Home services – automation, monitoring, security – is proving to be a valuable element of the bundle
Home services – packages that include some combination of home automation, home monitoring, and home security – have a long way to go before they rival any of the other elements in the residential bundle in terms of revenue. But the potential is there and initial indications are highly encouraging.
There is still only a small subset of broadband providers that offer some combination of home services. AT&T, Bright House, Comcast, Cox Communications, Time Warner and Verizon in the U.S., and Rogers Communications in Canada are among the few.
No one is breaking out revenue figures, let alone subscriber figures – companies rarely do for developing markets. But as early in the market as it is, and as few companies are currently participating in it, total U.S. revenue from IP connected home service bundles can be expected to grow to exceed $1 billion by 2014, according to a projection by Parks Associates. Even split five or 10 ways, that’s not chump change for a brand new market.
Anecdotal evidence – the only evidence anyone is willing to offer – suggests that subscribers are enthusiastic about having the ability to unlock the house for a child returning from school who forgot his or her key, turn down the thermostat from wherever they are if they forgot to do it when they left the house, and somewhat unexpectedly one of the more popular uses is to check in on pets left at home.
Comcast has been in the market for going on three years, and now has Xfinity Home available across its entire footprint.
Comcast CFO Michael Angelakis said, “we kind of look at it two ways. One is as another product that certainly is attracting a different customer base. A lot of the relationships are new to Comcast. In addition, a lot of them are bundled, whether it’s triple play or quadruple play. So we think that’s really positive. And then on a standalone basis, we hope to build a business which we think is pretty successful over the next few years.” Angelakis’ comment came during the company’s conference call with analysts to discuss first quarter results.
AT&T launched its Digital Life products about a year after Comcast. The service is now available in about a score of markets, and the company is aiming to have it available in about 50 by the end of the year.
AT&T Digital Life president Kevin Petersen said, "It’s been a two-year journey for us, and it’s a real pleasure to get to the market and see how customers like it. We couldn’t be more happy about the reception.” Petersen made his remarks at the recent Connections: Connected Home Conference, which ran in concert with the CTIA show.
The allure of home services for service providers is clear. Even with companies like ADT, FrontPoint and Vivint having been in the security business for decades, there remains vast growth potential, and broadband-based service providers are only expanding the market.
“I think the space is undersaturated,” said Jeremy Warren, Vivint’s vice president of innovation.
“This is not a bare-knuckle market share fight. We’re all just growing the pie.”
But home services is not an endeavor to just leap into without looking first. It may not be a particular technological challenge, but it is a logistical one, inasmuch as it is highly dependent on customer service.
“The fundamental foundation of home security and home automation is the customer experience, in terms of sales, of installation, and of ongoing support. The business can be profitable when you commit to the long-term experience. That’s why all of what we do is done in-house,” Warren said.
“Not everybody follows that strategy.
Some people outsource some of that, and that can work with security. But then when you go on and start offering home automation, that can be a challenge. If you have four different numbers to call for four different services, that’s just bad for the customer experience,” Warren continued.
David Bercovich, VP North America, of smart home system vendor AlertMe, said, "If you have a friend with a mobile phone, you expect to be able to call, text, and email no matter what network they're on. That's the starting point for consumer expectations of connected devices in the home.
"Home controls platforms need to take on the complexity of controlling multiple devices based on personalized rules and intelligent automation that simplify the end-user experience. The value of the connected home ecosystem will increase exponentially as more devices are addressable and interoperable on the same platform,” Bercovich said in a statement prepared for the Connections conference.
Petersen said AT&T was cognizant that ease-of-use would be critical, and so it partnered with Cisco Systems to bring the security and automation elements together. “The old industry has fallen short,” he said. “We wanted a seamless connection so you are connected to your home from anywhere. It has to be simple and intuitive.”
As an IP-based set of products, home automation, home security and home monitoring easily piggyback on existing broadband networks. There are investments required in the back office, in customer service, and with customer premise equipment (CPE). And some of that CPE is purchased and owned by the service subscribers. While there are technological challenges in implementing the service, there is nothing fundamental that needs to be invented to make the service succeed.
Furthermore, the services that exist can be expanded, and the number of different services that could eventually be added remains open.
Home automation started with turning lighting on and off, and locking and unlocking doors, but add a thermostat and all of a sudden you’ve got a key element of an energy management service – and that’s even before Smart Grid applications have been commercialized.
But that’s putting the cart before the horse. The market is still new, and has the characteristics of an early market with multiple players: market fragmentation (of one kind or another), and a small supplier base.
In the case of home services, the fragmentation is manifested in wireless connectivity options. There are devices that operate on Wi-Fi, some on Zigbee (also known as RF4CE in some instances), Z-wave, Linuxbased X10, and sometimes Bluetooth.
Comcast has tried them all, and now prefers devices that connect using Zigbee, which operates in a wireless mesh. Bill Horrocks, VP, product management for Xfinity Home explained that Comcast likes Zigbee because it provides both connectivity and a level of security for connected devices, though some devices, such as security monitors, tend to be Wi-Fi based.
