Apr 16, 2013

Competing for In-Home Services

Late last year, in the course of some project-related research, I took a look at the home security market in the context of 'smart-home' service concepts. Fixed- and mobile-network operators view this as one of several promising market opportunities to offer home automation and home security types of service.

A great deal is made about mobile operators pursuing new opportunities such as these in what are referred to as ‘adjacent markets’. However, it is as well to recognize that incumbent providers from those 'adjacent' markets may also have ambitions of their own in the communications arena.
In the US market, for example, ADT (the market leader for home security services) has embarked on a strategy that will eventually position the company to compete with communications service providers such as AT&T and Verizon.

ADT has developed a platform – ADT Pulse – with which it aims to add lifestyle services (lighting, thermostats, entertainment) to its existing life safety offering (security, fire, emergency response, CO monitoring, high/low temperature monitoring and water detection). Thanks to the evolution in wireless, mobility, broadband and open standards the affordability of connected home and business services is now much more plausible and complementary to a remote security service.

The challenge for security- and communications-service providers is to design an appealing value proposition and viable business model. Given that ADT is the market leader in a highly fragmented US market with a roughly 25% market share, should companies like AT&T and Verizon (as well as their cable industry counterparts) seek to compete directly with ADT? Or, should they target the remaining, fragmented parts of the market with a lower price service, with potentially fewer functional frills, that leverages the economies of scale afforded by their extensive distribution reach?

In  light of these complications, it is tempting to wonder about the delay to AT&T’s Q1-2013 market roll-out goal for Digital Life, its smart home security offering. Has this been caused by a reassessment of the business viability or is it the need to come up with an innovative and competitively differentiated service proposition?

In Germany, Deutsche Telekom is pursuing a platform eco-system strategy for smart home services under a new brand entitled QUIVICON. Deutsche Telekom is working with a number of partners in a B2B2C model and its market vision encompasses a more expansive service set. It has promised to commercialize the service some time in Q2-2013.

Given the information-intensive nature of security services, there is also the potential to create game-changing service propositions. One example would combine traditional home security with device (PC, tablet etc.) and personal (identity protection) security add-ons.

If fixed- and mobile-operators are to succeed in adjacent industries where service concepts already exist, fresh thinking will be required to develop appealing service propositions and the business models to ensure their viability.

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