Ready or Not, IoT is Coming

We are getting very close to the time when just about every appliance you buy is going to be connected to the IoT, whether you want it or not. Chips are getting so cheap that manufacturers are going to soon understand the benefits of adding chips to most things that you buy. While this will add some clear benefits to consumers it also brings new security risks.

IoT in everything is going to redefine privacy. What do I mean by that? Let’s say you buy a new food processor. Even if the manufacturer doesn’t make the device voice-controlled they are going to add a chip. That chip is going to give the manufacturer the kind of feedback they never had before. It’s going to tell them everything about how you use your food processor – how long before you take it out of the box, how often you use it, how you use the various settings, and if the device has any problems. They’ll also be able to map where all of their customers are, but more importantly they will know who uses their food processor the most. And even if you never register the device, with GPS they are going to know who you are.

Picture that same thing happening with everything you buy. Remember that Tostitos just found it cost effective to add a chip to a million bags of chips for the recent Superbowl. So chips might not just be added to appliances, but could be built into anything where the manufacturer wants more feedback about the use of their product.

Of course, many devices are going to go beyond this basic marketing feedback and will also include interactions of various kinds with customers. For instance, it shouldn’t be very long until you can talk to that same food processor through your Amazon Alexa and tell it what you are making. It will know the perfect settings to make your guacamole and will help you blend a perfect bowlful. Even people who are leery of home automation are going to find many of these features to be too convenient to ignore.

There is no telling at this early stage which IoT applications will be successful. For instance, I keep hearing every year about smart refrigerators and I can’t ever picture that ever fitting into my lifestyle. But like with any consumer product, the public will quickly pick the winners and losers. When everything has a chip that can communicate with a whole-house hub like Alexa, each of us will find at least a few functions we love so much that we will wonder how we lived without them.

But all of this comes with a big price. The big thing we will be giving up is privacy. Not only will the maker of each device in our house know how we use that device, but anybody that accumulates the feedback from many appliances and devices will know a whole lot more about us than most of us want strangers to know. If you are even a little annoyed by targeted marketing today, imagine what it’s going to be like when your house is blaring everything about you to the world. And there may be no way to stop it. The devices might all talk to the cellular cloud and be able to bypass your home WiFi and security – that’s why both AT&T and Verizon are hyping the coming IoT cloud to investors.

There is also the added security risk of IoT devices being used in nefarious ways. We’ve already learned that our TVs and computers and other devices in the house can listen to all of our private conversations. But even worse than that, devices that can communicate with the world can be hacked. That means any hacker might be able to listen to what is happening in your home. Or it might mean a new kind of hacking that locks and holds your whole house and appliances hostage for a payment like happens today with PCs.

One of the most interesting things about this is that it’s going to happen to everybody unless you live in some rural place out of range of cell service. Currently we all have choices about letting IoT devices into our house, and generally only the tech savvy are using home automation technology. But when there are chips embedded in most of the things you buy it will spread IoT to everybody. It’s probably going to be nearly impossible to neutralize it. I didn’t set out to sound pessimistic in writing this blog, but I really don’t want or need my toaster or blender or food processor talking to the world – and I suspect most of you feel the same way.

Replacing Legacy Telephony

office-handsetI remember sitting in on an industry panel somewhere in the mid-2000s and hearing a discussion about how VoIP was going to sweep the business world and that the PBX would be obsolete within just a few years. I took this with a grain of salt since those on the panel were mostly VoIP vendors or sellers. But still, the general consensus in the industry was that the new would quickly replace the old.

And yet here we are more than ten years later and there are still thriving PBX providers serving businesses. I have a client who sells PBXs and resells PRIs to serve them who has been steadily growing his business every year for the last decade. He still made a significant number of new PRI sales in 2016, many of them for two and three year contracts going forward.

There are several reasons that the PBX industry is still going so strong. The first is that a few years after I saw that panel, SIP came along as a big improvement to PBXs. SIP allows PBXs to mimic some of the best features of VoIP and reduced the sharp contrast between the old and the new technologies. SIP meant there was no longer a huge contrast between old PBX phones and phones with newer features.

