Are communication service providers in a prime position to take advantage of the growing connected home market?
Editor’s Note: The RCR Wireless News Reality Check section is where C-level executives and advisory firms from across the mobile industry share unique insights and experiences.
The potential for “connected homes” enabled by the internet of things to become a major market opportunity is no longer in doubt. The benefits for consumers, such as controlling energy costs, increasing security and having a home that learns how to behave according to personal preferences, are too promising. Offering these services represents an enormous opportunity for communications service providers, but it is not a forgone conclusion they will lead in the arena.
CSPs can play a central role in delivering an easy to use yet valuable experience to consumers in managing their connected homes. The number of devices and services operating across different and fragmented platforms for the connected home is holding back its widespread adoption. For the connected home to make the jump from being used by early adopters to being commonplace, the experience has to evolve to be far more seamless than it is today. This is the window that is open for CSPs to step up and bring a truly integrated consumer experience to the connected home. But it may not be for long.
A global opportunity, with localized priorities
The opportunity for CSPs is to leverage their vast network, service and technical assets to become the central data hub to the connected home. By offering a central hub with open standards and a set of initial services. CSPs can offer a gateway for a larger ecosystem, linking a vast array of connected device and service in a home regardless of provider. This strategy will bring CSPs closer to customers – and their rapidly evolving needs – than their current position in their customers’ lives.
However, there are many companies vying for this role in connected homes, most notably the native digital platforms such as Amazon.com or Google and the large consumer device providers like Apple, Microsoft and Samsung. To compete, CSPs will need to focus on key differentiating factors such as ease of use, security, trust and interoperability.
CSPs have a clear advantage here. They are already trusted as TV, mobile phone and broadband providers, and some are already offering connected home services such as home security and appliance management. In addition, they are investing billions of dollars in smarter, faster networks, and they have an active and recurring billing and service relationship with consumers that can be built upon and used for additional revenue streams.
On top of that, CSPs already have installed consumer premise equipment in the home and have had for years. This presence offers CSPs a mass of network and user data that in many cases goes back for some time. If the right analytics technologies are applied to this, it could be a treasure trove of value waiting to be unlocked by optimizing existing and new services. To take advantage of this, CSPs can use some of their existing infrastructure, such as localized customer support in-market, active field forces and provision of services customized to various households or users wherever they may be.
Increasingly, consumers’ liquid expectations are flowing towards “whatever is easiest and whatever comes naturally.” Patience for learning new interfaces or setting things up that don’t work out of the box is beginning to wear thin.
But for CSPs to reach their potential in this space they need to play to their strengths. They should seize the advantage over other major digital players and device vendors, many of whom have realized the opportunity that connected homes offer in developing ever-closer relationships with consumers.
Interoperability isn’t a choice
The battle over standards in the IoT is not new, nor is it coming to a head any time soon. CSPs should be heavily involved and often driving the discussion around standards for interoperability. But if they wait around for the conversation to be settled, the window of opportunity to lead the connected homes market will close.
With open standards, risks can be minimized and CSPs can start to build their presence in people’s front rooms as the central control system for the connected home. There will only be a handful of standards that make it and the front-runners are already becoming clear. So CSPs should bet strategic and think long term, but not be too cautious if they are to strike while the iron’s hot.
Service marketplace
Interoperability has another side to it, too; it’s not just about who runs what device on which platform, but also about who can run which services from which devices. The future of services is contextual and personalized, but without data there can be no context. The more data gathered, the better the ability to run analytics and derive insights, which can then inform the decision-making process about which additional services to offer any individual. Many CSPs are well placed to manage such vast volumes of data because of their existing infrastructures.
For successful contextual services it’s important to offer consumers something that they will find genuinely useful at the right time and in the right place. If CSPs open their application programming interfaces to third parties and form ecosystem relationships with other service providers, symbiotic relationships can develop that will enable “services within a service” to be offered. For example, a virtual assistant that can order your favorite pizza simply by hearing a voice command; a call out to your regular local plumber in the case of water leaks in the home; or a mapping app that offers taxi booking services through their platform. APIs can increase the convenience and ease of life for consumers and in turn drive business for each party.
Interoperability, needs to be coupled with a user experience that makes it easy for the consumer to manage these services while hiding the complexities of the technology managing multiple variables within a connected home ecosystem.
