The market for smart home services in Europe is still nascent and one of the biggest barriers to growth, according to Jon Carter, UK Head of Business Development, Connected Home at Deutsche Telekom AG, is the fact that consumers still do not understand the smart home or how it benefits them. His company is working hard to change this in Germany, marketing smart home services to quad-play customers and demonstrating a growing range of smart home products (including third-party hardware from Philips and others) in all its high street stores, with fully trained staff.
Carter is convinced that consumers across Europe will pay for smart services – with peace of mind being one of the key hooks, whether it is the comfort of knowing that your home has security monitoring when you are away, or that water leaks will be detected or product breakdowns anticipated and hopefully avoided. “People wonder if there is a need for smart home services, and there is a need,” he declares.
Broadband operators must start by simplifying some every day tasks, he argues. A simple example is controlling the heating at home. German homes do not have a central heating thermostat but smart thermostats for each radiator, so this means that remote heating control becomes particularly convenient for a consumer in that country, he notes.
Carter was speaking at Broadband World Forum in London this week, where Alvaro Federico Gallardo Gonzalez, VP for Home Services at Orange, also noted the current low levels of consumer understanding when it comes to the smart home. But like Carter, Gonzalez is still bullish about the future smart home market, predicting that it will be worth $70 billion within a few years, money that will be split between services, devices and installation. “This is going to be a huge market with many players competing within it,” he declared. Orange aims to be one of those players, having already launched services in France, Poland and Romania.
Gonzalez pointed to the potential for connecting homes into services like education, health and assisted living as part of the wider connected ecosystem [which starts to touch upon smart government and smart cities], with narrower services including energy management, home automation and monitored security. He identified ‘comfort’ as an important consumer benefit. It is already clear that there are physical and emotional states (e.g. ‘comfort’ and ‘peace of mind’) that can be ‘sold’ via different service functions.
Orange and Deutsche Telekom agree that trust is a key asset for broadband service providers competing in this new market. Gonzalez highlighted how consumers must trust in the reliability of services when taking home security, assisted living and health services. Carter pointed to concerns about data privacy [which will be amplified as smart services use more data about ourselves and our lives]. “Research shows that Deutsche Telekom is one of the most trusted brands and a lot of that is because of the way we control customer data. This is a strength we can play to.”
Ian Wheelock, Engineering fellow at ARRIS (which provides network solutions and customer premise equipment, among other things, to TV and broadband service providers) also highlighted this service provider strength. Having surveyed 19,000 people around the world for its annual Consumer Entertainment Index, ARRIS found that the three categories of company that would be most trusted to manage an automated smart home were, in order, Internet service provider, home security company and TV service provider. 47% of people would prefer the ISP or TV company to deliver smart home services.
Jon Carter warned that the smart home market is a tough nut to crack for service providers. Deutsche Telekom is now a major player thanks to its unwavering commitment and investment over a number of years and he thinks service providers must harness one of their natural strengths – the ability to cross-sell, bundle and also to subsidize the cost of the hardware.
Hardware is a key battleground and Carter believes operators should use their normal subsidy model to their advantage. His company is also selling hardware products from the likes of Sonos in its larger retail stores. This is having several effects: Firstly, to help Deutsche Telekom take a share of the overall smart home hardware market; Secondly, to align its brand with good-looking devices with some clearly defined functions rather than simply shipping routers; Thirdly, to increase consumer confidence in smart home services and so change the whole perception of this market.
“You move this [smart home services] from a category that is not very engaging, with a piece of plastic, to something that is engaging and which will achieve the [so-called] ‘wife approval factor’.” Carter referred to Strategy Analytics research “showing big pools of cash that we as telcos can capture, and a big part of that is from the hardware.”
To further its marketing objectives, Deutsche Telekom is expanding its sales channels beyond traditional stores like Media Markt and Euronics and into DIY stores. The company is also going to partner with home insurers. One major German insurer will soon start promoting Deutsch Telekom smart home services tied to its core insurance policy.
In terms of cross-selling, Deutsche Telekom focuses its efforts on its (MagentaEINS) quad-play customers, offering discounts on smart services. “Every sales conversation around MagentaEINS tries to push the smart home,” Carter revealed.
