First Utility usher era of broadband energy providers

©First Utility

Previously, only existing energy customers with First Utility had been able to subscribe to their range of broadband packages, something which is also currently offered by Ovo Energy and SSE.

However, First Utility have gone one step better than Ovo by opening up these packages to entirely new customers, with the low prices they're offering suggesting that they're very serious about becoming a genuine rival to more dedicated internet service providers (ISPs).

That said, the emergence of multi-utility providers raises questions about competition and the ease of switching, since in offering special deals to those who take up both energy and broadband, First Utility will provide a disincentive against switching to a potentially superior ISP (or energy provider).

The deals

First Utility had been talking about making their broadband packages generally available as early as last December, yet it's only now that they've managed to actually realise their plans.

Still, despite the slight lateness, they're hoping to eat into the market share of bigger ISPs such as BT and Virgin Media in much the same way that they weakened the dominance of the Big Six energy providers

This is perhaps why they've used the nationwide launch of their broadband services as the occasion to introduce a discount for their 38Mb bundle, which like the other two includes line rental as standard.

One thing that First Utility are using to distinguish themselves from other ISPs is their promise (initially made in March) that these prices will not change for customers, even after the 18-month contracts applying to all of them end.

Of course, while it can be taken at face value that no substantial or sudden price increase will be inflicted on customers, given the nature of inflation it's highly unlikely that they won't seen any kind of bill rise in the long term. Added to this, those who sign up to the 38Mb package at the special price of £27.99 will most likely see this monthly fee increase to the standard £31.99 after the first 18 months have passed.

Nonetheless, First Utility also hope to differentiate themselves in another way, which is that they don't require any activation or installation fee to be paid, except in the case of those who don't have any pre-existing telephone line installed.

Given these redeeming features, First Utility are confident they can successfully "target the 15 million UK households who are currently out-of-contract with their broadband service provider and paying over the odds as a result".

Their UK Managing Director, Ed Kamm, said in March, "We've been successful in unsettling the Big Six in energy and our next target is the Big Four in broadband".

Other providers

Their optimism is shared by a couple of other energy providers, Ovo Energy and SSE, who both sell broadband as well as gas and electricity.

SSE have been doing so since 2015, and like First Utility they offer their three broadband packages to the general public, and not only to their existing energy customers.

While they beat First Utility to the punch of becoming the UK's first energy provider to sell broadband by two years, the fact that they've been followed by Ovo Energy and now by First Utility suggests that combining energy and internet may become a new norm.

Seeing as how SSE and First Utility offer discounts or special offers to those customers who take out both energy and broadband supplies with each of them respectively, it would seem that such a norm would be a good thing for customers, at least on the face of it.

Bad for competition?

However, there is a possibility that multi-utility combos would be bad for competition, and would incentivise customers to stay with potentially inferior services mostly for the sake of saving a few pounds on their monthly bills.

For example, with Ovo Energy, or rather, with Ovo Broadband, customers who change their energy provider but continue to receive broadband from Ovo will have to pay £5 extra a month for their internet connection.

In other words, utility combos create a disincentive against looking for better providers, and instead narrow the terms of "competition" to who can simply offer the lowest price across a bundle of services.

Yet as a recent Advertising Standards Authority case against a Sky Broadband ad found, customers aren't simply interested in low prices, but also in what a service can offer.

And if multi-utility combos become the norm, then customers may become less able or less willing to take advantage of superior services, something which could ultimately discourage providers from supplying them.