IoT or the Internet of Things is heralded as the next big thing in the technology world. Should pay-TV operators be paying attention? The truth is, the convergence of these two network-based service plans - IoT and the Connected Home - has started to happen from multiple angles for a few years now. And for pay-TV consumers, there is a real value in having access to IoT applications across a broad range of devices in and outside the home, through a packaged service provider offering that seamlessly blends media with communications and advanced lifestyle services.
1. The IoT business opportunity
On the commercial side, adding new services to a broadband subscription has been a page in the telecom operator's playbook for years. And with cable offering more IP access services or satellite operators deploying Over-the-Top (OTT) services, it is the whole broadband market that is looking for an n-th play to grow ARPU and improve customer retention.
On the technical angle, as IoT is based on IP and cloud technologies, and connected entertainment is accelerating in the same direction, most of the core underlying infrastructure is now common to all types and classes of smart home and connected entertainment services.
In terms of field operations, efficient customer care centres and installation/support crews can also be leveraged to offer more advanced n-th play services.
But such convergence and complementarity also comes with significant volatility in terms of converting the IoT marketing concept into concrete revenue streams and positive margins for service providers. As is the case for media entertainment today, and OTT is a good example, owning the network or the set-top box connected to the main TV set is not a guarantee that consumers will buy new types of services, and actually buy them from their incumbent broadband or TV provider. Several factors are at stake in the consumer decision-making process, as the decision proves to be more complex than just signing up for pay-TV. Yet smart consumer product marketing by service providers and CE competitors will lead to interesting market developments.
2. Is pay-TV poised for an IoT future?
In the foreseeable future, current trends show that existing services such as home security, home safety, home automation, energy management or e-health (and innovative ones that will be added overtime), will get growing traction with consumers as the market matures and we reach mass-market penetration. Industry research consensus shows that such advanced services could bring extra monthly ARPU in the range of 10 to 35 euros, for a penetration of 5 to 30 percent of the subscriber base in advanced markets. This is a significant opportunity for service providers - potentially tens of millions of euros in additional revenues in the future for a 1M subscriber operator - despite the regional volatility factors built into these estimates.
While ARPU from these services may only add up to a fraction of the media and network access services revenues that incumbent operators currently enjoy in the short term, there is definite potential for new revenues and accelerated growth at some point in the next 18 to 24 months.
CE vendors already see a big opportunity to extend their reach into the connected home through these new services and grow their device revenues. Their outstanding skills at creating superior devices and distributing them on a worldwide basis give them huge economies of scale. They can educate consumers, make the technology affordable for the masses or go after lucrative high-margin segments of the market. Yet, for some advanced IoT services - the ones that actually generate sustainable recurring revenues like home security or energy management - their installation and usage remain deeply integrated into the home environment and usually require an installer to come on site. This extra level of integration and service often requires regional partnerships with specialized firms and local subcontractors that will handle the last-mile dimension of the service.
This is obviously an area where broadband service providers are traditionally very well positioned. If this card is well played, this can form a natural extension to the on-going media gateway deployments and which can be increasingly positioned as a monetization anchor in the connected home.
As a counter approach, this could prompt CE vendors to become more like telco and cableco service providers and change their business models, or stay in a segment of the IoT market that has lower end-to-end service expectations and less built-in recurrence.
3. Integrating IoT into a Connected Home product strategy
For pay-TV service providers, extending their offering with IoT and smart home services will undoubtedly require new skills, first and foremost to find out which vendors are the right partners to choose to be successful in this new evolving environment while leveraging existing customer premise technology.
Most high-value added IoT services feature a hub device in the home to support low-energy protocols used by various devices and consolidate data before interfacing to a cloud-based application platform. Such a hub can be a standalone device or be integrated into a home media gateway for instance.
Seamlessly integrating services that are accessible at a click of the remote control gives service providers an edge, as such integration actually brings extra convenience that consumers tend to appreciate and value. This usually implies that the set-top box software platform is both Linux-based and HTML5-enabled, allowing the mash-up of API and services to be done very efficiently at the set-top box app level and on other device platforms, with the proper level of security - this is typically what NAGRA can deliver with its OpenTV 5 Connectware product for set-top boxes.
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IoT or the Internet of Things is heralded as the next big thing in the technology world. Should pay-TV operators be paying attention? The truth is, the convergence of these two network-based service plans - IoT and the Connected Home - has started to happen from multiple angles for a few years now. And for pay-TV consumers, there is a real value in having access to IoT applications across a broad range of devices in and outside the home, through a packaged service provider offering that seamlessly blends media with communications and advanced lifestyle services.
