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Straight Talk Telecoms

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Telecoms operators – and their technology partners – are getting excited (again) about the potential of the smart home. Several European operators have launched services and service providers in Asian markets such as South Korea, Japan, and Hong Kong have been building momentum for the last two to three years.

The smart-home concept has been around for some time. So, why does the telecoms sector feel that it is now ripe for exploitation and what has changed since the last wave of interest? There are a number of factors. First, it is part of the wider buzz around the Internet of Things. Several Internet firms have made investments in this space. Secondly, the smartphone and tablet have emerged as devices that can act as remote controls for the home. The technology itself is now affordable – at least for the higher end of the consumer market. And thirdly, broadband access speeds are no longer a bottleneck.

Spanish operator Telefonica has been trialing its smart-home service with a number of its customers. When asked who is best-placed to provide smart-home solutions, these customers placed telecoms operators in second place (behind consumer electronics firms but ahead of utilities and Internet companies). Telefonica has taken encouragement from this and believes that it has a fair shot at becoming a leading smart-home provider.

But does the “smart home” concept resonate with the wider consumer market? Do the individual components of a smart home deliver value that home-owners are prepared to pay for?

There are a number of services that sit under the smart-home umbrella – automation, entertainment, security and monitoring, energy management and usage, and healthcare. Even within a category such as healthcare there are different ideas and concepts. From a service provider’s perspective it makes sense to deliver a solution that supports a whole range of different services. But there is a risk that a lack of specificity in the value that each individual service can bring will weaken the overall proposition.

Telefonica’s smart-home solution is based on AT&T’s Digital Life platform. This has been positioned in the US as a home security and monitoring service. The hope is that people will subsequently buy additional services that sit on the Digital Life platform. Ovum expects that Telefonica will take the same approach in Europe, but it is by no means clear that there is the same established market for home security solutions.

If the market for home security solutions turns out to be smaller than service providers had hoped, it may make more sense to market other specific services rather than the more generic smart-home concept. The ability to better manage energy consumption and to remotely control heating and air conditioning is a service concept that delivers clear, tangible benefits. But competition is fierce. Utility companies see this as a natural extension of their core business.

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