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.

Comcast and the Smart Home

comcast-truck-cmcsa-cmcsk_largeComcast has very quietly gotten into the smart home and the Internet of Things business. They reported recently that they now have 500,000 customers for what they are calling Xfinity Home. With their 22 million total customers this is just over a 2% penetration rate, but any business line with half a million customers has to be taken seriously.

Comcast started Xfinity Home five years ago as a security business competing against the likes of ADT. But since then the business has taken on energy management and home automation. Announcements this month show that Comcast is making a play to be a major home automation integrator. They are now supporting the home automation devices of 9 major manufacturers: August (smart locks), Automatic (automobile), Cuff (fitness tracking), Lutron (smart lighting), Leeo (alarms), Nest (thermostat), Rachio (sprinkler system), Skybell (doorbell), Whistle (pet tracking). It’s an impressive suite of products and is all integrated through the Comcast portal.

When I last looked at Comcast’s security product, a few years ago, it was more expensive than a lot of their security competitors. It looked like they were counting on the power of the bundle to attract customers. For instance, the basic security product only covered monitoring for 1 door and 3 windows and got more expensive to cover your whole house.

The monthly charge for the new suite of products is going to be $40 per month. This will include security monitoring as well as remote access to lighting and thermostat controls. Customer pay $5 a month extra if they want to be able to see and record video feeds from their home. Customers are asked to sign a 2 to 3 year contract for service. I can’t find yet if that new price will change as Comcast monitors more devices. Comcast normally charges $200 for installation but seems to often waive that fee. They charge extra for installing more than a set number of devices.

The key to succeeding in home automation is service. Customers find home automation to be confusing and they want somebody to set it up and somebody there to fix things when they go awry. I looked at a number of online reviews of Comcast’s current product and there are a lot of complaints about poor customer service and difficulties in getting problems fixed. This is going to get even harder for Comcast (or anybody else) to do well as they add more and more products to the home automation suite.

This business also requires a lot of truck rolls if done right. Most customers are going to want help whenever they integrate a new product into their home or whenever things aren’t working the way they want. Since truck rolls are expensive, this is one of the major concerns about being profitable in this business line.

Still, half a million customers is impressive, and as Comcast integrates more devices into the package it’s going to become more attractive to customers. Comcast has one advantage over most companies, which is that they already have enough customers to enable them to devote considerable time and resources into integrating devices and making sure they work well together. Ideally new devices from the various vendors would self-configure out of the box and would work seamlessly with existing devices. But I haven’t heard that anybody yet has yet mastered that degree of automation.

Comcast is doing this as a way to offset sinking cable revenues. And they are off to a good start. At $40 per month they are already near to a quarter of a billion dollars per year in annual revenues. And I’m sure they will find ways to goose more money from customers.

Every triple play provider has to look at this and consider if this business line makes sense. The biggest problem any small provider will have is in coming up with a suite of products that integrates well and works seamlessly together. But assuming that you are able to find such a suite of products, then the biggest asset for most small carriers is the relationship with their customers.

This is the kind of product that can be used as the springboard for everything else you do. When customers rely on you to make things in their home work right they are more open to hearing about other products and services you might offer. But I am sure that, just as Comcast is certainly finding out, the key to being profitable in this line is to find a way to control and cover the cost of the truck rolls while doing things right.

Who Will Own the Internet of Things?

Tribrid_CarYesterday’s blog talked about the current Internet that is falling under the control of a handful of large corporations – Apple, Amazon, Facebook, Google and Microsoft. This leads me to ask if the upcoming Internet of Things is also going to be owned by a handful of companies

This is not an idle question because it has become clear lately that you don’t necessarily own a connected device even though you might pay for it. As an example, there was recently an article in the New York Times that reported that a car company was able to disable cars for which the owners were late in making payments. The idea of Ford or General Motors still having access to the brains of your vehicle even after you buy it is unsettling. It’s even more unsettling to think access is in the hands of somebody at your local car dealer. Imagine them turning off your car when you are far away from home or when you have a car full of kids. But even far worse to me is that if somebody can turn off your car then somebody else can hack it

The car companies are able to do this because they maintain access to the root directory of your car’s computer system. Whether you financed the car with them or paid cash, they still maintain a backdoor that lets them get remotely into your car’s computer. They might use this backdoor to disable the vehicle as in this example or to download software upgrades. But the fact is, as long as they have that ability, then to some degree they still have some control over your car and you. You have to ask if you truly own your own car. As an aside, most people don’t realize that almost all cars today also contain a black box, much like the recorder in airplanes that records a lot of data about your car and your specific driving habits. It records data on how fast you drive or if you are wearing your seatbelt – and this data is available to the car companies

Perhaps the car is an extreme example because car is probably the most complicated device that you own. But it’s likely that every IoT device is going to have the same backdoor access to the root directory. This means that the company that made an IoT device is going to have a way to gain access. This means every smartphone, appliance, thermostat, door lock, burglar alarm and security camera can be controlled to some degree by somebody else. It makes you seriously ask the question if you entirely own any smart device

Over time it is likely that the IoT industry will consolidate and that there will be a handful of companies that control the vast majority of IoT devices just like the big five companies control a lot of the Internet. And it might even be the same companies. Certainly Apple, Google and Microsoft are all making a big play for the IoT

I’ve written before about the lack of security in a most IoT devices. My prediction is that it’s going to take a few spectacular failures and security breaches of IoT devices before the companies that make them pay real attention to security. But even should they tighten up every security breach, if Google or Apple maintains backdoor access to your devices, then they are not truly secure

I think that eventually there will be a market for devices that a buyer con control and that don’t keep backdoor access. It certainly would be possible to set up an IoT network that doesn’t communicate outside the home but where devices all report to a master controller within the home. But it’s going to take people asking for such devices to create the market for them

If people are happy to have Apple or Google spy on them in their homes then those companies will be glad to do it. One of the first things that crossed my mind when Google bought Nest was that Google was going to be able to start tracking a lot of behavior about people inside their homes. They will know when you wake and sleep and how you move around the home. That may not sound important to you, but every smart device you add to your house will report something else about you. With the way that the big companies mine big data, the more they know about you the better they can profile you and the easier it is for them to sell to you. I don’t really want Google to know my sleep habits and when I go to the bathroom. To be truthful, it sounds creepy.