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

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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.

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