"Charge The Least" - How to put David Cameron's idea into action

A wish by the UK Government that energy companies should be forced to charge customers the lowest price has been in the news lately.

However, HMG seems to be rowing back, possibly motivated by the fear that energy companies will simply raise prices, as some have apparently threatened.

So things are going all blurry.

The latest I've heard is that energy price plans will get labelled with some kind of 'APR' style tag. This sounds complicated, and indeed silly. The problem is that competition isn't working - so the answer is either to accept that energy competition is lackluster and patch up an answer, or to provoke competition.

I have two simple suggestions.

1. Just do it! Bill the lowest price plan.

By comparison with your mobile phone operator, energy suppliers have a very easy job billing you. In go meter readings (real or estimated, manual or automatic). They go through the logic of your price plan (for instance, this fixed fee and that price per unit). And there's your bill. Hey presto!

Speaking from direct and personal experience, I can tell you categorically (i) that every leading billing system out there has the ability to run billing data through as many plans as you like, for comparison or to apply 'best price' logic; (ii) every legacy system I've met can have this feature added quickly and cheaply, with the only appreciable long-term cost being the additional microseconds it will take to calculate each bill.

So the simple aspiration, "Charge the least," can be achieved technically, cheaply and quickly.

But there are two objections.

a) "But we'll just have to raise our prices."

It's trivially the case that if energy suppliers had to charge the lowest price, and that most of us are on the wrong price plan, then their revenues will be hit. 

But neither the government nor consumers need to care about this. There's no suggestion that new, lower prices should be introduced, only that the existing plans should be applied to the benefit of consumers. In other words, the complexity of pricing, lacklustre competition between increasingly vertically integrated energy companies, and consumer inertia have produced surplus profits.

An energy company can raise its prices to make good this shortfall. If the market is competitive, other players can choose not to follow suit - and gain a competitive advantage. And if all industry players act in the same way, the regulator and, if necessary, the Competition Commission can take action against such apparent oligopilistic behaviour.

b) You can't compare apples and oranges.

It is true that, while the basics of energy billing are simple, there are potentially important differences. The two main differences are: how do you pay (e.g. with or without a direct debit); and how long do you commit (e.g. the contract is for a minimum one month, one year or two years - the kind of thing we have to decide for instance when we sign up for broadband services or pay TV).

Yes, this means that it's not 100% achievable for every consumer to pay the least every time. But no, this doesn't kill the idea.

In this and other industries, direct debit is viewed as a benefit to the supplier, that can be rewarded by (say) a £5 reduction. So it's perfectly easy (a) to calculate the best deal with and without DD and display both, (b) to apply the relevant offer based on the customer's choice to pay by DD or not.

Contract periods are similar, but the reward is often a little more complicated - a price plan with a monthly commitment may be quite different from an annual one. And in regulated industries, there's always a concern that powerful players will artificially inflate the difference, which creates huge barriers to entry for a competitor (think what it's like trying to change your mobile phone operator six months in to an 18 month contract - you're locked in, and competitors are locked out).

So an answer in this case seems to me to be:

1. Make the 'best price' logic apply within the customer's chosen contract period rather than to all price plans
2. Display the best prices under different contract terms
3. Require that any customer changing contract term with their supplier has a 30 day right to cancel and sign up with another supplier
4. Give customers a similar 30 day right to terminate a contract early and without penalty following any price increase by a supplier

2. "Green Button" Innovation

In the USA, President Obama introduced a voluntary (for the industry) scheme, motivated by the desire to help customers reduce their energy consumption. 

The idea is that your supplier gives you access to your customer information (present and past energy usage) in a simple, standard way online.  Which doesn't sound so revolutionary. The magic is the next step.

It's not just your right to access your data, but your right to let an app do the job for you. So instead of relying on the energy companies, for instance, to display the information to you in graphical form, to help you compare your energy usage to statistics for other similar households and so on - third parties can do that, at no cost to the utility.

We could do that too. 

Now, guess what? A mandatory green button scheme in the UK would also allow people to create apps to compare prices - what you could have paid with any and every alternative supplier now and back through previous bills - and into the future, based on projected use.

So if the UK Government decides to back away from relying on energy suppliers to optimise pricing for consumers, the Green Button option might be even more powerful - because it would give consumers ownership of their own data, which we could then all use both for green reasons (cutting down usage) and to help us access a competitive market, with a simplicity and confidence that would overcome the confusion and inertia that leaves most of us out of pocket.

A Call to Action

These aren't the only options. There's a host of possible regulatory changes, some of which may be more potent in the long term.

But I do like simplicity. So how to choose between these two? Don't choose! Leave the choice to the suppliers!

Why not challenge every supplier to implement either automatic bill optimisation, or Green Button data access, or both by (say) April 2013? And require all operators to indicate in a standard way whether they have signed up to one, both or neither scheme in all advertising and on every customer bill. 

Do you know what? I think this cunning plan might just work!

Telecom Twit-tering

One strictly for telco or business types, if this isn't you then may I suggest visiting this site?

