What lessons can the utilities industry learn from telecoms? (part I)

Was 2015 the year the world took notice of climate change? It certainly was the hottest year on record[1] and for extreme weather phenomena. The year also witnessed the Paris Climate Conference (COP21) when hundreds of nations agreed to turn down the world’s thermostat[2] by two degrees Celsius (3.6 degrees Fahrenheit)[3] with targets to decarbonize and cut greenhouse gas emissions.

Needless to say the result from the Paris talks is likely to impact utility companies around the world. They will be expected to improve energy efficiency and deliver ‘smarter’ services to consumers[4]. There are other factors which are driving energy companies to look for smarter more efficient solutions.

New grids

According to the International Energy Agency, 1.3 billion people do not have access to energy[5]. Access to energy is crucial for human wellbeing and to drive economic development[6]. This is particularly the case in areas such as Central and Sub-Saharan Africa where over 600 million people do not have access to electricity[7]. To help raise their citizens’ living standards, government authorities are looking at ways to extend energy services. While energy companies can tap into these new markets and extend their grids, post-paid billing may not be an option in many new areas. This calls for different revenue assurance models. It is a challenge utility companies will need to overcome.

Financial efficiency

Competition is another driver. Public opinion, regulation and the need for authorities to provide competitive choice in the market has seen the deregulation and the introduction of a retail utilities markets. With increased competition as a result, the traditional business models in utilities is under significant pressure. There’s now a pressing need for utility companies to be financially efficient and to adopt new pricing strategies to compete effectively – in both existing and new markets. Utilities need business models that can provide transparency to customers and build trust.

Lessons can be learnt from the telecommunications industry. This industry, similar to utilities, has faced numerous regulatory and legislative pressures. Telcos – like utilities – have millions of customers and households to manage. Of course there are differences between the two industries which can vary according to markets and regions. Some utility incumbents operate as sole – monopolistic – players, while telecom operators have to wrestle aggressive competition from other telcos and more recently, from over-the-top (OTT) outfits such as Google, Skype and Facebook. Telecoms also have a range of payment methods – with robust revenue assurance systems in place.

The continuation of this article will look further into the similarities and differences between utilities and telecom in terms of: opportunities and challenges of IoT, mediation solutions, seamless online billing, access to service, forge partnerships and new business models.

[1] NBC News, 29 December 2015[2] United Nations Conference on Climate Change[3] CNN. 14 December 2015[4] PwC, 14 December 2015[5] International Energy Agency[6] IHS CERA & World Economic Forum 2012[7] GSMA, Mobile for Smart Solutions

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