Service Providers and the Connected Home

Service Providers and the
Connected Home
Kurt Scherf, Vice President, Principal Analyst, Parks Associates
The Challenge before DSPs
Digital Service Providers (DSPs) – including broadband, television, communications, and wireless service providers – must
assume an expanded role in the digital home. They are facing competitive threats from both fellow DSPs and alternatives
to the services they have provided for decades (voice, video, data services, communications, etc.). From Vonage to Google,
the DSP have more competitive challenges today (and risk to their bottom-line profitability) than ever before, and they must
work harder and smarter than previously to keep their own customers happy and to differentiate from their competitors.
There is a duality to their position, though, as DSPs operate in a risk/opportunity paradigm. The digital home opportunity
is a significant “greenfield” area of development. With hundreds of millions of households worldwide establishing the basic
connection points to enable multidevice connectivity, it is an open field as to which companies can most successfully mine
this new opportunity.
DSPs operate in a risk/opportunity paradigm
The DSP will leverage two-way communications (operator
to the home and device-to-device in and around the home)
to build new services, increase customer satisfaction, and
Broadband and Home Network Growth
Residential Broadband Subscriptions (#M)
800
Home Network Households (#M)
grow revenue per subscriber (ARPU), doing so through
deployment of home network equipment and delivering
connected home applications spanning entertainment,
communications, technical support, and home, health,
and energy management.
Service and Device Connection
and Configuration are of primary
importance to DSPs
2
200
2009
2010
2011
2012
2013
2014
2015
Source: Parks Associates Research
© 2011 Parks Associates
As history has shown, the digital home is not yet a “set-
In other words, as DSPs pursue digital home opportunities,
it-and-forget-it” experience for consumer or service
they must consider the impact to their brand, customer
provider. Instead of a world where all IP-connected
service, and overall revenues. Particularly important are
devices easily self-configure, announce their capabilities,
the processes to connect and configure services and
share similar interfaces, and function with out-of-the-box
devices. These tasks must be accomplished in a much
ease, installation is typically fraught with trial-and-error,
more automated way, and DSPs must manage solutions in
missteps, and – to the detriment of the DSP – a customer
a significantly more granular manner than what they have
support call.
done in the past.
The Connected TV and Video Experience: Recommendations, Search, and the User Interface | © 2010 Parks Associates
The Digital Home Components
Pay-TV services: As pay-TV providers face increasing
competition from new entrants and alternatives (such
as free-to-air and online programming), their connected
home efforts are focused on allowing subscribers to access
content and unique services in new ways; examples of
such efforts include the whole-home DVR, availability
of online video content to television sets, and use of the
home network to bring user-generated or home serverbased content to the television screen; TV Everywhere
initiatives currently provide cable television channels
to Internet-connected devices, but
the pay-TV DSP’s
premium content is finding its way to a growing number
The digital home is comprised of the following elements:
Access services: Facilities-based services, including
broadband, pay-TV, communications, and wireless services
of retail-based CE (game consoles, smart TVs, connected
Blu-ray players, smartphones, tablet computers, and more)
Communications:
Advanced
customer
premise
equipment, such as the femtocell, improves wireless signal
Content: Can be facilities-based (such as pay-TV) or “over-
quality in the house and can serve as a distribution point
the-top,” including music, video, gaming, and user-created
for information and content on a wireless network to other
content that comes into the home to be accessed via
devices and systems in the home
numerous platforms
Mobile devices: The proliferation of smartphones and
The residential gateway: Broadband and triple-play DSPs
tablets expands the DSP’s reach beyond communications
are using residential gateways in increasing numbers to
and into mobile applications for entertainment and home
terminate broadband access services, to help configure
and lifestyle management; DSPs are interested in making
and manage home network settings, and reduce or
TV Everywhere content available to mobile devices and
prevent customer support calls; they are also launching
leveraging these devices as control points for advanced
points for new connected home services
television services or home and lifestyle management
features
The sheer multitude of components in the digital home forces DSPs to
undertake new roles - and seek the most efficient and flexible ways to do so.