But SIP alone doesn’t account for the continuing popularity of PBXs for businesses. As I mentioned earlier, there is still a thriving PBX industry that uses traditional PRIs and not SIP trunks and which still support that same old telephones that businesses have been using for decades.

There are a number of reasons why PBXs are still being used by businesses. Probably first among these is captured by the old adage, “if it ain’t broke, don’t fix it”. Offices full of information workers have probably upgraded phones during the last decade. But a lot of businesses operate in a different environment. There is no particular urgency to change a phone system that’s operating in a warehouse or a lumber yard or a milking barn. As long as such phones work well, the easiest path for the business operator is to keep renewing the phone systems and to not make a change.

I remember back when CCG still operated several offices that we were always being bombarded by vendors to upgrade our key systems. But it’s easy in a business office to defer such upgrades because they are disruptive and time consuming. My employees universally told me that they didn’t want to learn a new phone system – and so we never made an upgrade.

It seems like a lot of businesses also don’t want to make the capital spending decision to change technologies. Tearing out a PBX and installing new phones can mean a big one-time fee. Even if this is financed over time, businesses seem to put off making that decision until their old system stops meeting their needs.

And while most businesses still have office phones, you can’t discount the influence of cellphones on the workplace. It is a daily occurrence for me to be talking to somebody who is on a cellphone while they are sitting at their desk next to their office phone. Businesses are often not ready to get rid of office phones, but a lot of their business is handled with cellphones. This is only going to be bolstered by the widespread introduction of HD voice where the quality of cellphone calls promises to meet or exceed the quality of landline calls. Perhaps the real transition we will see in a few years will be businesses finally walking away from office phones altogether.

This all has a material impact upon those who sell phone service to businesses. I know a number of ISPs, for example, that only offer VoIP and they are often flummoxed by the number of businesses that are not interested in what they have to sell.

A lot of ISPs don’t want to hear the market’s message – that a lot of businesses are still happy with legacy voice products. My clients that do the best in sales of voice to businesses still operate their own voice switches and offer a variety of products to businesses including IP Centrex, PRIs, SIP trunks and traditional POTs lines. A seller who offers both the old and the new technologies is always offering something that people want to buy. I think a lot of us get wrapped up in the idea that newer is always better and it often takes customers to tell us that isn’t always true.

How Important are Data Upload Speeds?

cheetah-993774I’ve recently seen that the cable industry is working towards a solution that will provide what they call “full-duplex,” or, what the rest of the industry calls, “symmetrical” data speeds. Currently cable networks are capable of download speeds of up to a gigabit, but the technology supports relatively tiny upload speeds.

It looks like the solution for full-duplex won’t be cheap. Cisco says that their solution will require having additional fiber to the last active component in the network, which either means more fiber to nodes, or in some cases even past the nodes. It’s also going to require setting aside a few more empty channels from the cable network unless the duplex operates by cannibalizing the downstream data.

This raises the question of how important upload speeds are. Are they important enough for big cable companies to implement an expensive network upgrade? Already today cable companies have built (or plan to build) fiber to larger businesses or to sizable business communities. The DOCSIS cable networks have been unacceptable for business broadband for many years, except perhaps to smaller businesses that use the web in ways similar to home users. Most of the large cable companies have also begun building fiber to greenfield communities rather than extend their coaxial network.

But there is no doubt that upload speeds are vital to businesses. There are huge numbers of businesses served with cable modems today that would benefit from faster upload speeds. The case for symmetrical residential speeds is harder to make.

There are only a few types of residential customers that need fast upload speeds. One is gamers. They don’t necessarily need superfast speeds, but everything I read shows that they love speeds somewhere between 25 – 50 Mbps. There are also lots of folks that work from home that need faster broadband. For example, I know several photographers who send out massive files of pictures and videos to customers and who struggle if they are on slow upload broadband.

