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Smart home: in search of the killer application

Monday 1 December 2014 | 16:18 CET | Background

'Connected Home' is an umbrella term extending to two sectors, OTT video and the second screen as well as the emerging smart home. Both are in full development, but at very different speeds. 

Video on demand is a 'killer application', but Smart Home is still searching for its own breakthrough app, according to analysts at the 'Connections Europe' conference organised by Parks Associates recently in Amsterdam.

 

The two verticals will not converge, Parks expects. They will develop independently, even if there is some overlap in areas such as home gateways.

OTT is a mature market

The TV market is much more mature than the smart home market in terms of technology. The sector is well on the way to moving away from traditional linear content to new forms of delivery. Netflix, HBO and others have shown there is a growing market for subscription VoD services.

The question is not whether video will be delivered 'over the top', but who will deliver it, and how. One of the conference guests went so far as to suggest there is only one sort of TV: live sports broadcasts. Everything else is on-demand. The TV providers are still in the race, by offering the same services and hyper-profiling their users.

Growing number of business models

Smart Home is still at the beginning of its development. The rise of the smartphone as function manager has supported the development and availability of the hardware and software needed for the smart home. Big Data is the next target.

There are essentially two business models for the smart home. The first is the one-time purchase by the consumer of the equipment. The other is a service provider charging monthly service fees and subsidising the equipment in part or fully.

Both offer alternative variants now being developed in the market. One is premium pricing. Nest Labs has shows it's able to ask over USD 200 for its connected thermostat.

The data collected by such a thermostat can be used for in-app transactions, advertising and generating sales leads. For the consumer, it can also mean lower energy bills or home insurance premiums.

The combination as unique selling point

Smart Home applications are multiple, resulting in dozens of possible services. On their own, most are not so attractive, but a bundle does appeal to many consumers, according to Parks Associates. Almost half (43%) of American consumers are willing to pay USD 10 per month for a set of relevant services. A total 59 percent would pay USD 5 and 69 percent are ok with a price of USD 3.

Faced with the choice of a normal thermostat or a self-learning thermostat that costs three times as much, 42 percent of consumers choose the more expensive device. This shows there is money to be made from delivering the right differentiation at the right price point.

In the US and Latin America, security is the main reason to adopt a smart home system - more and more households have security systems. In Europe, it's less obvious what the 'killer app' would be for the smart home. Most likely there is not just one app, but a large number of smaller services that would appeal to a mass public.

Consumer awareness still low

Consumer research by Parks Associates shows that awareness of the 'smart home' is still low. Most people don't know what it is, or think a smart TV is the same as a smart home. The same is true for 4K. A recent survey in the US found 15 percent of respondents say they have a 4K TV, while retail sales figures show it can be no more than 1 percent.

There are five main barriers for the smart home: the low awareness, an unclear value proposition, high prices, consumer concerns about interoperability and issues surrounding privacy and security.

Most sector experts agree more needs to be done in terms of consumer education. Building a system and waiting for customers to come won't work. The boxes will gather dust on store shelves before any market emerges.

Nest is expected to expand its product range beyond the current thermostat and smoke alarm. It plans to spend USD 35 million on marketing in the US in Q4. For the still small smart home market, that is an enormous sum.

Other industry players are positive about companies like Apple (HomeKit) and Google (Nest) joining the market. This is good for raising awareness of the market and will help all players.

Competing platforms

Several suppliers are addressing the interoperability issue with the development of plug-and-play smart home devices. This includes modular power plugs, door and window sensors, smoke alarms, baby phones and IP cameras. Some devices, such as the more expensive LED lights, already have built-in controllers, while others work with a supporting power plug.

Smart home is also under development by service providers. US-based iControl is developing a service platform for companies, including a number of large US cable operators. There is also a consumer brand, called Piper.

Qivicon or Ozom

In Europe, Deutsche Telekom is actively investing in the smart home market. In its home market, it's using the Qivicon label. The same products are offered white label in other countries, to as many players as possible, including other operators.

While telecom providers are addressing the market from the service side, there are also technology companies taking a hardware approach. Insteon is active on the retail market. Its starter kit for USD 100 comes with a gateway and two smart plugs. Its marketing focuses on security for the home and family. Insteon is already active for several years and has a wide range of products available on the market.

ROC-Connect is a smaller player, with 12 devices available, all with the same logo to show they are plug and play. Its gateway uses Wi-Fi and ZigBee. The controlling app is kept as simple as possible, without rule engines. The home-improvement retail chain Sodimac is introducing the platform under the name Ozom in Chile and five other South American countries.  

In each case, a home gateway is supplied that communicates with all the devices. These use a combination technologies. Wi-Fi is a given, in order to support interaction with smartphones and tablets. Wi-Fi is less suitable for M2M, in part due to the energy used. This often leads to the choice for other radio technology, such as Z-Wave or ZigBee, or a wired solution.

Open or closed

The ULE Alliance (DECT Ultra Low Energy) also is developing a set of devices and services. They are betting that providers won't need to supply another gateway and can instead use the existing modem/router with DECT base station which comes with the broadband connection. 

DECT has as its advantages reserved spectrum and low energy use in stand-by. It supports a data rate up to 1 Mbps, suitable for calls or video at 6-9 frames per second. However, the alliance is still in its early days, and the number of products available is limited.

As is often found in the early days of a new market, several protocols exist alongside each other, some open and some closed systems. Insteon uses its own radio interface and powerlines as a secondary path for the signal. This is a walled garden. For them, 'open' means they are working with multiple hardware partners.

Other alliances, such as Z-Wave, have a lot more members, but this also makes it more difficult to establish interoperability and bring 'plug and play' products to market.



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