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3
The Digital Home Components
Connected consumer electronics: These retail- and DSP-deployed CE, including smart TVs, Blu-ray players, game consoles,
and Web-enabled set-top boxes, can play a dual role; they can be pure “over-the-top” plays and have Web applications
that receive content from unmanaged services; there is also increasing development of CE that link to premium managed
services from television providers
Technical support: In growing numbers, consumers are seeking out professional technical support services to help resolve
problems with home computers, peripherals, and home networks; these services can be delivered via multiple channels
and DSPs are now delivering premium technical support to complement their broadband and wireless businesses
Home and Lifestyle Management: The DSP role in home and lifestyle management is nebulous at present, but there is
growing interest in leveraging broadband and wireless networks as the communications infrastructure between a smart
meter and a utility to report real-time energy consumption information to the customer; also, DSPs – particularly in Europe –
are interested in pursuing value-added applications that allow consumers to self-monitor their home for safety and security
purposes; detection and reporting of environment hazards such as smoke and carbon monoxide can be implemented,
and remote control of lighting, energy management devices and systems, and appliances may also be significant features
Critical success factors for DSPs deploying connected home devices and services:
• How effective they are in deploying and managing their core services – with dynamic
service provisioning, quality-of-service assurances, seamless billing and activation, and
service and customer management as key tenets to high-quality delivery;
• Focusing efforts on “zero touch” service/device provisioning and billing, where the
installation of both customer premise equipment (CPE: typically defines products such as
modems, residential gateways, set-top boxes, eMTA terminals, etc.) and retail-purchased
consumer electronics can be automated, with few, if any, configuration frustrations;
• How well they can deploy value-added services to segments of their subscriber base; and
• How efficiently they can scale their connected home service deployments to account
for devices beyond the residential gateway – set-top boxes, network-attached storage
devices, and other retail-purchased consumer electronics.
4
The Connected TV and Video Experience: Recommendations, Search, and the User Interface | © 2010 Parks Associates
Stage 1: Service and Device Activation
The digital home opportunity for DSPs begins with
the basics – service provisioning and activation. Here
the DSP establishes the appropriate connections to
the PC, sets up e-mail accounts, and introduces the
customer to the DSP-branded portal, which can host
Are Consumers Interested in Expanding
Home Network Use Cases?
Home network from service provider
All home network households
Printer sharing
Connected TV
e-mail, entertainment services, and customer support
information. The DSP goal is to bring service and device
activation to the customer in the easiest way possible
with the minimal amount of configuration.
During the initial home network setup, DSPs have the
Shared files
Network-attached storage
Remote access to
networked devices
opportunity to add value by enabling basic home
0%
network configuration tools. Why? Because a growing
portion of their customers expect it!
Percentage of U.S. Networked Households
30%
Source: Consumer Demand for Technical Support Services
© 2011 Parks Associates
Worldwide smartphone connections will be 400 million by 2014.
Today, less than one-half of U.S. households with a
Beyond broadband services and customer premise
home network have a configuration where printers and
equipment, DSPs can play a more active role in the
centralized files are accessible to multiple devices on
activation and proper configuration of wireless devices,
the home network. The DSP could be significant player
including smartphones and tablets. With worldwide
in changing these dynamics. The demand for enhanced
smartphone connections approaching 400 million by year-
home network configurations is 30-150 percent higher
end 2014, these devices will have active roles as controllers,
in households that are already receiving at least a basic
entertainment displays, and communications platforms
(broadband-sharing) home network from their service
blending fixed and mobile connections (voice-over-Wi-Fi
provider when compared to networked households in
and femtocells).
general.