In my work I sometimes send fairly large files and attachments. And yet, except for those few times when somebody is on the phone waiting for the files while we talk, I’ve never much cared if it takes a little longer to send files. I’ve always figured that’s how most people feel. One of the services we offer at CCG is conducting consumer surveys and I’ve never reviewed a survey that showed a big consumer demand for fast upload speeds – most survey respondents say that it doesn’t matter.

Many of you probably suppose that once somebody buys fiber broadband that they get blazingly fast upload speeds. But when I look at my small clients that is not the case. I would guess – without sitting and counting –  that 60% to 70% of my clients with fiber networks do not offer symmetrical data speeds.

But there is obviously a lot of marketing advantage in offering symmetrical speeds. Verizon FiOS converted all of their products to symmetrical speeds late in 2014. CenturyLink built fiber past a million homes this year and is offering symmetrical data speeds. And of course, Google Fiber made the huge splash a few years ago by offering a symmetrical gigabit product for $70. The first symmetrical data products I can remember were from municipal providers like the ones in Chattanooga and Lafayette.

It will be interesting to watch to see if the cable industry decides to implement full-duplex. By doing so they might be able to wipe out the perceived advantage that fiber has in the marketplace today. I would think today that a lot of consumers would view a 100/100 Mbps product as superior to a 100/25 Mbps product even if they never use the upload capabilities. And perhaps it is that marketing perception that most matters, and maybe that is what will drive the cable companies to make the investment, at least in the markets where they have competition.

Why is my WiFi Slow?

Wi-FiOne of the universal complaints in the broadband world is that WiFi networks operate poorly. So today I thought I’d talk a bit about how WiFi functions. I think it’s probably different than what most people expect.

Most people know that there are two frequencies used for WiFi today – 2.4 GHz and 5 GHz. The 2.4 GHz band covers 80 megahertz of total bandwidth and is divided into 11 channels in the US. That may sound like a lot, but one 802.11 connection requires five consecutive channels. In practical terms this means that almost all WiFi gear in the US is preset to only offer channels 1, 6, and 11 and that means that only three non-overlapping transmissions can occur at the same time. The WiFi in Japan covers a wider spectrum footprint, up to channel 14, meaning they can use four non-overlapping signals simultaneously.

In practical use if you can see three or more WiFi networks you are experiencing interference, meaning that more than one network is trying to use the same channel at the same time. It is the nature of this interference that causes the most problems with WiFi performance. When two signals are both trying to use the same channel, the WiFi standard causes all competing devices to go quiet for a short period of time, and then both restart and try to grab an open channel. If the two signals continue to interfere with each other, the delay time between restarts increases exponentially in a phenomenon called backoff. As there are more and more collisions between competing networks, the backoff increases and the performance of all devices trying to use the spectrum decays. Your data is transmitted in short bursts each time you make a connection and before the restart cycle repeats.

If you’ve ever been in a hotel where you can see ten or more other WiFi signals, the reason for slow speeds is that there are huge conflicts between competing devices. People generally assume that the hotel has a poor Internet connection, but they could have a fast connection and the slo speeds are due to so many devices trying to connect simultaneously. Each WiFi device is rapidly turning on and off repeatedly trying to get open access to a channel. Your device will grab a channel for a short time and then get kicked off due to interference. Congestion has become so bad on the 2.4 GHz band that AT&T and Comcast no longer use 2.4 GHz for video or voice. Almost all smartphone makers no longer recommend using their smartphones at 2.4 GHz.

WiFi has improved dramatically with the introduction of the 5 GHz spectrum. In North America this spectrum swath has 24 non-overlapping channels. However, more than half of these channels are reserved for weather and military radar. However, this still provides a lot more potential paths to add to the three paths provided by the 2.4 GHz spectrum. Unfortunately the 5 GHz band shares the same WiFi characteristics as the 2.4 GHz spectrum and has the identical interference issues. But with more open channels there is still an increased chance of finding a free channel to use.

And interference between devices is not the only culprit of poor WiFi speeds. The network configuration can also contribute to poor performance. Some of the biggest sources of interference are range extenders or mesh networks that are used to try to get better signals. Range extenders listen to all WiFi transmissions and then retransmit them at a higher power level, and usually using a different channel. This creates even more WiFi signals in the intermediate environment competing for an open channel. When you can see your neighbor’s WiFi network, if they are using range extenders they might be always trying to use most of the available WiFi channels.