Data is not only used for adding context and enabling discovery; with the proper investments in instrumentation and diagnostics, CSPs can become a service center that can support not only their own products but also products in the digital service ecosystem. Many digital service providers will not have the operational capabilities to fully support their services at scale and will be dependent upon a provider who understands the home to better diagnose whether problems are network or product based. In order for the CSP to take advantage of this they will need to invest in consolidating operations across applications, network, field force and home diagnostics – all of which are already important in their core business.
Again, CSPs have an advantage when it comes to APIs and opening their infrastructures to ecosystem partners. They’ve been doing it since the day mobile phones first got tested on their networks. This mindset is valuable and should be harnessed to help secure their position in the connected home.
Security is table stakes
With all the data traveling between devices as IoT in the home grows, the security of data – as well as physical security linked to devices such as smart locks – will drive purchasing decisions. Accenture’s “2016 Digital Consumer Survey” found that of the consumers who own or planned to buy an IoT device in 2016, nearly three-quarters (69%) knew the products can be hacked and therefore can result in stolen data or device malfunctions.
This awareness is important, but it needs to be matched with action. Being a trusted provider is vital if a CSP is to take a central role in the connected home, but it’s about more than that; it’s about demonstrating respect for a person’s data. To do this and maintain trust, CSPs must be transparent.
It’s vital that people know where their data is going and how it is being used. We already know that people are – for the most part – happy to share personal data with the digital giants because they know that in return they get personalized services. It’s a trade-off, but one about which consumers are becoming increasingly aware and willing to make. CSPs should stay ahead of the game and ensure they have security embedded at every stage of the data journey for consumers, and can clearly demonstrate how everything is protected. And this is not only related to data. Media capture devices and similar sensors can be used to provide a number of automated services to the consumer – but this opens up a number of issues with security and privacy.
Privacy and trust are as important as security for the connected home to work. A CSP will need to use data in a manner that is more apparent to the end consumer, whether for home services or further monetization such as upselling or advertising. The CSP will need to make sure the process of communicating the capture and leveraging of data and media for purposes outside of service management is clear so that it is always understood that it is to benefit the consumer. A number of “digital natives” have become adept at this and have a bit of a head start, but at the same time they have paved the way for privacy policies to exist.
Analytics inform
Edge analytics is also another potential revenue generator. If the CSP controls a home hub, then when the fridge runs out of milk and orders more the payment to the consumer’s store could be added to their existing mobile phone bill. Participating in the retail value chain, of course, presents a number of different challenges, but digital natives are certainly looking to take over that market on top of the services CSPs provide.
Meet expectations, then exceed them
There are so many elements of the connected home imaginable today, and doubtless there will be many more in the future. With so much connectivity expected in every home, people will need a central management system with an integrated experience across all of their connected home services. This approach can make everything easy for the consumer and should be designed in such a way that it works straight out of the box. It needs to be intuitive and cause a minimum of frustration when new devices are added to a home network or new services are offered. Consumers have increasingly high expectations for a simple, powerful experience, and every element of a connected home should be designed with that in mind. This is critical from the service and product development processes to the back- and front-office operations that support all digital and physical touch points to the consumer.
Once again, CSPs have a long history of innovating for consumers, and offering things that – years a few years earlier – may not have been imaginable. But, innovation by CSPs in the connected home space has – by and large – fallen behind what the market is offering. Disruptive digital organizations not held back by legacy infrastructures and operations have steamed ahead with agile and flexible business models, unrestricted by the traditional boundaries of industries.
Logically, CSPs should be at the front of the race for taking control of the connected home and providing consumers with the easy, localized experience they expect. CSPs have the trusted relationship, an existing household footprint, support services that are easily leveraged, and infrastructure and capacity to take a leading role. But they must build upon this lead as quickly as possible if they are to move ahead of competitors.
Paul Lalancette is the Global Connected Home Practice Lead at Accenture Mobility, part of Accenture Digital, and can be reached at [email protected]. Sef Tuma is the global lead of Accenture Digital Video, and can be reached at [email protected]. Francesco Venturini is a global managing director for Accenture’s Communications and Media industry groups, and can be reached at [email protected].
