Comcast has its Triple Play: Internet, voice and video. Now, the telecom giant is reportedly considering teaming up with NRG Energy to sell electricity in Pennsylvania. Will this be a strike out or a home run?
More than a decade ago when deregulation was starting and the Internet was taking off, companies like utility.com, essential.com, beMANY.com hit on the bright idea of selling utility services like phone and power online. They quickly folded.
What makes Comcast think it can now do better? The company hasn't said much about its plans. A Comcast representative told Greentech Media "this is something we're exploring" without providing more details. But a January 28 earnings conference call with analysts may offer some clues about the company's overall strategy.
“These results demonstrate we are competing better and have intensified our focus on customer retention in the value of our Triple Play strategy,” Michael Angelakis, Comcast CFO, said. “We are growing our customer relationships, increasing the number of customers receiving higher levels of services and have an increasing number of customers taking multiple products. At year end, 79% of our video customers took at least two products and 44% took all three services versus 40% in 2012.”
This is nothing new for Comcast. “One of the great things about this business for so many years is we find new products to sell using our existing base,” Comcast CEO Brian Roberts said.
So Comcast, which earned $1.9 billion last year, is trying to sell its customers multiple products: Internet, voice and video. The more products it can sell to existing customers, the more revenue.
Comcast had 53.1 million Internet, voice and video customers at the end of 2013 (the company doesn't break out its customers by state so we don't know how many are in Pennsylvania), according to the company's January 28 earnings report. That's some customer base.
Further, Comcast sells Xfinity Home, a security and home energy management package. The system includes a smart thermostat that automatically adjusts a home's temperature like Google's Nest. So Comcast is already in the up-and-coming smart home business. If you're an existing customer, why not buy power from the company too?
Comcast appears to be teaming up with NRG Energy, a major power supplier with about 2.3 million retail customers of its own. A partnership with an experienced supplier like NRG makes lots of sense.
If Comcast starts selling electricity in Pennsylvania, it would enter a highly competitive market. For example, in PECO Energy's service territory there are 51 suppliers for residential customers and 56 suppliers for non-residential customers, according to a January report by Distributed Energy Financial Group (DEFG). However, you can bet they're watching Comcast's moves closely.
So why would Comcast start selling in Pennsylvania? Sure, it's headquartered there. But more likely, it's because the Pennsylvania retail market is strong. In fact, it's the third most competitive retail market in the U.S., according to DEFG's report. About 1.9 million residential customers, or about 38% of the segment, buy electricity from competitive suppliers, the report said.
The report notes that “to succeed in a competitive electricity market, retail energy providers must be able to effectively acquire and retain customers. Customer engagement and the customer relationship are vital to them.” Comcast knows a thing or two about getting and keeping customers.
Only a few markets, like Pennsylvania, allow bundled service options that can include in-home energy management devices, advanced thermostats and bill payment options, the report said. Again, this works for Comcast.
The Pennsylvania Public Utilities Commission (PUC) has been taking steps to improve the outlook for retail markets in the state. “We’re looking at new ways to move the needle on competition,” PUC Chairman Robert Powelson said at the unveiling of the DEFG report.
A bipartisan group of nine state senators introduced a bill that would have competitive suppliers provide default service instead of utilities providing power to customers that don't switch to retail providers.
Pennsylvania wants to make its market even more competitive. It seems like the perfect setup for Comcast to start selling electricity. If Comcast does well in the Keystone state, it has millions more customers in Texas and the Northeast that might be open to buying one more product from the company. In a few years, Comcast may have to rename its Triple Play the Grand Slam.
