Yahoo Finance First Utility branches into broadband as multi-utility market heats up
The largest independent challenger to the UK’s ‘Big Six’ energy suppliers has set its sights on the broadband sector in an attempt to widen its consumer appeal as retail competition heats up.
First Utility, which supplies gas and electricity to about 900,000 households, plans to undercut the broadband rates offered by the four largest telecoms giants to target the 15m broadband customers who pay a higher monthly rate for "out-of-contract" rates.
Ed Kamm, First Utility’s UK managing director, said it was the same strategy used by the company when it entered the retail energy market in 2008 to offer lower rates than the standard variable tariffs which are still used by 16m "sticky" gas and electricity customers.
“The parallels between the energy and telecoms markets are striking, with large swathes of households paying far too much for both services. We’ve been successful in unsettling the Big Six in energy and our next target is the Big Four in broadband,” Mr Kamm said.
“This next phase of our business development will see us adding more diversified services to our portfolio while continuing to grow our domestic energy customer base. Broadband is the first step and is a natural extension of the business,” he added.
First Utility’s bid to become a multi-utility brand follows a host of similar moves from its rivals and points to a rising trend towards "bundling" utilities to gain an edge in an increasingly competitive market.
“We relish the opportunity to compete and we don’t shy away from a challenge. It’s who we are as a brand. We fight the difficult fight,” said Mr Kamm.
The one-stop-shop approach has already been adopted by smaller, niche players including rival energy challenger brand Ovo Energy, which has also launched a broadband offering.
Telecom Plus, the owner of Utility Warehouse, has been bundling energy and broadband services together for years, and newer energy minnow Extra Energy offers customers insurance deals in addition to the standard gas, power and broadband options.
Toby Siddall, a managing director with Accenture, predicted last year that the market is ripe for a surge in multi-utility offerings.
“Whether it’s utilities or energy companies branching into telecoms and broadband, or whether it’s the entertainment and telecoms companies looking to go the other way ... we will see a more intense battle for the key ‘value-adding’ relationships in a connected home,” he said.
The early movers within the Big Six energy suppliers - British Gas, SSE, EDF Energy, Eon UK, Scottish Power and Npower - are also jostling for position in the emerging "home services" market.
In 2015 energy giant SSE threw its weight behind its largely overlooked existing broadband business, by sharply undercutting the market to offer the cheapest deal at the time in an aggressive bid for market share.
British Gas owner Centrica plans to leverage its early success in the smart metering business in a billion-pound strategy shift away from energy production towards expanding its presence in the digitally enabled “connected home” space and its smart thermostat business Hive.
