The Internet evolved
We are witnessing the next major evolution of the Internet with a switch in focus from delivering content to delivering capability. We are moving to a networked world where every device (light switch/plug socket/appliance) will be IP addressable and the web will be used to connect and integrate them. This particular space already has it’s own titles and Telco’s tend to focus on the mass consumer using terms such as the Connected Home or Smart Home. The ‘Internet of Things’ is also becoming a common phrase.
The connected home space is rapidly climbing up the list of operational priorities for Telco’s. It presents new ways to generate strong recurring revenues that leverage their core capabilities and by bundling these new services they hope to reduce customer churn. The potential benefits of this market are enormous.
Networking devices will deliver huge benefits to consumers making products easier to install, with much more functionality, at lower cost and with improved safety. Existing business models will be challenged by new technology and new ways of thinking. For example, take the often-criticised model of a washing machine - why would a customer want to be able to remotely control their washing machine? The reality is they probably wouldn’t. However, they will want to save money and networking appliances in the home means that the device could be automatically triggered to wash when the energy tariff is low. Moreover, imagine the appliance manufacturer remotely diagnosing a problem and uploading a new firmware to provide a solution that would previously have been costly to fix.
These are the consumer benefits but there are also huge benefits to the manufacturer and the environment. Manufacturers rarely know where their machines actually finish up. Imagine the benefits of real-time data on device usage, faults and condition. This data would significantly reduce the through life cost of supporting appliances and allow appliance manufacturers to develop a more direct relationship with the end consumer. Potentially, as the machine comes to the end of its life, this data would allow them to offer the consumer a new appliance ideally suited to their particular needs and, given this direct relationship, a replacement could be offered at a significantly reduced price.
Everyone is starting to recognise the benefits of the connected world but the challenge is execution.
Individual manufacturers of devices cannot put the infrastructure in place to provide the connectivity and deliver services. This is where the Telco’s have the competitive advantage and the opportunity. They have the infrastructure to manage the network and deal with the customer support issues relating to networking devices over broadband and mobile. Furthermore, manufacturers want to embrace these new technologies but they need the infrastructure in place to roll out a new generation of intelligent devices. Finally, consumers will not want to go to multiple websites to monitor and control individual devices; they want someone to pull together for them on a single GUI. With manufacturers needing someone to provide the infrastructure and consumers demanding integration the Telco’s are ideally placed to deliver.
In my view, Telco’s risk losing market position and customer revenues by failing to adapt their networks to deliver these new services and there is very real competition. This new market could give rise to a new generation of data centres, utility companies could cash in on the opportunity of extending beyond the utility meter, cable companies delivering entertainment are keen to move beyond the set-top box into the home and mobile operators see 4G/LTE as their route into this space.
However, it is the business model and not the technology that now presents the major challenge. The traditional model based on a super gateway in the property has been discredited because there are too many technical and commercial issues that make it impossible to scale. Leveraging broadband and exploiting the web by using Cloud-based platforms is the key to success. Telco’s need to adopt a model based on tiered intelligence with dumb end-user devices, some of which will be aggregated in semi-intelligent nodes, that then connect to the router to be managed by the Cloud-based platform. This Cloud-based approach is the key to deployment in the mass market because products and services can be delivered at appealing price points and it can scale.
The most successful models in the marketplace at the moment are in the home monitoring space with companies like Intamac offering Cloud-based solutions to Telco’s and these companies have deployed new services to SMEs and residential properties. These home monitoring services embrace home security, video, automation, energy management and health care. These are services the consumer already recognises and for which there is an identifiable need - this is critical. Equally important, the use of a Cloud-based platform to deliver these new services will put in place the framework needed to embrace the type of intelligent appliance mentioned earlier so new capabilities can constantly be added.