Home Analysis European broadband providers must get into gear for fifth play

European broadband providers must get into gear for fifth play

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European broadband operators seem perilously hesitant about expanding their horizons into the fifth play of the smart home with services such as security end environmental monitoring. This comes at a time when their counterparts across the Atlantic have been stirred into action at least on the home security front and in some cases could invade Europe with these services through alliances. At the same time traditional providers of home security services could enter this market on their own, either in alliance with a broadband operator or independently.

There is another dimension to this in the rapid growth of Internet connected devices both inside and outside the home, with Wi-Fi emerging as the clear favourite to be the dominant medium for connectivity rather than 4G, as witnessed by Apple’s decision to make its iPad mini Wi-Fi only. Of course conspiracy theorists argue this was because of Apple’s desire to exclude mobile operators from any influence over its iPad ecosystem. Whatever the case we are in for a boom in Wi-Fi connected devices. Taking an average of all surveys, the number of Internet connected devices is about to overtake the number of people on the planet around the end of this year and soar to 20 billion, well over double the human population, by 2020. Virtually all those devices will have Wi-Fi, and for around 80% of them that will be the dominant mode of connectivity. Broadband operators need to formulate a clear Wi-Fi strategy that focuses strongly on emerging in-home applications in the short term, radiating out to external hotspots as well.

Wi-Fi will fit well with the application set to become the first big one of the fifth play, home security, with European operators mostly very slow off the blocks. Meanwhile US broadband providers are already investing heavily in this area, led by AT&T, which has identified home security as a potentially $1 billion a year market, after launching its offering called Digital Life in May 2012. This includes fire detection and environmental monitoring, including as options cameras, window and door sensors, smoke alarms, carbon monoxide detectors, motion detectors, glass break sensors, door locks, thermostats, moisture detection, and appliance power controls. These are all IP broadband connected, often via Wi-Fi although also featuring the Z Wave lightweight wireless protocol for some of the home automation signaling.

AT&T will have been encouraged by a recent survey from Dallas based research firm Parks Associates finding that 14% of US broadband households are “highly interested” in receiving security services from their ISPs. Even more significantly, 40% of users of existing home monitoring systems unallied with a broadband provider state that they would switch if that company fails to introduce new features such as email alerts, energy management, and lighting automation functions. This reveals starkly the rapidly growing importance of bundled services and new IP features for customer retention as well as subscriber growth and generation of fresh revenue sources.

This study might have been confined to the US, but its findings are equally applicable in Europe where some Telcos such as BT in the UK have been in the home monitoring business for almost two decades, albeit without broadband. The home alarm business is far older than that, going back almost a century to the early days of firms such as ADT Security, which now occupies almost a quarter of the US market for home surveillance. This comes to a nice irony, which is that in those early days ADT was owned by AT&T, which had been rumoured this year to be considering a bid to buy it back again for a fast track into security, for then it would instantly gain that coveted $1 billion a year revenue in that field. In fact ADT took $3.1 billion in 2011.

What all this tells us is that the smart home era has well and truly arrived, certainly as far as home security and environmental control are concerned, and if broadband operators fail to seize the opportunity, other players will occupy the space.

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