The Connected Home: Making it Work

The Connected Home: Making it Work

Stratecast Analysis by

Mike Jude, Ph.D.

Connected Home (CH)

The Connected Home: Making it Work

Table of Contents

Executive Summary ... 4

Introduction ... 6

The Connected Home: Increasingly Connected ... 7

Connected Equals OTT ... 11

How does the Consumer make it Work? ... 13

Implications for Communication Service Providers ... 16

Demographics ... 18

The Last Word ... 19

List of Exhibits

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 2007-2020) ... 9

Exhibit 6: United States OTT Revenue (2006-2020) ... 10

Exhibit 7: Home Network Penetration (North America, 2015) ... 10

Exhibit 8: Number of Home Network Devices (North America, 2015) ... 11

Exhibit 9: Willingness to Drop Video Subscription for OTT (North America, 2015) ... 12

Exhibit 10: Willingness to Switch to OTT with Cellular Wireless Access Included (North America, 2015) ... 13

Exhibit 11: Desire for Content Management Capability (North America, 2015) ... 14

Exhibit 12: Interest in Home Automation with Maintenance (North America, 2015) ... 14

Exhibit 13: Use of Home Electronics Maintenance (North America, 2015) ... 15

Exhibit 14: Home Electronics Maintenance by Wage Demographic (North America, 2015) .... 15

Exhibit 15: Home Electronics Maintenance by Age Demographic (North America, 2015) ... 16

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 self-management 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

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.

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.

Introduction

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 self-configuring 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

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}

The Connected Home Market

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. Telemetry Communication Services Networks Home Entertainment Telemetry Communication Services Networks Home Entertainment