IoT as a New Product Line

Light bulbLast week Google and Nest announced that they were discontinuing the Revolv IoT hub for the home. The hub is the smart device that sits at the core of an IoT network and is generally the device that lets a user communicate with any other devices in the network. The Revolv hub will still work for anybody that owns one, but there will be no further development on the hub and no new devices designed to work with it.

And this got me thinking about small carriers offering IoT as a product. Big companies like Comcast are now offering a home automation package. Comcast has integrated nine different devices together that range from security, smart locks, smart lights, smart thermostat, etc. Comcast reports that they are surpassing their early goals and have a penetration rate of over 5% of total broadband customers.

But I would think that a company as large as Comcast has developed their own proprietary IoT hub to work seamlessly with all of the various devices. But finding a reliable hub vendor, and working to get any hub to work with a core set of devices can be a daunting task for smaller carriers. And since there are not yet any industry standards for IoT, devices don’t automatically integrate into different brands of hubs and will not work at all in many cases.

The real fear for a small carrier is that you’d build a product line around some specific brand of hub and that hub would either be discontinued or the company that makes it might even disappear. If you can’t trust somebody as large as Google for an IoT hub, then who can you trust in an industry that doesn’t yet have any clear dominant IoT manufacturers?

There are other issues with the IoT business plan that have to be considered. Probably the most immediate and costly issue is the fact that supporting residential IoT means a lot of truck rolls. I’ve looked at the cost of a truck roll for some of my clients and it’s not unusual to see costs of $50 to $75 for a truck roll, and so any business plan has to compensate for a product that is going to require multiple visits to customers over time.

Another issue to consider is customer expectations. There is now a huge variety of smart devices on the market and the vast majority of them are not going to work with whatever hub you choose. I would expect that once customers have some IoT devices from an ISP that they are going to buy other devices and will be disappointed when they won’t work with the hub that they are already paying for. And it’s virtually impossible for a small ISP to integrate incompatible devices with their hub of choice.

Yet another issue that is still of concern for the whole industry is security. Smart devices tend to have very rudimentary operating software and IT experts say that hacking IoT networks is relatively easy. I don’t think many of us are too worried about somebody hacking into our smart coffee pot, but when you put your thermostat, front door locks and watering systems onto a network together there is a lot of chance for damage from malicious hacking.

But a greater security concern is that an IoT network can be a gateway to your entire network and can let in malware and other problems that can create havoc with finances and personal data stored on your computers.

There are certainly customers that will buy these services, as has been demonstrated by Comcast. We might be decades away from a time where there might be significant penetration rates like we see with triple play products. But there probably is an opportunity today to get a small, but potentially profitable product out into the market. But the risks and costs of offering residential IoT still looks to be out of the comfort zone of many small ISPs. Perhaps rather than try to offer a full suite of products like Comcast is doing, a more workable strategy might be to concentrate on a small handful of functions like security and smart thermostats.

Barriers to Home IoT

HouseThe early IoT industry has been busy making smart thermostats and monitors of all kinds for homes, but the industry so far has not done as well as some industry analysts predicted. I think there are a number of barriers that have to be overcome for this to become a widespread technology.

Ease of Installation. Ideally you could buy an IoT device, take it out of the box, push a button, and it would work. But there are almost no devices yet like that, and many devices will never work like that. Hooking up a thermostat and many other smart devices means electrical wiring work and most people aren’t comfortable doing this on their own and are not always ready to pay an electrician to do this for an IoT device. Putting in smart door lock means changing out the old one, and anybody who ever changed a door lock knows that it is never as easy as it ought to be.

Ease of Connection. Even after you install most current IoT devices you aren’t done; you next have to connect them to your home network. We are not yet at a time when a device can self-configure, and perhaps we never want it to be that easy since a device that can do that can also be easily hacked to reconfigure. But if you think people are uncomfortable wiring a thermostat, there are just as many people who are uncomfortable messing with the settings on their home WiFi networks.

Fear of Hacking. It doesn’t take very much web research about home IoT devices to run into articles about the lack of security in these devices today. People don’t want an outsider to be able to hack into their surveillance cameras to watch them or to be able to maliciously tinker with the settings on any of their devices. Until the industry gets serious about security this fear factor is very rightfully going to a barrier to entry for a lot of people.

Ease of Using the Information Generated. When I read the literature on a home energy system it goes into great length to describe the great graphs and charts it will generate for me about my energy usage. But I don’t think most people want data – they want solutions. They don’t want to have to interpret data on hourly usage and then decide how to tinker with the settings to get the results they want. People want solutions and they are going to want IoT devices that understands what they want and takes care of the details. If you have to constantly monitor the data out of your IoT devices and then fiddle to achieve your goals, then what you’ve really gained is a new chore – and none of us want that. I think what we are waiting for is the smart house that can take care of all of the IoT devices for us.

Solving One Problem and Creating Another. I took a look at getting smart door locks. But as I thought through how they work I could see they were not for me. They work by interfacing with your cellphone and also have a manual override. But I am the prototypical absent-minded professor-type and I rarely have my phone with me when I leave the house, even when I should. I picture myself locked out of my house and not able to remember the manual code. And who the heck do you call – a locksmith or an IT guy? And oh crap, my phone is locked inside the house.

Value Proposition. In many cases I just don’t see the value proposition that some of the early IoT devices deliver. For instance, do smart locks really make my home any safer from a guy with a crowbar? Do I really need to pay extra for a smart refrigerator or dryer? It might be that the value propositions are there, but the manufacturers need to do a better job of convincing me why any device is indispensable in my life.

Only for Do-it-Yourselfers. All of these issues to me tell me that everybody who is not a do-it-yourselfer is going to want and need help with IoT, either in setting it up, configuring it or deciding how to use it. Today one a certain rather small percentage of the population is willing to tackle all of those tasks, and that is probably the limiting factor for most people.

But there is an upside to any business that can devise a business plan to help people with IoT devices. Cable companies, telcos and ISPs are certainly in an ideal spot to be that vendor for many homes. All that is really needed is that your customers like you and trust you. And trust is the key word. When you want to have a home security system installed you must trust the company and the people doing the work. I remember back when I lived in Maryland that Comcast once sent a tech to my house who was driving a dilapidated 25-year old pickup and dressed poorly. This guy was clearly a contractor and I would not have let this guy install a Comcast burglar alarm in my house. But the Comcast technician in Florida showed up in a Comcast truck and seemed very knowledgeable and professional and is somebody I would be more likely to trust.

There are a large percentage of people who are never going to want to fiddle with IoT devices, no matter how easy this becomes. I can’t ever foresee the day until maybe when we all have smart robots that a smart home is going to be easy enough for the average person. There are too many components of a smart house that are going to be beyond the comfort level of most people. And that sounds like a permanent new service business to me.