In a lot of the US we now also see a lot of public hotspots. For example, Comcast is in my neighborhood and I can walk and maintain a WiFi signal is most places from WiFi public signals that are transmitted from every Comcast home WiFi router. These public signals are always on, meaning that the WiFi router is using at least one channel at all times.

Probably the biggest new culprit for poor WiFi performance comes from our quest for greater speeds. The 802.11ac standard operates by merging together a lot of WiFi channels, and divides the whole WiFi spectrum into just two 160 MHz-wide channels. This means that only two devices using this 802.11ac can use up all of your home WiFi bandwidth. This standard was intended to be used to operate in short high-bandwidth bursts, but as people use this for gaming or watching 4K video the channels stay occupied all of the time.

Unfortunately the demands for WiFi are only increasing. The cellular carriers are still pestering the FCC to allow LTE-U, which would using WiFi to complete cellular calls. There are currently tests underway of the technology. We can also expect an increasing demand for WiFi from IoT devices. While most WiFi devices won’t use spectrum continuously, they still place demands on the channels and cause interference. There are also increasing use of devices that are always on, such as video surveillance cameras or smart home controllers like the Amazon Echo. A lot of experts look out five or ten years and expect WiFi to be unusable in a lot of places.

OTT is Not Easy on the Consumer

Fatty_watching_himself_on_TVThis article compares the channel line-ups for Sling TV, DirecTV Now and Playstation Vue.  I think it provides the best demonstration I’ve seen yet of how confusing it’s going to be for consumers to choose an OTT option.

The process of choosing an OTT provider is only going to get harder in the future as additional OTT providers enter the market. In the coming year we are going to be seeing Google / YouTube with a similar on-line option. Hulu has announced that they will soon be launching a live-streaming alternative. There is a strong rumor that Amazon is considering an OTT option and has already announced they are pursuing live sports. And various articles I’ve read hint at a few more new OTT providers in 2017.

Comparing OTT channel line-ups is a lot more work than comparing the line-ups of your cable company vs. one of the satellite providers. While satellite providers aren’t required to maintain the same rigidly-defined line-ups as the cable companies, the two sets of line-ups are still reasonably comparable.

Cable company line-ups are defined by the FCC cable rules that require a basic and expanded basic line-up. Contracts between cable companies and programmers has led to uniformity and there are not major difference between cable companies. Cable companies are free to offer additional premium tiers and packages, but even those are largely the same between cable companies. The satellite providers know that their basic package is competing against the expanded basic line-up, so they include roughly the same channels in their 50 – 75 channel packages as the cable companies.

The OTT companies have a different set of challenges. The programmers are not required to sell them any content, and so the OTT companies must negotiate with each programmer individually. These have to be interesting negotiations because the OTT providers want to put together the skinniest bundles they can get while still offering what consumers want. They are then free to bundle channels in any way that the programmer contracts will allow. Since each OTT providers negotiates a unique arrangement with programmers there are going to be major differences between the line-ups from different OTT providers.

The programmers, however, either want to sell multiple channels or else they want a revenue stream that insures them of some decent profits. Programmers understand the math, which is that they are losing money for every customer that moves from traditional TV to a smaller OTT offering. This puts them into an awkward position. It’s obvious that the cord cutting phenomenon is gaining momentum. But if the programmers help to create really attractive OTT packages they are then helping to accelerate cord cutting for consumers.

As I’ve written before, many of the programmers are able to tolerate the growth of OTT since they are selling a lot more new content overseas than they are losing to cord cutting. Many of them acknowledge that there are cable channels that only exist because of the monopoly the handful of programmers have over the industry. They know that the cord cutting phenomenon is going to mean the death of less popular cable networks.

