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Crossing the Threshold

Technology opens customers’ homes to utility services.

Fortnightly Magazine - September 2011

Examining other mature markets also reveals that sales costs per new customer are significantly less than marketing, ranging anywhere from a negligible spend up to $125. With the exception of direct retail— i.e., brick-and-mortar stores—sales costs generally are highly variable and incurred only for successful sales. However, account management can be impacted by utilities’ relative lack of scale, as most prominent retailers operate on a national or regional level.

Provisioning & Installation

Utilities today are responsible for provisioning and installing their own field equipment, and the clear point of demarcation is the meter. The vast majority of these installations require a crew and truck to be dispatched, where the bulk of the work is done on-site. This approach, while perfectly appropriate for traditional utility owned properties, isn’t well suited for the beyond-the-meter market.

When utilities venture beyond the meter, installing home-based connections, appliances and software, new service models must include provisioning software and operational methods and procedures (M&P) that minimize the time—and therefore cost—of provisioning and installation. If provisioning and installation aren’t optimized, the economics of providing in-home services are greatly impaired, requiring many months or even years to pay back the costs.

DSL broadband service from telcos in the early days is a good example of the not-so-hidden costs of provisioning and installation. In 2001, when broadband demand was beginning to take off, the telco DSL offer was notoriously difficult to provision with an average installation time of 2 hours 10 minutes, and a cost of anywhere from $600 to $1,500 per subscriber. 1 With a per-subscriber revenue between $40 and 60 per month and a gross margin of approximately 80 percent, the payback period ranged from 13 to 47 months—quite a wide range and not competitive with cable modem service at the high end.

Identifying this disadvantage early, telcos such as Qwest, SBC and Bellsouth (the latter two now merged as AT&T) took several steps to reduce costs and ensure a positive customer experience, including aggressively promoting customer self-installation; putting in place M&P standards, such as technical prequalification, to ensure self-install had a high success rate; and optimizing DSL modem technology with protocol standards to minimize configuration and compatibility hurdles.

These changes lowered installation costs enough to make DSL a consistently competitive market option while also improving the customer provisioning and installation experience.

While self-installation might not be feasible for some in-home solutions, minimizing the burden of provisioning and installation will be imperative, especially given that in-home energy services will be focused on just a fraction of consumer usage or demand. These services will produce a lower dollar value per month—about a $10 to 15 value is typical—compared to other in-home services, such as broadband (about $50 revenue), or security (about $30 revenue). Before utilities contemplate crossing beyond the meter into the home, we must be well prepared with the service infrastructure in place to ensure a low-cost and positive customer experience.

Support & Care

Utilities have excellent support and care capabilities for the core business of providing reliable electricity and generally are very responsive to service calls and