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Security providers early winners in home automation/home security space

Security providers early winners in home automation/home security space But telecoms and cable companies also are in it to win and shouldnt be discounted, an industry analyst says

DALLAS—Security providers have a “first mover” advantage in home automation/home security right now, but the big telecoms and cable companies entering the space are serious competitors who may be game-changers in the future, according to a market research company analyst.

“In the short term, there's enough opportunity for everyone,” Tom Kerber, director of research on home controls and energy at Parks Associates, based here, said in a May 17 webcast on engaging consumers on home automation/home security services. “The combined efforts of all channels will help educate the consumer, grow awareness and increase the opportunity to sell home automation and connected home devices. The idea is that a rising tide floats all boats.”

However, he said, “there are different industries [security providers, telecoms and cable companies] that will be going head-to-head in the connected home. Each channel has its strengths and its weaknesses and size is just one of the factors, and it potentially could be a big factor.”

Kerber said security providers are in an enviable position at the moment. He said they “have a great opportunity to drive the market, at least in the early stages.”

He said reasons for that include “their customer base really matches some of the early adopter profiles, their one-on-one sales approach used by dealers is best suited to educate customers on the value propositions of the connected home, and their professional installation process ensures the customer experience is positive from the outset.”

In addition, Kerber said, “the security channel was also one of the first to the market. We've all heard of ADT Pulse [and also] other players like Vivint, 2GIG and who have been leading the home control/home automation security space for some time now.”

“The security channel, I think, has a lot of reason to feel good at their prospects,” he said.

But Kerber noted that telecoms and cable companies have been entering the home automation/home security space during the past two years. Companies include AT&T, Verizon, Comcast, Time Warner Cable, Frontier Communications and Cox Communications.

Kerber said that some in the security channel discount them. “They're looking at these broadband service providers and telecoms and some are thinking, 'Hey, they've been here and done that before, and they've failed in the past,' and maybe they consider them potentially inferior competitors because of the lack of that strong dealer touch point.”

However, he said, “I think the telecoms would argue that the technology has come a long way and that it has really radically simplified the installation process, making even DIY solutions a practical alternative.”

For example, Kerber said, “Verizon reported recently that 80 percent of its customers chose to install their home monitoring and control systems themselves. So it's definitely not a done deal in terms of who's the winner in this space. Everyone is making substantial investment here, and they're in it to win.”

But Kerber said there continues to be a lot of opportunity in the space. He said that Parks Associates' research shows that “the income from all connected home bundles will grow to over $3 billion in the next five years.”

“This is a growing market that's still in the early adopter phase with still a lot of opportunity,” he said. “The percentage of people who are willing to pay a premium for these services is there and certainly will drive the market going forward.”

And, he said, “beyond the early adoption, I think the ideas of expanding capabilities through opportunities to make money or to drive incremental value through expanded capabilities will drive us beyond early adoption.”

As an example, he pointed to Comcast's partnership with EcoFactor, an energy modeling services company, to provide customers automated control of their thermostats and save up to 30 percent on energy costs. “An application like that, layered on top of this remote monitoring control, I think definitely has the opportunity to drive the market beyond the early adopter phase,” he said.

He also said that partnerships with utility companies could be another opportunity. “They have the ability to fund and put money in that the rest of the channel does not have the capability to do,” Kerber said.


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