But back to consumers. You can see in the comparison in the link I posted above that between the first three major OTT providers it’s not easy to even visualize what you get in the various packages. The options between the three providers are significantly different, and all of these options have some glaring holes from programmers that have not yet allowed their content into these OTT bundles. It’s hard to imagine how complex this comparison is going to be with 3 – 6 more options by the end of 2017. I think a lot of consumers are going to come to web sites like this and be intimidated by the choices and will delay cutting the cord.

It’s likely that over time the various OTT providers will find niches in the market. Certainly if they all end up with the identical sets of channels there won’t be a lot of difference between them. But I would expect the ones that will be successful in the long-run will find a demographic niche that will give them an advantage. But for now their line-ups are a messy hodgepodge since they are cobbling together line-ups from the channels that they are able to acquire. This is going to make for a number of confusing products for the first few years of this new industry until they all figure it out.

How We Use Cellphone Data

HTC-Incredible-S-SmartphoneNielsen recently took a look at how we use cellphone data. They installed apps on people’s phones that tracked data usage on both cellular networks and WiFi. The data comes from a massive study on the usage of 45,000 Android users in August. Nielsen also continues to study the usage of 30,000 cellular customers every month using the same app.

What Nielsen found wasn’t surprising in that they found that younger people use cellular data the most. They also found that Hispanics are the largest data users among various ethnic groups.

Here are the average monthly usage by age:

‘                      Cell Data         WiFi Data

18 – 24            3.2 GB            14.1 GB

25 – 34            3.6 GB            11.2 GB

35 – 44            2.9 GB              9.3 GB

45 – 54            2.1 GB              7.5 GB

55 – 64            1.4 GB              6.4 GB

65+                  0.9 GB              4.8 GB

This study quantifies a lot of things that we already knew about cellular usage. We know, for example, that younger people use their cellphones to watch video more than older people. I have anecdotal evidence of that by watching my 17-year old. If she’s representative of her age group then they are using cellular data even more than the 18-24 year olds. They communicate with pictures and videos where older generations use email, chat, and text messaging.

These numbers also show that most people are not yet using their cellphones as a substitute for landline data usage. Certainly there are many individuals for whom the cellphone is their only source for data, but these numbers show average cellphone data usage far below average landline usage. I have a number of clients that track landline customer data usage and most of them are reporting average monthly downloads somewhere between 100 GB and 150 GB per household. Comcast recently reported that their 6-month rolling median data usage is 75 GB – meaning half of their customers use less than that, and half use more. All of the numbers in the above charts, while representing individuals and not families, are still far below those numbers.

Nielsen also tracked data usage by ethnicity, as follows:

‘                                  Cell Data        WiFi Data

Hispanic                       3.8 GB          10.1 GB

Native American         3.5 GB            7.3 GB

African-American        3.3 GB            9.1 GB

Asian                            2.3 GB            9.9 GB

White                           2.2 GB             8.6 GB

This shows that Hispanics, on average, are the largest users of data, both cellular and WiFi. Whites are at the bottom of the average usage chart.

Nielsen also was able to look into usage by geography. They didn’t publish all of the results, but did provide some interesting statistics. For example, they have some strong evidence now that cities with widespread WiFi networks can save customers money on their cellphone plans. For example, New York City has a lot of public WiFi and users in the city use WiFi 14% more than the national average while using cellular data 12% less. Contrast this with a city like Los Angeles with little public WiFi, and citizens there use WiFi 9% less than the national average and use cellular data 13% more. This kind of study can provide the basis for a city to quantify the benefits to the public for building a public WiFi network.

Productizing Safety

padlockThe Internet is becoming a scarier place by the day to the average user. It seems like a week doesn’t go by when there isn’t news of some new and huge data breach or other nefarious use of the web. But as much as those big events might create a general industry sense of unease, these announcements also make people worried about their own individual Internet security.

The big ISPs like AT&T crow about recording and monetizing everything that their customers do on the web. And with a likely weakening or elimination of Title II regulation by the FCC this is likely to intensify. Every web site parks cookies on the computers of their visitors, and the bigger sites like Facebook and Google gather every fact fed to them and peddle it to the advertising machine. There are hackers that lock down PCs and hold them hostage until the owner pays a ransom. There are smart TVs that listen to us and IoT devices that track our movements inside our homes. There was news this week that smartphones with a certain Chinese chip have been sending every keystroke back to somebody in China.