In order to facilitate both efficiency and scale for service
This demand is an opportunity for a service provider to
and device activation, DSPs will need activation solutions
provide branded home network configuration tools that
that provide both minimal configuration and the ability to
enhance their customer support credentials. Such services
reach a variety of devices beyond the modem, residential
can build loyalty and establish the service provider as the
gateway, and/or the set-top box. In other words, as
go-to entity for additional home technical support services,
consumers add more devices to the home network,
which operators can build into new revenue-generating
providers need solutions that can scale to include these
services.
new devices with little to no reconfiguration requirements.
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5
Stage 2: Value-added Services
Bundling of core access services – broadband, television, home phone and
mobile – increases customer satisfaction. Depending on the number of services
on the bundle, the percentage of consumers indicating very high satisfaction
improves anywhere from 10 to 20 percent (overall, 62 percent of broadband
subscribers are highly satisfied with their service).
Bundling value-added services within a DSP’s core offerings may have an even
more significant impact on customer satisfaction. In examining consumers
Bundling services can
improve customer
satisfaction rates by
10-20 percent.
who receive a typical value-added services package (a home network router/
residential gateway, parental controls, Internet security, and access to premium
tech support, to name a few), the percentage of customers giving their
broadband service provider high ratings for satisfaction figure rises to 80 percent!
Beyond bundling, however, which
How do Value-added Services
affect Customer Satisfaction?
value-added services will play the
greatest
(U.S. broadband households extremely satisfied with broadband service)
All broadband households
role
in
both
improving
customer satisfaction and loyalty and
contributing to new revenue streams?
62%
Premium technical support
Parks Associates research finds that the
Online file/data backup service
presence of exclusive entertainment
Home network router
content (video and music offerings for
Extra warranties
example), home networks, and a variety
Parental controls
of customer support and assistance
Antivirus/Internet software protection service
offerings
Home security service
(data
backup,
premium
technical support, parental controls,
Home monitoring service
and
50%
Percentage of Respondents
Source: Consumer Demand for Technical Support Services
© 2011 Parks Associates
80%
managed
Internet
security)
increases the percentage of highly
satisfied broadband customers by 8 to
18 percent.
With proper activation of services and devices, DSPs are able to deliver both core
and value-added services features in a proactive and cost-effective manner. Many
customers sign up initially for a few basic services – perhaps just a broadband
connection. However, as service providers roll out new services (voice-over-IP,
IPTV, Web camera monitoring, etc.), these companies not only want to activate
the accompanying hardware but make sure the back-end systems (billing) are
notified if/when the customer has activated the service and should be billed
accordingly.
6
The Connected TV and Video Experience: Recommendations, Search, and the User Interface | © 2010 Parks Associates
Stage 3: Tech Support for OPEX Savings & Revenue Generation
With the increased number of devices being added to the
QoS is essential to maintaining subscriber satisfaction
home network comes the risk that customer support calls
and reducing churn. Without QoS, a scenario in which
will grow substantially. In fact, one-quarter of consumers
one household member’s VoIP suffers from pauses while
reporting a networking-related problem contacted their
another family member downloads a file is highly possible.
broadband service provider for assistance, regardless of
That same scenario would cause a delay in video, and
where they purchased the home networking equipment.
customers will not tolerate these service problems.
Assuming that support calls for home networking alone
will remain on their current trajectory, the cost to DSPs
will total in the hundreds of millions of dollars annually.
DSPs must implement solutions that provide for more
automated, remote, and dynamic resolution of device and
service configuration issues.
Finally, remote management capabilities allow service
providers to update CPE firmware and software remotely.
This ability is particularly critical with video-related services,
for which remotely enabled firmware and software
upgrades deliver QoS for smooth voice conversations and
video viewing. Customers may be willing to put up with a
slight “crackle” on a phone call or a small delay in receiving
an e-mail, but a bad image during the big football game
can ruin a good viewing party!
Support calls for home networking could cost
DSPs hundreds of millions of dollars annually.
