The connected home of tomorrow provides a vast number of opportunities for developers, device manufacturers and service providers. But how much opportunity will exist for mobile network operators is still unclear.
That thought occurred to me as I toured a connected home here in Denver a couple weeks ago. The 110-year-old bungalow was inconspicuously outfitted with Comcast's Xfinity Home offering and sported at least eight connected gadgets including security cameras, thermostats and a hub that essentially consisted of a dedicated tablet.
The appeal of the connected home is easy to see: The cameras record video that is stored for 10 days in the cloud, enabling homeowners to see past activity around the house; an activity log tracks when doors are opened and closed; and users can set personal settings to receive text messages when a door doesn't open as scheduled – for instance, if a child doesn't come home after school on time. And like other smart home systems, users can control it remotely using a phone, PC or other connected gadget.
Comcast is growing its Xfinity Home ecosystem through a third-party developer community that includes Google's Nest (thermostats), Chamberlain (garage doors) and Rachio (sprinkler systems). But it doesn't include any wireless service providers.
That makes sense on one level, at least: Both AT&T and Verizon operate extensive fixed-line networks, and both have their own connected home offerings. Indeed, AT&T continues to gain traction with its Digital Life offering, although Verizon quietly offloaded its home automation unit to Nexia last year.
A market that has yet to take off
The smart home market has struggled to get legs for a few reasons. Would-be users are confused by a wide variety of products from a vast number of vendors, creating uncertainty about which products work with which others. Also, while individual devices may not be expensive, outfitting an entire home can be a pricey proposition. And many consumers simply aren't aware of the benefits a smart home can offer.
Still, analysts say the market for the connected home is immense. Research and Markets this week predicted the smart home M2M market in the U.S. will enjoy a compound annual growth rate of 35 percent over the next five years, and the worldwide market will reach nearly $122 billion by 2022.
Whether any pure-play wireless service provider can claim a substantial sum of those revenues has yet to be determined, however, primarily because it still isn't clear what value the addition of wireless adds to the connected home – at least not yet. While some have argued that the low-bandwidth spectrum used by carriers provide the in-building coverage necessary to provide connected home services, they probably aren't ideal for providing data-rich connections between, say, video cameras.
"However, the main task for smart home devices is to talk to each other," Ira Brodsky wrote several weeks ago in Computerworld. "This should be done in the way that is most secure and consumes the least battery power. It takes significantly more power to reach a tower one mile away -- particularly for a device installed in the basement or on the wrong side of a refrigerator. Low-power wireless mesh networks are a better fit."
Of course, nearly every would-be smart home in the U.S. already has a fixed-line broadband connection. So even in a best-case scenario, wireless would be a complementary feature rather than an alternative to existing connections.
Looking beyond the hub
Instead of trying to be a hub, then, pure-play mobile carriers looking to tap the connected home market must figure out what value they can bring to the ecosystem, then find ways to leverage that value. Each major wireless carrier adds value simply in the strength of their networks, which can be used to back up fixed-line services in the case of an outage, for instance. Carriers also have huge subscriber bases as well as massive retail footprints across the nation. And major distribution channels are very compelling to device vendors that may not have their own distribution deals in place.
So while fixed-line network operators have a clear advantage in the connected home, wireless still has key roles to play. The challenge for carriers is to identify those roles, then forge alliances with both fixed-line broadband companies and device manufacturers to elbow their way into the market.
"Smart home products and service providers are looking for mass market channels for distribution," said Harry Wang, senior director of research at Parks Associates, via email. "U.S. carriers' consumer reach through their retail stores and marketing machine, along with their ability to bundle services together, can be attractive asset to the smart home industry. If Sprint can bundle Amazon Prime membership with its wireless service plans, carriers can bundle smart home services as well."--Colin | @colin_gibbs