All of this has to be making the average Internet user uneasy. And that makes me wonder if there is not a product of some sort that smaller ISPs can offer to customers that can make them feel safer on the web.

Savvy Internet users already take steps to protect themselves. They use ad blockers to reduce cookies. They use browsers like DuckDuckGo that don’t track them. They use encryption and visit sites using HTTPS. They scrub their machine regularly of cookies and extra and unidentified files. In the extreme some use a VPN to keep their ISP from spying on them.

Small ISPs are generally the good guys in the industry and don’t engage in the practices used by AT&T, Comcast and Verizon. I know some small ISPs that try to communicate to their customers about safety. But I think safety is now one of the biggest worries for people and I think small ISPs can do more.

Customers can really use the help. It’s easy to assume that customers ought to understand basic safety procedures, but the vast majority of them load some sort of virus protection on their PC the day they buy it and never think of safety again. They repeatedly do all of the bad things that lead to trouble. They open attachments on emails. They don’t update their software to have the latest security patches. They use social media and other sites without setting basic privacy filters.

I think there is an opportunity for small ISPs to be proactive in helping to make their customers feel safer, and in the process can create more loyal customers. I think there are two possible ways to undertake this. One is an intensive education campaign to inform customers about better web practices. I’m not talking about the occasional safety reminder, but instead a steady and concentrated effort to tell your customers ways to be safer on the web. Brand yourself as being a provider that is looking out for their safety. But don’t pay it lip service – do it in a proactive and concentrated way.

I also think there is a space for a ‘safety’ product line. For example, I have clients who run a local version of the Geek Squad and who repair and maintain people’s computers. It would not be hard to expand on that idea and to put together a ‘safety’ package to sell to customers.

Customers could have a service tech come to their home for a day each year and you could ‘fix’ all of their safety weaknesses. That might mean installing ad blockers and a spyware scrubber. It would mean updating their browsers and other software to the latest version. It could mean helping them to safely remove software they don’t use including the junkware that comes with new computers. It might include making sure they are using HTTPS everywhere. It also might mean selling a VPN for those who want the highest level of security.

I have clients who have been selling this kind of service to businesses for years, but I can’t think of anybody who does this in any meaningful way for residential customers. But since the web is getting less safe by the day there has to be an opportunity for small ISPs to distinguish themselves from larger competitors and to also provide a needed service – for pay of course.

The Real Value of Bundling

Numismatics_and_Notaphily_iconMost telecom providers these days offer some sort of bundled product. Bundles have become such an automatic pricing tool that I think many providers don’t consider the value proposition behind bundles. Originally bundles were created to try to make customers want to stay with a provider – to make them sticky, in industry jargon. If your bundles don’t do that you are probably missing something.

Consider two different companies I know that have the best bundles. The first is not even a telecom company. I have a friend who owns and operates a CPA firm that has been in business for fifty years. His firm always did traditional bookkeeping and tax preparation work. A decade ago he started getting a lot of competition from other tax-preparation alternatives – the big companies like H&R Block and also software packages like TurboTax. He realized that his primary product didn’t offer any significant advantages over his competitors, and that if he didn’t change something he was going to see a lot of customer churn and he would always have to spend a lot of marketing just to retain a customer base.

So he decided to create bundles by offering other services that his customers already used and bought elsewhere. He first added a payroll service and made it easy for his customers to pay their employees. This was a product that was available from many other places, but he found that his customers preferred to buy the service from somebody they already trusted. He then added credit card processing since almost all of his customers accepted credit cards. Again, this is a widely available service, but many of his customers over time moved their business to him.

In recent years he has become even more creative. He’s become an insurance broker and can offer policies from a wide array of different insurance companies. Probably the most creative product he’s developed is a point of sale system that he developed himself. His customers are small retail stores like restaurants, nail salons, grocers – and he has a system on an iPad that can take credit card payments and that automatically logs each sale into the accounting system.

