In the late 90s, home automation was either a techie hobbyist solution or a very rich person’s game. But with each passing year of this decade we have seen progress on the major prerequisites of mass market adoption. Standards-based, reliable, and affordable technology became available for the first time. Consumer IP-based home networks have provided the education and channels for, well, networked solutions. Broadband, always-on Internet to the residence has become the norm for most first world countries. Various component pieces needed around the home have ridden the cost curve to affordability. Software and silicon are now available to conceal the various complexity factors. Even the industry itself has gone about a successful re-branding to “home control.” And the mobile phone is now a ubiquitous handheld accessory that has evolved into a Smartphone, capable of running applications to link into the home, and control it. See Exhibit 1, titled “What a Difference a Decade Makes,” to appreciate the positive change in the underlying market factors. 2007 saw the emergence of the next step in this march to mass adoption: service providers entering the market with “home control services.”
A clear lesson over the last decade is that home control products sell most effectively as a system sale. On the high-end, many custom home integrators have built businesses on packaging a set of devices and offering installation services. In the “premium mass market”, home control devices have seen the greatest sales when sold as a kit, both through specialty retailers and mass electronic retail outlets. Yet, the firms best positioned to serve the mass market with a system sale approach are Telcos and MSOs (Cable companies).
Telcos and MSOs are experienced, through their self-install broadband offerings, at working with best of breed hardware vendors to create “starter kits” of a set of devices (e.g., DSL gateway, home networking adapters, phone filters). These service providers can uniquely lower the entry cost of the solution for the consumer by subsidizing the home control starter kit using the contractually-committed future monthly revenue streams for the service(s). Service providers have both mass-market installation capabilities and on-going remote technical support services through their call centers. Some service providers are even hunting to justify a home networking support service that would have life beyond the first couple of months of a broadband installation, and for those consumers wanting such a service (over one-third of Internet households when polled in a recent study by Parks Associates), an ever growing home control network of devices provides that new revenue center. Monetizing the home network, with its increasing home penetration, has become important to service providers in North America, Europe, and Asia in recent years; however, the rapid commoditization of their current services has made “home control services” a must to deliver their revenue forecasts to shareholders.
“Home control services” consist of home monitoring & control, media & entertainment management, home health, and energy management. What was once a set of exciting but “on the roadmap” services for broadband providers has all of the sudden become a strategic imperative. “Triple-play” packages of voice (telephone), video (TV), and data (Internet access) have seen a dramatic price declines over 2007 and service providers are now scrambling to replace this lost revenue for 2008 and beyond. In North America, the triple-play bundled set of services was on average $213 per household in mid 2006, but is now routinely being offered below $100 per household. This trend is even more dramatic in Europe. BSkyB in the UK, as one example, is currently offering an attractive triple play package for just ₤19 per month.
In addition to new revenue streams, home control services are very “sticky” services and help to increase consumer loyalty while decreasing subscriber defection. Once a consumer has a set of devices installed around the home providing one of the value-added home control services, that consumer will think long and hard and before switching to the next great triple-play deal to come out. As the rate of growth for broadband, video, and telephony is flattening, grabbing new customers from your broadband competitor becomes the easier proposition; home control services is both an offensive weapon to entice new customers and a defensive churn-buster to lock-up the installed base. As a result of all these factors, every major North American Service Provider, most major European service providers, and many Asian service providers are either offering home control services today or have field trials scheduled for 2008.
CableLabs, the technology standards body of the global Cable industry, recognized that Telcos were making significant progress with home control services and in mid-2007 released a Request for Information on Security-Monitoring-Automation (known as the “SMA RFI”). The response was strong and has sparked the vendor community. The RFI will result in many RFPs out to vendors, the first of which have just recently hit the streets, and ultimately new services to consumers. What this means strategically to the nascent home control services industry is a repeat of the broadband wars; Telcos vs. CableCos– except this time for the next round of services, that of home control services. This market dynamic has spurred both internal projects at dozens of established vendor firms as well as notable venture capital investment into new entities, so yet another wave of innovation is afoot.
So, what are the home control services exactly? Media and entertainment services include monthly PVR/DVR services such as TiVo and enhanced media benefits like online music or internet video services on the TV or mobile phone. Consumer interest is very high for these media control services; for example, an IDC study showed that 70% of consumers would purchase a DVR/PVR service, 55% of consumers would pay for a way to view digital photos on their TV, and 43% would pay for the ability to listen to digital music stored throughout the home. Home monitoring enables the consumer to monitor and control their home, including a second home, through a browser interface or the mobile phone. In the US alone, forecasts range from 10M to 20M new self-monitored homes by 2012. See Exhibit 2 for a screen image of a home monitoring service.
Home health services include independent living (IL), chronic care, and wellness services, and with the graying of populations in most first world countries is a demographic necessity. The most viable home health service for service providers is IL, enabling family members in their 70s, 80s, or 90s to live at home longer before making the transition into an assisted living facility by employing passive monitoring devices around the home tied into a 24-hour call center. The cost of an assisted living facility (ALF) is well over $70K per year, so paying even $100 per month for a viable IL service is a bargain in comparison to the ALF alternative for the care and monitoring of an elder loved one, and of course substantial monthly revenue for a service provider. See Exhibit 3 for a screen image of an IL service.
