Smart homes will be a $11.2 billion opportunity for telcos in 2022, according to a new report from ABI Research – however, they’ll have to work hard to get a piece of that smart home pie, and they’ll have to stop thinking like a telco to have a chance.
Communication service providers such as AT&T, Comcast, Orange, and Verizon help drive the growth of smart-home adoption by building home offerings alongside their investments and deployments of broadband and video services. However, more recently most telcos have been outperformed by aggressive competition and are now at a crucial stage, says ABI Research senior analyst Pablo Tomasi – telcos need to adopt and accelerate what ABI calls “un-telco” strategies (that is, strategies that stretch beyond traditional offerings to foster revenue growth), else they risk being relegated as marginal players.
“CSPs are being threatened in a market increasingly driven by the likes of Google and Amazon with a range of products and services from AI-powered smart home voice control smart speakers to security solutions,” said Tomasi. “But things are changing and CSPs are accelerating their strategies for the smart home. Telefonica with Aura, Orange with Djingo, and SK Telecom with Nugu lead the way of CSPs developing AI assistant to support their smart home play. Now is the time for CSPs to be more aggressive in tying the usage of their AI assistants to their other connected and smart home offerings.”
CSPs must take a platform approach, as players like Deutsche Telekom and Comcast have done. A platform strategy must be supported by the creation of a wide partner ecosystem and must be underpinned by an innovative monetization approach favoring freemium services over traditional bundles. CSPs have assets all around the connected home from providing connectivity, creating content and delivering video, to specific applications such as monitored security and as such, they have a wider reach than any other competitor. CSPs should use this mix of essential (e.g. broadband connectivity) and value-added services (e.g. monitored security) to tailor a strategy fine-tuned to customers’ needs and regional dynamics.
“CSPs should not impose their legacy fixed-line business model to the smart home,” Tomasi said. “The smart home is core to the CSPs’ future and it is a real test to assess how far CSPs have developed their business beyond their telco heritage and how they can adapt their bundling business to market condition, experiment with innovation, and compete head-to-head with webscale players.”