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Telecom Carriers: Make Room for the Smart Home Opportunity PDF Print E-mail


In their new report, “Catching the Smart Home opportunity: Room for growth for telecom operators,” Arthur D. Little reviews the key trends driving the potential for Smart Home solutions, presents an overview of four main segments and provides recommendations for telecom operators in the launch of Smart Home services.

A Smart Home is a home or building that is equipped with a special connected platform enabling its occupants to remotely control and program an array of automated home electronic devices. The Smart Home offers a wide array of new applications such as home automation, home cloud and e-Health services.

Today, fundamental trends have emerged to drive the take-up of Smart Homes that include the aging of society, the increased penetration of portable devices, and there is a strong push by a wide range of leading players, including over-the-top players, telecom and utility service providers, and appliance manufacturers providing Smart Home devices.

Based on various projects, Arthur D. Little estimates that Smart Home revenues will grow by 12% a year until 2020 in Europe. This revenue sizing includes both direct revenues, such as home automation services/products, and indirect revenues, such as the maintenance of the new devices/services.

The Smart Home market is composed of four major segments:

• Home automation – The centralization of five main home systems on a unique user interface: home security, home energy and utility management, home motorization, lighting and entertainment. The main drivers of this segment are comfort, modularity and peace of mind, especially when it comes to security, while energy management emphasizes cost savings. Security and energy management are the most advanced systems in terms of integration, while home automation is still at the early stages of development. Arthur D. Little forecasts a 6% annual growth rate for these services until 2020.

• Smart Home assistance – The configuration, maintenance, repair and support services available for digital home devices, such as PCs, TVs, game consoles and networks. This market is expected to grow at a pace of 5% per year until 2020. The Home assistance ecosystem is very fragmented with a wealth of solutions offered. Successful players are primarily making partnerships, with each one focusing on specific aspects of the value chain, such as personnel qualification, sales, service delivery, billing and CRM. The main success factor in the Smart Home assistance market is the legitimacy perceived by customers, mainly retained today by manufacturers, but telecom operators are also well placed among trusted companies for technical support.

• Home cloud – The Home cloud market is driven by the increasing amount of data, mainly video, leading to a strong demand for remote storage and access. These services cover three main types of digital data: content, productivity and sensors, but raise concerns about the managing of data. Telecom operators will be able to leverage their customer trust, as well as their reliabilities and existing infrastructure. The market is expected to grow at a strong pace of 50% per year.

• e-Health – The application of telecommunication technologies in the health sector offers a unique cost control lever for health stakeholders by dematerializing some healthcare components. A wide variety of actors, such as telecom operators, device manufacturers and big pharmaceutical companies, are playing in the e-Health market. While market players are entering e-Health according to their natural position in the consumer electronics or medical device industry, several telecom operators are addressing both. However, the value sharing mechanism among actors is uncertain, as it is highly dependent on standardization scenarios, making the market potential for telecom operators uncertain.

Thanks to their broadband internet gateways, telecom operators are the leading players in terms of penetration of households with Smart Home solutions. The broadband box has evolved from a mere internet connection device to a highly innovative platform connecting various devices. In addition to that, telecom operators offer interoperable solutions based on open models that can allow heterogeneous Smart Home solutions to interconnect, contrary to closed OTT ecosystems.

Another significant asset of telecom operators in the Smart Home environment is the central role they play in the customer relationship, which can enable them to capture a great value of future Smart Home services. Other key assets that telcos could leverage include sales force, shop networks and support capacity, as well as network management capabilities.

As the Smart Home market is still emerging, Arthur D. Little anticipates two possible market structures:

• The Smart Home market is captured and aggregated into large ecosystems driven by global players. This model is clearly favored by OTT players, which have already developed solutions that can bypass the operators. Arthur D. Little believes that in order to mitigate the risk of being circumvented; telecom operators should form alliances when available and should also promote hybrid Smart Home platforms with applications close to their core business and also open to third parties.

• The Smart Home market grows strongly, but with a patchwork of solutions and standards. In this scenario, the ecosystem will remain highly fragmented with numerous heterogeneous competitors trying to capture value from the Smart Home market. In this case, operators will be in a position to leverage assets to offer their own solutions, but also to integrate external solutions and facilitate the digital life of their customers. By doing so, they would generate new revenue streams and also improve the stickiness of customers to their existing services.

Conclusion

Thanks to their strategic assets, telecom carriers are well positioned to capture value from Smart Home services. Telecom operators should act now to promote hybrid platforms where they can offer their own solutions, as well as a myriad of external solutions and position themselves as digital life facilitators.

The future Smart Home needs to be seen in a broader context as more locations are connected. This will broaden the type of actors in the ecosystem and will give the opportunity to telecom operators to strengthen their central position as the integrator of Smart Home services. It will be up to them to define to what extent.