy and AT&T, would take the opportunity to form a huge conglomerate. Currently, that doesn't seem likely.
One could imagine a world, however, where you pay $5 on your cable bill for energy management services that help you slash $25 on your electric bill. Some of those programs could, in theory, operate with partnerships rather than mergers. AlertMe, a U.K.-based company, is already in talks to bundle its energy services with telecoms.
In many areas, telecoms and utilities already have robust relationships behind the scenes, and many cell carriers currently provide backhaul networks for grid communications. However, selling iPhones and HBO is certainly not the equivalent of maintaining the safety and reliability of the electricity grid, another reason why partnerships, rather than M&A, are far more likely on a large scale.
As for NineStar, they know that the merger could be the beginning of something beautiful, and not just for its little corner of the world. Both Myers and executives from NineStar are asked to speak at conferences around the world to discuss how the merger will support their smart grid objectives. “People are keeping a close eye on us,” Myers said.