The bottom line is that he has created a suite of products that make his customers very sticky to him. He has priced each of these products competitively because his profit comes from selling the whole suite of products, not any one product. He has found that offering the bundle of services has greatly reducing churn and he rarely loses A customer. Customers have a hard time leaving him since they would need to find multiple vendors to replace him.

I have a telcom client who has done something similar. While they are a rural telco, they decided twenty years ago to expand into the business market in some nearly cities. They did okay selling telephone lines at first, but they saw churn and found that customers had no reason to be loyal to them as a provider.

So they decided to tackle a bundle of a wide variety of technical services needed by small businesses. Of course, that meant providing broadband as soon as that became a common need for businesses. But over time they have done a lot more.

They first tackled being the IT shop for small businesses. When they started this it meant installing and maintaining a server at a customer location. Over time that function has moved back to their own data center, but they still provide this service for most of their customers. They also created their own version of the Geek Squad, before there was such a thing at Best Buy. They will purchase, program, maintain and repair customer computers and associated electronics. They also have gotten into other lines of business – they resell, install and train on various major cloud software packages. For a while they offered video conferencing (before Skype made it free and easy). They even offer copiers, postage machines and other major office equipment.

Their goal was to make themselves indispensable to a small business by becoming a one-stop shop to buy everything electronic. And it has worked. They won over a significant portion of the businesses in their markets as customers and those customers are remaining loyal to them. A customer doesn’t have an easy time leaving them since that means replacing them with at least three or four other vendors.

These are two examples of bundles done right. If your bundles are only used as a pricing tool then you are missing the biggest benefit of the bundle – which is to create loyal customers who won’t leave you. Worse yet, I see mandatory bundles that trap customers into buying services they don’t want – and when these customers finally get fed up and find an alternative you’ll never see them again.

The Practical Impediments to Smart Home

Outdoor cameraThere are a lot of small telcos and ISPs these days flirting with a Smart Home product, and I know a few of them who seem to be having some success. But – at least for now – it is unlikely that the product line will get significant customer penetration rates. A Smart Home product, while interesting, it not yet a replacement for triple play revenues. Here are a few of the issues involved with being successful with Smart Home:

Public Perception. Probably the biggest hurdle is still customer perception of the product. So far the idea has made inroads with some early adopters, but surveys show that the majority of people either don’t know what Smart Home is or else don’t find it of interest. Anybody selling the product has an uphill battle of educating their customers of the benefits first before they can sell it.

Most small carriers are starting with a product that includes security and energy management (a smart thermostat). These two products are the most recognizable to customers and so are the easiest to sell.

But Smart Home products beyond those are a different case. Just look at the options that are available in the Comcast Smart Home product. This includes options like smart door locks, a smart irrigation / sprinkler system, smart lights, smart garage door, indoor and outdoor cameras, and even a smart doorbell that will show you who is at the front door. The general public is largely not knowledgeable about these products and it’s an uphill battle to upsell people past the base product.

Surveys show that there is general dissatisfaction with the state of the IoT industry as a whole. Early adopters that like IoT expect that if they buy some new gizmo they see advertised that it will work with the platform they are using. But there is still no standard industry interface with devices and there are half a dozen or more different ways that devise communicate with users today. The industry is a long way away from plug and play, which is the expected standard today.

And then there is price. Without considering the equipment costs and the connection charges, Comcast charges $49.95 per month for the package. There is a lot of work to do to convince customers that there is enough benefit to them where they need to take on a new monthly bill of that magnitude.

Quickly Obsolete. Probably the next biggest concern for anybody entering this business is if the components used to deliver the product will remain available. There are a huge number of big and small companies that are offering Smart Home hubs and add-ons. Past experience reminds us that there is always an eventual shake-out in a new industry and that most of the companies selling IoT won’t be here a few years from now.

You can’t even trust going with a large vendor for components. Earlier this year Google’s Nest walked away from their smart hub product and turned off the web servers that supported the product.