Regarding the size of the vendor ecosystem, Horrocks said, “it’s grown significantly from our launch, when we had a very small partner base. It’s very robust now – we’re excited about where they are today. We’ve worked with our peers to develop robust Zigbee ecosystem. Some providers of Zwave devices are now developing equivalent devices with Zigbee radios.” While MSOs sometimes work together (e.g., consulting with each other on backing Zigbee), few companies in the industry at large talk to each other. It’s an issue of herding cats.
The traditional security companies do their own thing, MSOs tend to speak only to each other, and consumer products vendors have rarely shown an interest talking to service providers.
Utilities, who might have an interest in energy management programs, remain isolated.
In March, home energy management specialist Energate and GE began to combine the former’s software, wireless communications, gateways, smart thermostats, home energy gateways, switches, and consumer energy displays with the latter’s demand response management software. The two companies plan to sell the combined solution to utilities.
The integrated offering will enable consumers to tell their utility how they want to have their energy usage information packaged, as well as which smart technologies they prefer for efficient energy use in their homes, Energate said.
Meeting in the middle with home services companies isn’t likely to happen soon.
Vivint has designed an energy management package that includes not only the ability to remotely control the thermostat, but also the installation of solar power.
“You can see how much the solar is generating alongside the savings you’re getting on HVAC,” (heating, ventilation and air conditioning) Warren said.
“Energy is ripe for doing more,” he continued.
“We can do things smarter than we’re doing them now.” A year ago, Comcast introduced an energy management program called EcoFactor, a cloud-based element of the package that hooks in to a connected thermostat. “We’ve got algorithms that look in to the balance between the most efficient setting and comfort,” Horrocks said. “That’s the beginning of our energy platform.” Putting some of the intelligence in the cloud can be as important in home services as it is in video services.
“Cloud device virtualization is an important development because it solves three critical problems facing consumer product brand owners,” said Shane Dyer, president of Arrayent, which has developed a cloudbased platform and gateways to support connected home services.
“Virtualization enables the lowest-cost hardware possible because device complexity can be pushed to the cloud and on to smartphones. Second, virtualization makes interoperability among devices using different LAN technologies, such as Wi-Fi and ZigBee, possible. Third, virtualization can enable devices to connect to different application owner clouds, such as a home energy management company, retailer, or a security company,” Dyer said, also in remarks prepared for the Connections event.
Comcast Cable president & CEO Neil Smit recently talked about Comcast’s exploration of other home services. “I think that there are other opportunities for products that we could hang off the Wi-Fi, that we’re currently investigating,” he said.
“So you could have the home security service, the lighting service, home energy management that we have today, and you could add other services onto that. And we’re looking at that portfolio of services that we could hang off the Wi-Fi umbrella right now, which is one of the reasons we’re focusing so heavily on Wi-Fi. Sixty percent of mobile usage is in-home, and people are hanging a lot more devices, an average of six devices, off their home Wi-Fi. We’re going to continue to push hard on that product.” Smit’s comments were during the same conference call that Angelakis’ comments above came from.
AT&T’s list of potential home services includes biometrics, energy optimization, water consumption, garage door openers, video verification, pool control and irrigation control, Petersen said. Healthcare also is an attractive area, he added, with the ability to allow older or infirm people to stay at home longer with monitoring services for family members or healthcare professionals.
There are already medical monitoring devices on the market that could be hooked into a home network, but service providers – perhaps wisely – have thus far steered clear. Telephony is a lifeline service, and the regulations attendant to lifeline services can be strict. Medical monitoring could very well end up in the same category, and without even guidelines on who is liable for what, the service could be a legal minefield.
“There’s a big challenge in medical technology,” Warren noted. “It’s on our roadmap, but trying to get doctors and insurance companies and everyone else all together? It’s a nightmare.” That said, an increasing number of people are using biometrics – monitors to measure their athletic performance and workout progress.
IMS estimates that makers of sports and fitness monitors, such as Nike+, Adidas, Under Armour, Fitbit, Fitbug, BodyMedia and Jawbone, are on a path to sell 43.8 million devices this year, and predicts that over the next 5 years they may sell as many as 252 million units total over the 5-year span.
The popularity of fitness and heart-rate monitors, sports and running computers, outdoor pursuit computers, cycle computers, activity monitors, pedometers, and the like indicates that biometrics could be a preliminary service offered in advance of medical monitoring. The trick will be finding a value-add to draw activity that’s already occurring into the home network.
Stuart Sikes, president of Parks Associates, said services and products for smart homes have been available about 15 years but haven’t been able to find a wide market until the recent technological developments. “This is about to explode,” he said. “Our problem is not technology. Our challenge is figuring out how to monetize and compel the consumer to spend money on the services.” “We’re seeing a lot of convergence in this space,” Warren said. “I expect the Googles and Apples and Microsofts will get in, start working through the Xbox or whatever. In 5 or 10 years, we’ll see that there were two or three companies that got it right and will have a big advantage over everyone else.”
– The Associated Press contributed to this article.