The Connected Home: Making it Work
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1 June 2015 The Connected Home: Making it Work Stratecast Analysis by Mike Jude, Ph.D. Connected Home (CH) Volume 5, Number 2
2 The Connected Home: Making it Work Table of Contents Executive Summary... 4 Introduction... 6 The Connected Home: Increasingly Connected... 7 Connected Equals OTT How does the Consumer make it Work? Implications for Communication Service Providers Demographics The Last Word List of Exhibits Exhibit 1: Do you have a connected home installation? (North America, 2015)... 7 Exhibit 2: Would you buy a connected home installation? (North America, 2015)... 7 Exhibit 3: Connected Home Installation Willingness to Pay (North America, 2015)... 8 Exhibit 4: Broadband Internet Subscription (North America, 2015)... 8 Exhibit 5: Broadband Penetration (United States )... 9 Exhibit 6: United States OTT Revenue ( ) Exhibit 7: Home Network Penetration (North America, 2015) Exhibit 8: Number of Home Network Devices (North America, 2015) Exhibit 9: Willingness to Drop Video Subscription for OTT (North America, 2015) Exhibit 10: Willingness to Switch to OTT with Cellular Wireless Access Included (North America, 2015) Exhibit 11: Desire for Content Management Capability (North America, 2015) Exhibit 12: Interest in Home Automation with Maintenance (North America, 2015) Exhibit 13: Use of Home Electronics Maintenance (North America, 2015) Exhibit 14: Home Electronics Maintenance by Wage Demographic (North America, 2015) Exhibit 15: Home Electronics Maintenance by Age Demographic (North America, 2015) Exhibit 16: Connected Home Space CH 5-2, June 2015 Stratecast Frost & Sullivan, 2015 Page 3
3 The Connected Home: Making it Work Executive Summary The connected home is an artifact of the Internet: it exists at the intersection of home networking, telemetric services, content delivery, and communication services. Increasingly, this means that it is simply an integrated combination of over-the-top (OTT) services, delivered by means of a broadband Internet pipe. More importantly, consumers are now becoming comfortable with this notion, and are increasingly looking for ways to obtain connected home services and support. The network operators have been approaching connected home solutions carefully. This is perhaps understandable given the history of telephony and the perils of customer support. Yet, it is clear that the connected home offers the last great opportunity for operator dominance in the consumer communication market. For it is in this space that operators are most likely to be able to avoid the substantial overheads that regulation will impose. However, the connected home is a complex beast, and is hard for consumers to maintain. In the ultimate connected home scenario, most home appliances, utilities and services will communicate. Imagine trying to maintain such a diverse and complex environment; especially as an average, non-technical consumer. Consequently, a better approach than simply selling products and services is needed to propel the connected home market forward. Yet, this selling of products and services with an implicit role of consumer selfmanagement of the connected home environment is exactly the approach that has been pervasive in the connected home market. Clearly, a better way is required. Recognizing that remote service management is the secret sauce that will drive an accelerated demand for the connected home, leads to the conclusion that either operator-provided or third-party remote service management is essential for market growth. While operators tend to view remote service management as a revenue-depressing overhead, it could actually be the primary revenue generating activity in the connected home market. Also, remote management will Report Quick Summary for Busy Decision Makers I. Executive Summary II. Introduction a. Connected home is at the intersection of communication services, content management, home network, and telemetry. b. Connected homes are complex, but complexity breeds opportunity. c. Remote service management is an essential ingredient in driving demand for connected home solutions. III. The Connected Home: Increasingly Connected a. 20% of survey respondents claim that they have a connected home. b. Yet, this statistic is probably understated. c. Broadband is pervasive: 70% household penetration. IV. Connected Equals OTT a. 22% would drop conventional subscription TV. b. 53% of respondents would go completely OTT, if wireless were part of the bundle. V. How does the Consumer make it Work? a. Two-thirds of respondents would buy content management if it were available. b. 49% interested in home automation support. VI. Implications for Communications Service Providers a. Must build service into connected home offerings; lead with the service proposition, and include content management. VII. Demographics a. 55% female. b. $71,000 average wage. VIII. Last Word CH 5-2, June 2015 Stratecast Frost & Sullivan, 2015 Page 4
4 increasingly be essential in the positioning of integrated service packages. Those operators who decline to do so will cede market dominance to those who will. The news from this year s Connected Home survey is actually good: consumers are willing to buy connected home offerings, and are willing to pay for support. Communication service providers who are reading the tea leaves in search of commercial opportunities will find much to be optimistic about in this year s results. As noted above, though, the opportunities come with a price: and that is increasingly looking like an investment in remote customer service. CH 5-2, June 2015 Stratecast Frost & Sullivan, 2015 Page 5
5 Introduction 1 The connected home is rapidly coming into focus. What once was simply home automation has been firmly co-opted by content. Connectedness now means the ability to obtain and consume content flexibly, over virtually any device, using a home network. Telemetry, too, is an increasing part of the connected home with home security and utility management protecting and controlling the home environment, and managed by consumers from virtually any location that has an Internet connection. Everything from water consumption to the amount of solar energy that is being delivered by solar arrays can now be observed and managed by apps running on smart devices. Interconnecting all of these smart devices and content delivery services within the home is an increasingly capable home network. Now largely supported by Wi-Fi technology, the home network enables a flexible infrastructure that is selfconfiguring and easy to use, yet alarmingly insecure. Applications now define the service space that enables connected home functionality. There are a myriad of applications that a consumer can download to mobile smart devices: some that enable cross-platform functionality like video and The Connected Home Market Networks Telemetry Communication Services Home Entertainment The connected home market consists of the domain where communication services to the home, home networking, telemetric services, and content delivery/home entertainment services overlap. This report focuses on the most recent Connected Home Consumer Preferences Survey. social media integration. However, seamless operation across applications is still largely absent; and when an application or device fails, the consumer has to troubleshoot the problem. Yet, complexity is an opportunity. Or, more precisely, making things less complex is. This year s annual Connected Home survey, the fifth in a series, discloses that the connected home market is ripe for growth, and is just awaiting a service package that the consumer can trust will work as advertised, and be well supported. This report covers the state of the connected home market, its characteristics and the opportunities available to communication services providers (CSPs) that are willing to include remote service management in their service offerings. It will be of interest to all CSPs and those who provide them technology. 1 Please note that the insights and opinions expressed in this assessment are those of Stratecast and have been developed through the Stratecast research and analysis process. These expressed insights and opinions do not necessarily reflect the views of the company executives interviewed. CH 5-2, June 2015 Stratecast Frost & Sullivan, 2015 Page 6
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