Smart home is $11.2bn opportunity, but are the telcos ready for it?

ABI Research estimates the smart home segment could potentially be worth in the region of $11.2 billion by 2022, but the diversification question still remains for the telcos.

The smart home is a concept which has been on the horizon for some time, we’ve been debating the merits of talking fridges for years, but until recently it has perhaps been little more than a gimmick. The advantages of the expensive upgrades were limited, and in all honesty, there seem like little point in connecting your toilet to the internet. That said, during the last 12-18 months applications and services have started to appear to make the prospect genuinely interesting. And we’re talking about more than just connecting your bog.

This seems to be the point of the ABI Research note, the consumer is starting to welcome the idea of the smart home. AI-powered products are becoming more the norm off the shelf, while the concept of the data-sharing economy is no-longer a baffling idea. But are the telcos ready for this evolution?

“CSPs are being threatened in a market increasingly driven by the likes of Google and Amazon with a range of products and services from AI-powered smart home voice control smart speakers to security solutions,” said Pablo Tomasi Senior Analyst at ABI Research.

“But things are changing and CSPs are accelerating their strategies for the smart home. Telefonica with Aura, Orange with Djingo, and SK Telecom with Nugu lead the way of CSPs developing AI assistant to support their smart home play. Now is the time for CSPs to be more aggressive in tying the usage of their AI assistants to their other connected and smart home offerings.”

The smart home will also offer a small opportunity for the telcos, all of these devices will have to be powered by the internet, therefore those who are happy with the utility tag can sit back and wait for the trend to kick-in. However, for telcos who want to diversify revenue streams and interact with the consumer in a more meaningful manner, they will have to demonstrate they are capable of competing with some of the most innovative companies on the planet.

A platform approach is one way in which this can be done, with telcos favouring the ‘freemium’ model over the traditional ‘bundled services’ option, according to ABI. By creating an extensive and varied ecosystem, and leveraging current assets all around the home (connectivity, content delivery, etc.) and emerging concepts such as monitored security, the telcos have a wider reach than others attempting to capitalise on the smart home enthusiasm.

The issue here is timing. As with any hype curve, getting in ahead of competitors is critical. There was an opportunity to act as the middle man between the consumer and the manufacturers of smart home devices, leveraging the excellent relationship telcos have developed, though this is still a distinct possibility.

Research from consultancy firm EY suggests consumers are not settled on where they would like to purchase their smart home devices from. Broadband providers proved to be the most popular choice, at 19%, but tech websites were a popular choice on 18%, while going direct to the specialist manufacturer was as well on 17%. Utility providers collected 15% and household appliance manufacturers took 13%. 11% choosing smart phone manufacturers is encouraging for that segment, though MNOs only took 4%. Variety is important right now, as it demonstrates there is still an opportunity for someone to take a strangle hold of this relationship with the consumer.

The potential for the smart home is massive, and this potential will only become bigger as the voice user interface becomes more commonplace. The important factor here is to take a risk and secure a leadership position. With the emergence of the connected and sharing economy a couple of years ago, the telcos took a backseat and suffered because of it. They sit at the bottom of the totem pole waiting for the crumbs to fall down, largely collecting revenues from connectivity alone.

The smart home is an opportunity for mistakes of yesteryear to be corrected.

Smart home is on the up but still too complicated – EY

It certainly has been a slow burner, but according to research from EY the smart home revolution is about to catch fire.

Sci-fi films have been stacked to the ceiling with intelligent, connected devices, but in reality adoption has been pretty ordinary, some might even say woeful. We have seemingly been talking about the connected revolution for years, but it’s only been in the last couple of months, thanks to some aggressive advertising campaigns from Amazon and Google, that it has started to catch-on. Smart speakers have put the smart home into the mainstream and it looks like it is only going to get better.

“Our survey shows that UK consumers are warming to a new wave of smart products and services that help redefine home living,” said Adrian Baschnonga, Lead Telecommunications Analyst at EY. “Looking ahead, smart security and energy services boast the fastest take-up rates, underlining the importance of convenience, control and efficiency as drivers of demand.”

Adoption rates are certainly heading in the right direction as the research shows 26% of households own at least one smart device (speaker, heating device, security etc.) but this figure is expected to rise to 59% by 2022. Smart heating devices look to be the most promising area, with 38% of households planning to purchase over the next five years, while 32% plan to buy some sort of smart security product, and both digital home assistants and smart lighting devices are expected to be in 31% of households.

Penetration for each of these devices are still very low right now, but it does appear users are put off by the complications of installing the hardware or managing the software. This is hardly an usual trend, it is the same before the mass adoption of every technology evident in the bell curve, but perhaps the slow start to the smart home has been down to a lack of education. The digital era is taking over, but it is only now the millennials, those who would be considered more comfortable with new technology, are starting to become the most influential purchasers in the market.

Another concern is perhaps the value proposition, although it is not addressed in the research. You have to wonder whether the price/hassle/benefit ratio is actually worth it right now. Your correspondent bought a Google smart home device for his parents at Christmas, functionality is pretty limited for the moment. This is expected as it is still early days, but considering the technology is very good at promising your world will be rocked here and now, it is a bit of a dampener.

Gradual improvement are being made to ease the consumer into the connected experience and Google has released an update to what we think is a really useful feature. Routines is a feature on the Google Home device which allows users to customise a routine for different times of the day. For example, the ‘Good Morning’ routine can be configured to take your phone off silent, adjust lighting and heating in the house, tell the user about their day (meetings, weather, traffic conditions on the way to work) and then a pre-selected radio channel or playlist can be started. All you have to do is say ‘Hey Google, good morning’. Similar routines can be set up for the commute, getting home from work or going to bed.

The Routine feature is what we would expect from smart devices; default processes which offer benefits to the consumer without them having to do too much. It eases the consumer into the swing of things and gets them comfortable with the technology. As it stands there are too many device manufacturers or software developers which are creating a fantastic offering but leaving too much work for the consumer to do. The first steps on the way to the digital life need to be simple; the user needs help.

“Our survey findings highlight many positives that product and service providers can draw on as they formulate their smart home strategies,” said Praveen Shankar, EY’s Telecommunications Sector Leader. “However, looking ahead, they must position the customer at the heart of their approach and provide a compelling and consistent story about the value they can offer them. Customer concerns regarding installation and security should not be treated as an afterthought, and clear communications should exist before, during and after the point of sale.”

Perhaps the issue is technologists have focused too much on making this big wonderful world where everything works in sync and ticks like clockwork. The vision is big and brilliant, but maybe these companies are forgetting change is scaring for the majority. No-one likes to feel overwhelmed when treading onto unwalked paths, and maybe the industry is just asking a little bit too much of the user right now.