Controlling Truck Rolls. The next big worry of companies I know who are considering the product is that it’s going to involve a lot of truck rolls. There’s not just the trucks rolls needed to initially install the product, but adding a new device to a customer’s system is probably going to need a truck roll.

And like any new technology there are going to be bugs and user errors and it’s likely that the product is going to require a lot of maintenance calls.

Summary

I think most homeowners are intrigued by the idea of having a Jetson’s home where an automated home makes life easier. But we are still a decade or two away from having a fully integrated and easy-to-use Smart Home product that can deliver some of that promise.

This doesn’t mean that you can’t be successful with a limited Smart Home product now. But you must be aware of the risks and have a plan for somehow controlling excessive truck rolls for the product to be profitable. What nobody wants is a product line that takes a lot of work but that doesn’t move the bottom line.

Are Cable Companies Winning the Speed War?

Polk County SignThe latest news about Google Fiber slowing on their metropolitan fiber builds got me to wondering if perhaps the cable companies are starting to win the speed wars. Are we getting to a time when a fiber overbuilder is going to have trouble competing with them?

After many years of being stingy with bandwidth the cable companies have now largely adopted the opposite strategy and increase household speeds over time without raising prices. I can remember quotes from several big cable companies a few years ago where the cable companies claimed they were giving households all the speed that they need. And this was back at a time when they were experiencing a significant amount of network congestion during the peak evening hours. But my reading of many different customer reviews tells me that the cable companies have largely solved the congestion issue.

This is not to say that there are not places where the cable networks are still not up to snuff, but compared to ten years ago, a lot more cable networks seem to be delivering the speeds that customers want. Of course, there are still plenty of small town where the rural cable networks are not up to snuff, but metropolitan areas seem to have improved a lot.

The FCC reported in their 2015 Measuring Broadband America Fixed Report that Comcast customers got between 109% and 119% of the speeds that they paid for. I know personally that my speed tests often shows at least 5 Mbps better performance than what I am paying for with Comcast.

But the question that has been nagging me is if a new fiber provider can really thrive in a metropolitan area? Can they get enough customers to be profitable? It’s been widely reported that Google and other fiber overbuilders need at least a 30% market share to succeed, and that’s a tall order in a city where everybody already has broadband.

People need a compelling reason to change providers, because it’s a process that nobody enjoys. It means staying at home to meet an installer, returning settop boxes and modems, and worrying about the billing transition.

I have some anecdotal evidence about the way at least one group of people buy broadband. I’ve been a member of several active Maryland sports message boards for over two decades and broadband is a periodic topic of conversation since sports fans these days care about watching sports on the Internet. The majority of the people on these boards happen to live in neighborhoods that have both Verizon FiOS and a cable company – mostly Comcast, but sometimes somebody else. These are folks who have had the choice between fiber and coaxial cable networks for a long time.

What I’ve seen over the years is that there are a few people that are big fans of either the cable company or Verizon. But the vast majority don’t seem to really care as long as the broadband works well enough to watch their sports and the other things their families do on the Internet. Probably half of the people on these boards have moved back and forth between the providers during the last decade. I’ve seen evidence that content matters more than speeds when over the years there were occasions when one provider or the other did not broadcast a Maryland football or basketball game. At least among this one large group of I don’t see any major affinity for fiber over coaxial cable networks. These folks just want something that will work.

A new fiber provider has to provide a compelling reason for people to change. Certainly having lower prices could be a compelling reason, but most metropolitan fiber providers are not much cheaper than the cable company (and sometimes they are more expensive). And while a fiber provider might offer gigabit speeds, I wonder if that is enough to get people to change if they are happy with the speeds they have had for the last few years?

I’ve always said that there is some percentage of any community that will change to a new provider because they dislike the current provider for some reason. But those are rarely enough customers to justify a business plan, and so being successful with fiber also means persuading customers that are not unhappy to change. And perhaps, as Google has found out, that is not as easy as fiber proponents have assumed. Certainly, the cable company tactic of greatly improving the performance of their data products is making it harder and harder for a new overbuilder to thrive.