Comcast Labs

comcast-truck-cmcsa-cmcsk_largeIt’s easy to think of all of the big ISPs in the industry as roughly equivalent in terms of services, technology, and customer experience. But Comcast has invested in Comcast Labs, a research and development branch of the company that is starting to distinguish Comcast from the rest of the industry.

Comcast Labs has branches in Silicon Valley, Seattle, Philadelphia, Denver and Washington D.C. The Lab employs 40 PhDs, 10 Distinguished Fellows and hundreds of engineers and active inventors, all very focused on telecommunications and product research.

The lab is different than the more familiar Bell Labs, which has always done a lot of pure research and not just telecom research. Comcast Labs is very focused on developing specific products for the company as well as looking for ways to improve the Comcast networks.

The impact from Comcast labs is pretty easy to see. They developed the X1 settop box platform which is regarded as the most innovative box in the industry. The platform includes an easy to use navigation system and cloud-based DVR and can be used to control up to five TVs in a home. They are constantly developing new features and during the recent Olympics they rolled out a remote with voice control (you talk to the remote).

They have also developed a fully integrated set of home automation features marketed at Xfinity Home. Comcast Labs developed a custom hub, rather than relying on a hub made by somebody else. The company so far has integrated a number of home automation features into the platform which includes security, thermostat, water sensors, cameras, door locks, etc., all controlled from a smartphone or from a TV.

Comcast Labs doesn’t only develop consumer devices and you can read about some of their other research on their blog. The company has adopted the concept of moving network control to open source software and is heavily invested in OpenStack and GitHub development. They are also researching a future migration to IP video, which would free up more of the network for delivery of data.

The company and the Labs are also researching areas that will have a long-term benefit to the company such as finding network solutions that use less energy and moving towards a software defined network to be more flexible and to more quickly implement solutions nationwide.

A high-level Comcast executive recently bragged that the company through Comcast Labs could solve problems and deliver solutions within weeks that would take other companies in the industry many months or years.

I find it interesting that the company doesn’t talk a lot about Comcast Labs. There are very few articles on the organization outside of the Comcast websites and I assume that they dissuade those at the Labs giving interviews to outsiders.

But it’s clear that Comcast Labs provides the company with a lot of solutions that would not come from off-the-shelf electronics and solutions. This puts the company on par with Google, Facebook and AT&T as companies that have largely withdrawn from the normal industry vendors and taken their own path by developing their own equipment and solutions.

Of course, the company doesn’t operate in a vacuum. For instance, the FCC is currently strongly considering a requirement that the industry develop a standard solution to allow customers to buy off-the-shelf settop boxes. The custom X1 box that Comcast Labs has developed goes in the exact opposite direction of what the FCC is looking at and the company would probably have a hard time complying with such an order.

But overall Comcast Labs provides the company with a resource that other telcos can’t match. The company is constantly rolling out new features and products that companies without a research arm will not be able to match. I’m sure the reason for this research is to create more loyal customers by providing features and services that they can’t get elsewhere. I guess time will tell how good this strategy is, but it’s hard to argue with success, and as much as people like to complain about the company they are growing faster than anybody else in the industry in terms of new customers.

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.