Cost savings is often the initial driver pushing service
Remote management of the customer premise equipment
providers and equipment vendors to implement
such as modems, set-top boxes, and home networking
automated support initiatives. Reduction in calls is a key
equipment offers service providers a number of benefits.
metric in evaluating the effectiveness of an integrated
First, service providers can offer online technical support,
customer support solution, and reducing call volume by a
solving CPE problems using remote diagnostics tools that
mere 10 percent can be considered a resounding success
can repair problems without the need for a customer
by today’s standards. However, cost savings may be only
support call or service appointment. Second, remote
one of the reasons for service providers to evolve from
management of CPE allows service providers to increase
reactive to proactive entities. Broadband providers can
the quality-of-service (QoS) for customers by intelligently
implement technical support services that not only allow
managing network traffic.
them to manage their incoming technical support calls
The ability to intelligently manage the network is especially
but also can develop fee-based businesses to handle a
important as service providers anticipate the adoption of
variety of technical support issues.
next-generation services such as VoIP and IPTV. Ensuring
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7
Stage 3: Tech Support for OPEX Savings & Revenue Generation
Consumers respond favourably to the idea of receiving services such as PC tune-ups, virus detection and removal, home
network support, peripheral problem resolution, and help with common PC applications from their DSP. Three-fourths of
consumers also indicate a preference for receiving a variety of technical support services from a single vendor, which bodes
well for the DSP, which can bundle the cost of premium care services onto the customer’s existing monthly bill.
Current and Desired Value-added Features from a DSP
Currently Use
Highly Interested
Antivirus
Router/gateway
Parental controls
Online data/file backup
Premium tech support
CE warranties
Home security service
Home monitoring service
0%
Percentage of respondents
50%
Source: Consumer Demand for Technical Support Services
© 2011 Parks Associates
The top technical support services of interest to consumers:
• Antivirus/Internet
security
services:
Managed
services
from
broadband providers that detect and remove malicious software
from home computers. These services typically have service providergenerated alerts that inform users of new security threats, security tips,
and troubleshooting.
• Parental Controls: Common parental control services offer filters to
prevent children from accessing inappropriate content online. Additional
features typically include restrictions to chat/instant messaging sites,
file-sharing blocking, day-and-time restriction scheduling, and
monitoring and logging of Internet habits for parents to review.
• Online data backup services: Automatically copy documents,
photos, and videos from home computers to a service hosted on
the Internet.
• Live technical support services: automated, telephone, and online
solutions include remote and on-site support services
8
In total, the premium
care opportunity for
service providers
will grow from $2.4
billion in 2010 to
$4.5 billion in 2014.
The Connected TV and Video Experience: Recommendations, Search, and the User Interface | © 2010 Parks Associates
Stage 4: New Connections & Services
The digital home is not a static environment, and
home network configuration and provide at least basic
consumer demand for enhanced value-added services
management functionality to ensure a high quality of
spanning communications, entertainment, home and
experience, particularly in their use as video playback
health monitoring, and energy management will drive
devices.
the majority of new home network connections in the
next few years. With the digital home infrastructure in
place, connected devices will grow quickly beyond the
residential gateway, router, and wireless access point.
This evolution of the digital home includes consumer
electronics, home controls, and communications nodes
and represents a significant opportunity for DSPs to play
a role in the configuration and management of the home
network.
To account for the variety of consumer desires, as well
as regional differences as to which digital home features
matter most, DSPs need flexible activation, provisioning,
and monitoring solutions that are capable of providing
support for a great many devices and services.
DSPs need to extend their reach further into their
subscribers’ homes via set-top boxes, residential gateways,
and femtocells – and expand to new devices and services,
including Web-enabled consumer electronics, mobile
The first opportunity will be to support the proper
devices, and monitoring and control solutions. Operators
configuration of more basic home networking settings,
can take advantage of connected CE to launch home
providing consumers with the ability to augment the basic
networking, online storage, remote DVR scheduling, and
functionality of the home network. Enhancing the usability
other types of advanced services. Providing managed
of the home network by helping consumers establish
digital home services can be either a revenue generator or
proper settings for printer and file sharing across devices
a differentiating factor for service bundles. Home services
is the first step.
and blended applications which “converge” entertainment
As consumers buy more connected and smart CE, there
will be a greater need to bring these devices into the
and communications offer the potential to grow ARPU
significantly.
