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Summary

The topic for the first day of Informa's Smart Home World conference, which took place in June 2015, was how big the smart home opportunity will be and how it can be monetized. There was a focus on home security, with the monetization strategies of other applications in the automation, smart care/well-being, and smart energy sectors remaining complex and as yet largely unproven. Ovum remains cautious as to exactly how much the mass-market consumer will pay for smart home services, and warns service providers that the smart home should be considered only as part of a long-term strategy.

Meeting fundamental needs will be critical to adoption

There is no doubt that smart home is a hot topic. Some companies opted to send whole teams to Smart Home World rather than just the odd representative, and at some points there was standing room only. Although attendees tended to be from telecommunication-based companies, there was a good level of representation from other stakeholder industries such as security, energy, and insurance – making for some very interesting debates.

Monetizing the smart home remains the biggest issue by far. Home security seemed to be the only service that most providers felt confident about being able to charge for. Orange, tempted by the high EBITDA percentages of specialists such as ADT, went as far as to state that telcos must become security companies. This is true to some extent if they are serious about delivering professional home security, because consumers are not going to trust the service otherwise. However, there seemed to be almost a naiveté in some quarters about the size of this opportunity. The professional home security market is limited in all countries, in some cases comprising fewer than 5% of households. Although new business models may raise the ceiling to some extent, growth in many markets will remain limited based on the simple fact that the demand is not there, regardless of price.

Many smart home services and applications could further benefit users. A number of presentations addressed the topic of using design to solve everyday issues. The issue for many of these applications is that either the consumer is not going to be willing to pay (smart energy, for example), or the business model is too complex, with a number of stakeholders involved in the value chain and social issues to consider (smart care/well-being, for example).

Service providers will need to work with third parties (insurance, energy, and healthcare companies, for example) to make the business work, and this will take time. Big opportunities exist around the smart home, but it will take years for the industry to develop, and service providers should not expect to make big bucks fast.

Appendix

Further reading

Smart Home: The Broadband Service Provider Opportunity, TE0003-000801 (November 2014)

Author

Michael Philpott, Practice Leader, Consumer Services

michael.philpott@ovum.com

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