Deutsche Telekom is currently investigating freemium models as a way to increase uptake. “We want something that every single broadband customer can get – something they do not have to justify to their partner because it costs EUR 10 – some basic smart home functionality that is free.” Door contacts (for security) are an example of a free product that might eventually lead to paid services (like managed security monitoring).
Carter advises broadband service providers that they need to embed the smart home into all their processes including staff training, and expose customers to the concept at every touch point, including on their bills. Selling smart home services has to be built into sales targets and commissions for regional managers and staff, he says. “The smart home is a key strategic objective for Deutsche Telekom; every store has a sales target, and a smart home display unit,” he told the audience at Broadband World Forum in London.
Hardware is also the gateway (literally) into the smart home, which is why it will be increasingly important for telcos to get their hardware strategies right. According to Carter: “We control the key enabler: the home router. Fixed-line telcos have a unique advantage because they are deploying the broadband gateway into the home. At Deutsche Telekom we ship two million routers a year and from next year every new high-speed router will have IoT capabilities built in.” Among other things, this means including new radio technology that can communicate with devices around the home – including Bluetooth as well as Wi-Fi.
Ian Wheelock at ARRIS emphasized the need for telcos to remain in control of gateway and router functions, as far as possible, as more devices appear in the home. “There are a lot of different players in the IoT ecosystem; lots of ecosystems and suppliers and so many disaggregated ‘point solutions’, so many different temperature sensors or smart light switches, typically with their own small hubs that need to be powered up and paired up on the Wi-Fi network,” he observes.
He pointed to the potential for radio subsystem incompatibility, leading to poor coordination between these different hubs and systems. If service providers then want to take responsibility for the experience inside their broadband home, their customer care teams will need to know more about all these technologies. His final concern is that the devices and platforms that people bring home from shops, and which today provide basic Wi-Fi options, “will start to unload smart home services and take subscribers away from you.”
He warns how third-party IoT hubs that use network address translation (NAT) hide services behind them and therefore isolate the broadband subscriber from the infrastructure of the broadband service provider. He believes the operator home will be threatened by companies like Google and Amazon (via their retail products) as a result.
The solution is to provide the IoT hub yourself and onboard as many of the radio protocols (like Bluetooth Low Energy, Thread and Zigbee) as you need, which is not cost-prohibitive, Wheelock claims. One option is to upgrade the existing gateway and another is to use new peripheral products to bring the IoT capabilities into the home – devices that may need to be added anyway, like Wi-Fi extenders.
Set-top boxes can be used as part of this operator IoT ecosystem and the television (serviced via the STB) could become a display point for the smart home and IoT user interface. Wheelock notes that you can make the UI available on portable/multiscreen devices too, but he reckons the TV set is especially suitable for older people whose eyesight makes viewing a smartphone difficult. You can also use voice support found in some remote controls.
The general idea is that the service provider aggregates the different point solutions within a single device or platform, making services more convenient (for consumers) and easier to manage. This minimizes the chance of Trojan Horse ‘OTT’ providers moving in.
Despite the likely competition in smart home devices and services, Deutsche Telekom’s Carter is convinced that telcos can win big in this new market, partly because you need scale to be successful. And for this reason his company is now willing to make its QIVICON open smart home platform available to other service providers and act as consultants for the roll-out of smart services.
“Our real competitors are not each other but the West Coast [USA – meaning Silicon Valley, Google, Apple, etc.],” Carter told Broadband World Forum delegates. “The smart home and IoT platform is not where the value-add is or where the cash is, and we will hurt ourselves if we all try to build our own. So we are keen to work with others on a common approach and architecture, so everyone can then follow their own paths in areas where they think they can add value.”
Addressing the issue of smart home platforms in general, Gonzalez suggested that there will not be a ‘one-size-fits-all’ service provider platform for this market. He believes a platform built for ‘soft security’ [like pet cameras] and comfort requirements like managing thermostats will have a different QoS and cost profile to a platform dealing in hard security [like alarm monitoring] and remote health care or assisted living services. The former is also more open, designed so that more new services can be added, and the latter more closed, prioritizing the security of the data and communications. “It [the second kind of platform] cannot be hacked and must be really robust,” Gonzalez declares.
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Photo: Deutsche Telekom advertises its Magenta smart home offer.