Parks Associates forecasts that more than 8 billion devices will be
connected on the home network by year-end 2015.
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9
Summary Thoughts
Our recommendations for DSPs as they evaluate different customer support solutions include the following:
The solution must enable granular metrics and provide
The solution must scale to consumers’ changing needs.
a roadmap for extensions. Data and metrics matter to the
In initial rollouts of enhanced customer support solutions,
service provider, and any customer support solution must
the majority of subscribers will be content with significant
account for these numbers from all links in their service
amounts of automation in terms of troubleshooting and
portfolio – including home networking equipment or
self-help. Most do not want to be involved in the process
other digital lifestyle equipment. The mantra from service
of diagnosis or repair; some will not want to know about
providers is metrics equals management, so the solution
a problem, only that their equipment and services are
must fit well with existing and emerging standards for
working as promised.
remote management, including TR-069.
However, as customers grow more accustomed to their
The solution must also allow for the migration of
service provider as an experience provider and even
applications, including minute and localized measurement.
a trusted digital home advisor, the solution must take
The ability to pull specific data about quality-of-service
into account the likelihood that customers will want to
(packet loss, latency, etc.) from individual set-top boxes
customize its use to fit their particular lifestyle. The service
and other entertainment receivers is a critical next step to
provider may not want to remain a hidden fixer; there
many remote management systems offerings. Tools that
may be significant value in branding certain aspects of
enhance the provider’s ability to analyze and aggregate
customer care.
data will also be important to mining the data for new
opportunities for cost reduction or revenue generation.
On a simple level, this branding may entail something
like proactive messaging in the form of e-mail or instant
message that alerts customers to new virus outbreaks and
offers solutions. On a more advanced level, the carrier may
want to deploy a customer-facing and subscription- or
fee-based support solution and value-added service that
extend its basic offerings.
10
The Connected TV and Video Experience: Recommendations, Search, and the User Interface | © 2010 Parks Associates
About The Author
Kurt Scherf studies developments in home networks, residential gateways, digital
entertainment services, consumer electronics, and digital home technical support services.
Kurt is the sole author or contributing author/analyst to more than 100 research reports and
studies produced by Parks Associates since 1998.
Kurt joined Parks Associates following a career in political research and multi-tenant dwelling
management. He earned his BA from The University of Iowa.
Industry Expertise: Home Networks & Residential Gateways, Home Networking Media, Settop Boxes, Connected Consumer Electronics, Consumer Storage, Media Server Hardware and
Software, Consumers and Digital Entertainment, Television Services, Online Video, Digital
Home Technical Support.
ABOUT PARKS ASSOCIATES
Parks Associates is an internationally recognized market research and consulting company specializing in emerging
consumer technology products and services. Founded in 1986, Parks Associates creates research capital for companies
ranging from Fortune 500 to small start-ups through market reports, primary studies, consumer research, custom research,
workshops, executive conferences, and annual service subscriptions.
The company’s expertise includes new media, digital entertainment and gaming, home networks, Internet and television
services, digital health, mobile applications and services, consumer electronics, energy management, and home control
systems and security.
Each year, Parks Associates hosts executive thought leadership conferences CONNECTIONS™, with support from the
Consumer Electronics Association (CEA) ®, CONNECTIONS™ Europe, and Smart Energy Summit.
http://www.parksassociates.com | http://www.connectionsconference.com | http://www.connectionseurope.com
http://www.connectionsindustryinsights.com
Attribution: Authored by Kurt Scherf
Published by Parks Associates
© 2011 Parks Associates
Dallas, Texas
All rights reserved. No part of this book may be reproduced, in any form or by any means, without permission in
writing from the publisher. Printed in the United States of America.
Disclaimer: Parks Associates has made every reasonable effort to ensure that all information in this report is correct.
We assume no responsibility for any inadvertent errors.
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