November 12, 2015

CSPs can Unlock the Smart Home Market

Connecting the smart home with billing and customer service will help monetize the market.

The smart home is an obvious place for communications service providers (CSPs) to monetize. After all, who better to interconnect all of the people, places and things in a house and provide support services such as billing, customer service and more? And it helps position CSPs extremely well to take that giant leap into becoming digital service providers (DSPs).

Unfortunately, this vision has been interrupted by a jumble of products and apps that are not necessarily part of an ecosystem.  The concern is the overall trajectory of the market and whether CSPs are yet again on a path that will see them lose out on a huge opportunity and wind up playing second fiddle to more aggressive, innovative technology companies.

The State of Play
There are three models vying for dominance in the smart home market:   

  • Single Vendor/Ecosystem:  A single supplier (Apple, for example) assembles all the pieces through a combination of its own development and some form of ecosystem of partners.  This ‘plug-and-play’ model usually leads to compromises in functionality. It can also take time for the product line to fill out. Like the handset market, expect several companies to vie for the lead in this approach.
  • Do it Yourself (DIY): In this model, the homeowner buys everything and either lives with the lack of integration or tries to make things work together as best as possible. In a perfect world, standards would make this easier, but that day could be a long way off.
  • Service Integrator: A third party (a CSP, for example) assumes the responsibility for connecting all the pieces and offering the solution as a service. 

It’s too early to know which of these may emerge as a winner; most likely they will coexist in some manner. The fear is that CSPs do not appear to be leveraging their natural advantage and are squandering the quickest path to acceptance (and revenue). In other words, their trajectory is off.

Many CSPs are trying to be service integrators except in practice; the choices they offer are so limited it defeats the purpose. Others have taken more of an Amazon approach and offer what amounts to a catalog of products. It makes shopping a bit easier but doesn’t create the seamless environment customers are looking for.

While these approaches are better than doing nothing, neither of them will lead to market leadership.

The Way Forward
CSPs need to adopt a model whose main objective is to gain a toehold in the customer’s house and then work from there. It’s an incremental approach that means instead of trying to price every service as if it were a standalone offering at $30-40 per month, the objective is to provide a central control point or hub and then add on services costing under $5 a month each.

CSPs also need to form their own vibrant ecosystems in order to have access to, and be able to support a wide range of cutting edge choices within each product category.  Obviously there is a huge integration challenge, but by leveraging their market clout, CSPs should be able to forge strong relationships with their ecosystem partners to work this problem together.

If push comes to shove, CSPs need to leverage their technical skills to create the necessary software drivers or APIs to integrate these different devices. The payoff is the stickiness created by this seamless, connected experience. 

Taking this path is not only a major departure from tradition for CSPs, but it positions them strongly to make the transformation to DSP.

Photo by TimothyJ with Creative Commons license


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