Here's a quote from a telecom analyst, Sharifah Amirah reported in Total Telecom:

"While I appreciate that a lot of services still exist in silos, operators need to use consumer analytics tools to provide a personalised experience, including location-based services with what we call proximity-based marketing," she explained. 

Amirah also said the recession will enable telcos to refocus.

"The downturn provides an opportunity for large operators to streamline their businesses, and re-evaluate their strategies," she said.

Sometimes it's great to be long in the tooth, and I mean no disrespect - I've seen and read a lot of similar stuff recently. And I know this is what operator managers are saying - that's why you're saying it too. But even where it's not platitudinous it's wrong-headed.  

Here are some telco thoughts for recessionary times:

• In a recession, beware yesterday's great idea. I was at the Telecom conference in Geneva a decade ago and saw loads of location-based service hype, generally turning into the excitement of 'proximity based marketing'. One day something like this will happen, maybe, but just because it sounds novel doesn't mean it's life-changing. And if it is life-changing, it's going to be hard to do. Meanwhile life has changed, but not much in mobile world.
  
• In a recession, the winner is the one who makes stuff better and better. Trim out the fat, for sure, but that's not the starting point. The starting point is how can we do more for our customers, give them a better experience. Next step is how can we organise ourselves to deliver those positive changes. And a natural by-product of step two is what can we stop doing, do less of or do more efficiently.
  
• In this recession, developed world operators get the chance to work hands-on in the important area: how to grow profits by serving the poor. We're all a lot poorer all of a sudden. Practise on us. Because that's where the main growth opportunity sits.
  

And here are some thoughts for mobile operators.

1. Fix the basics.
2. Fix the basics.
3. Fix the basics.

Imagine a world where picture messaging just works. Where internet browsing just works.

You pretend it does now, but it doesn't. Unless 95% of people are confident that it really does work and you don't have to think about it, it doesn't work. What's the figure now? Nothing like that. Why not? Because yesterday's experience persists into today. Because the truth of the matter is you're not making it work.  Because you're obsessing so much about churn avoidance that you've sacrificed a good consumer experience now for the warm glow you experience from thinking how lousy you can make it for the consumer or handset that goes to another operator. Because you're so desperate to think of everything that's not P2P phone calls and SMS as 'added value' when most of your market is ready to turn that on its head. 

Always connected is the big story, and phone calls and SMS are the least interesting bit of that. You know that's true for you. Why do you assume it's not for your customers? Are you using email? facebook? twitter? and blogging? Any or all of the above?  If not, go try. If yes, stop looking in the mirror and start thinking how to get out of your customers' way when they want that stuff by making it easy and value-priced. 

Forget anticipating or shaping their needs until you've proved you can serve the ones you're missing right now.

Then while your competitors are busy thinking how to minimise revenue loss, you can look after your customers and move on to theirs.

A sign of the times? (or, "Recession bites")

Well, if there was any doubt we're heading into a recession...

Breakthrough?

Your mobile phone is a decent way of accessing the Internet just about anywhere.  Not brilliant, maybe, but good enough for all sorts of stuff.  Email, facebook, simple web searches, news and so on.

Traditionally, mobile operators have caned their customers for the privilege of viewing a tiny page slowly (and especially for those occasions when your browser can't support the massive graphics-rich page coming down the line). Why? The myth (OK, ancient truth) that mobile browsing is a premium service.

Nonsense!

But like it or not, this has been the approach and still generally is.

At last, Asda (which uses the Vodafone network) has changed the rules. Look:

Pay-as-you-go Internet Pricing

Price per MB

500p Virgin

400p Tesco

300p O2

    20p Asda

Obscure Orange, 3, T-Mobile, Vodafone

Checked today, but I make no representation about the accuracy or comprehensiveness of this information

'Obscure' means that the website doesn't want to give you the detail - assume the worst!

By the way, most of the operators offer either some kind of daily maximum  or/and daily, weekly or monthly bundles.  But for the most part, these position Internet at £1-2 a day. Much more than you are paying for high speed home broadband.

What can you get for £1?  Not much, perhaps, but too much, and in particular it's lousy knowing that each time you check and update facebook it will be costing you 30p or so.

So three cheers for Asda, assuming I'm reading their policy correctly.  If I make the occasional, casual email check etc, I'll spend pennies a day.  Well, I'm happy to do that any day, so suddenly it makes sense to make my mobile the default Internet access for all sorts of things.  Even a photo upload will be around the cost of a call (8p per minute, three cheers for that too). Almost all the mobiles in the house can download and run Opera Mini, which acts as a kind of middleman to the web, limiting the amount of data going back and forth and making most sites designed for PCs easy enough to use on phones, so suddenly it all makes sense.

Funnily enough, I'm pretty confident that if the others follow suit, their revenues will grow significantly (or to be techy, they will increase ARPU).  Because most people never use their phone for browsing. Bad technical experiences and fear of uncertain costs have ensured that.

Come on, guys.  Or am I going to have to trade up to Asda?