Energy management is initially being deployed as a premium home monitoring feature, but in some geographies, such as Canada and Europe where energy is mandated to be retailed separately from the energy wholesaler, an energy management service represents a key differentiator for any adopting broadband service provider. Energy management is especially appealing to many consumers in the worldwide “green movement” at hand, and yet another appealing service for a Telco or Cable company to offer and consolidate on one monthly bill. Even incumbent utility companies, a third breed of service providers, are very interested in energy management services for demand response reasons. See Exhibit 4 for a screen shot of an energy management service.
LonWorks, and in particular with the addition of the Interoperable Self-Install (ISI) protocol, represent a strong technology to employ for mass-market home control services by service providers and their networking hardware vendors. LonWorks ISI is the only way in today’s market to offer a self-discoverable home control device (motion detector, appliance control module, lighting control module, etc.), a key requirement for consumer self-installation. LonWorks proven field resilience matches the service provider’s requirement for high reliability and the associated improved customer experience and less likelihood of technical support calls. Furthermore, LonWorks technology supports device level diagnostics, enabling robust remote management which lessens the total cost of operating the services. For hardware vendors, one chip can serve all their international markets, rather than requiring different silicon for different geographic regions. The extensive international standards-body approvals Echelon has achieved with its technology is unparallel; open standards are very important to service providers. Lastly, LonWorks uniquely works simultaneously in both a client-server model and a peer-to-peer model within the home, meaning that the starter kits of devices from the service providers will have superior performance in the consumer’s home.
Beyond the silicon and devices, a vital piece to the solution set for home control services is the software. There is software needed in the home, server software needed at the network operations center (NOC), and a strong need for a simple yet robust user-interface. The software needed in the home, for home control services by service providers, is embedded-systems software that can operate in a broadband residential gateway (RGW), or in a set-top box (STB), or in a network attached storage device (NAS), or in a dedicated home control gateway (one instance in the home should cover the entire house). This software needs to able to discover devices, interoperate and control a wide variety of device classes, create automation “scenes” (macros), and put device(s) operation on schedules. The embedded software needs to be able to bridge different protocols (e.g. TCP/IP from IP cameras with LonWorks for lamp and appliance adapters), act as a master controller for the home, be delivered in small memory footprint, and be “portable” to be hosted in any of the devices listed above. There are dozens of additional requirements, but the in-home software must do this set of functions very well and reliably.
The back-end server software, at a minimum, needs to enable remote management for the service provider and integrate with other back-end systems like OSS, BSS, and CRM systems. While not a firm requirement, most CTOs of Telcos and MSOs prefer the back-end server software to offload the embedded software by being part of a distributed software system so that, for example, new device drivers or language font files can be downloaded in real-time. Both CableLabs and the DSL Forum have extensive device and service management requirements, and the back-end server and the embedded software have to abide by these dictates.
The user-interface (UI) for home control services is the key to a successful set of services. A poor UI will severely impair any home control service rollout. The UI must be very intuitive, highly customizable for a partner’s desired look-and-feel, and provide support for the many “screens’ of the home. The four screens that should have UIs for home control services– ideally each suited for the particular screen size, with a common look and functionality set, but personalized for each end-user in the home– are the home computer(s), the television(s), the Smartphone, and, potentially, touch panels. See Exhibit 5 for a connectivity diagram for an actual home control services rollout by a tier-one service provider beginning in early 2008.
4HomeMedia is an example of a company focusing on the software elements of home control services and is delivering the software requirements discussed in this article. 4HomeMedia’s software platform in 2007 was awarded “LonMark Software Product of the Year,” and selected as “Best of Innovations” at CES 2007.
Home control services are the next step in mass-market home control applications, and very possibly the key to mass adoption. Home control services are an extension of the in-home network and the associated triple-play services currently being offered by broadband service providers. BT, Bell Canada, and Telus, to name a few, are already offering home control services in their subscriber areas, and expect at least a dozen new home control services from tier-one service providers around the world in 2008. The trend of home control services is a very viable opportunity for hardware and software vendors, both those serving Telcos and MSOs today as well as those interested in breaking into this market segment.
About the author:
Brad Kayton is the co-founder and COO of 4HomeMedia, the recognized leader in home control services software and Echelon’s strategic software vendor for LonBridgeTM. Mr. Kayton has a successful track-record at founding new tech companies and is credited with creating / co-creating numerous market-changing product categories such as: hospital-compliant tele-medical video-conferencing (now standard in almost all hospitals; VTEL early 90s), the set-top video conferencing product form-factor (now 90% of the $20B business video-conferencing market; Polycom mid-90s), the broadband residential gateway (now a world standard for all tier-one telcos worldwide; 2Wire late 90s), and the digital media adapter (the world’s first DMA/DMR; PRISMIQ early 00s).