Changing Dynamics of the Smart Home: Opportunities for Providers

A Parks Associates Whitepaper Developed for Calix Changing Dynamics of the Smart Home: Opportunities for Service Providers - These market forces suggest suggest market forces These service the time is right for that the market now. enter to providers Many first-time buyers are joining the wave of of the wave joining are buyers first-time Many smart adoption, and they will need as home supportmuch or more as the early buyers. Providers today are rightly cautious when considering the smart cautious when considering rightly are today Providers now make to aligned multiple factors have however, home space; this service enter area. to servicethe optimal time for providers Innovative solutions in cloud and service provision are now available that address consumer pain consumer pain that address available and service now Innovative solutions in cloud technologies are provision smaller and also allow These opening up new servicepoints, and the ability differentiate. to revenues as the bigger players. on the same level compete to providers regional failures entrants’ previous by examining the lessons learnedtechnology and from the benefits of new Through service the smart enter confidently and successes, can now The need home services providers marketplace. setup and support with among consumers is clearly defined, a mass market,reaching needs while the to risks data privacy and elevated. are The changing dynamics of the smart changing opportunitiesThe service distinct who possess home create for providers, (devices solutions and services) the advantages in offering Service assets, the to consumers. have providers and flexible smart a robust and deliver promote, create, to and the brand recognition consumer relationships, privacy protection, and a variety of home experience consumers that incorporates support, to security, propositions. value personalized been challenging, Service but traditionally they have ambitions in the smart not new, provider home space are results. past efforts costly and disappointing with many abandoned or producing Consumers are becoming more connected every prod with new more day becoming are Consumers ucts and services smart as the of the early out market home moves have in the mass market, solutions consumers With stage. adopter seamlessly. to expectations for stronger Opportunities Service for Providers Changing Dynamics of the Smart Home: DynamicsChanging Smartthe of Home: Number of Connections is Growing

Consumers continue to be more connected, from health and in-home devices to smart home products and smart speakers. The average household owns 10.4 IoT ( of Things) devices.

Among U.S. broadband households: 26% own at least one device from a list of common smart home devices 28% own a smart speaker with voice assistant, up from 3% in 2016 46% own a connected health device

71% own a connected entertainment device

© Parks Associates

A positive experience drives more purchases. When a household buys one connected device and the experience of setup and daily operation goes smoothly, more purchases will follow. Parks Associates research finds that owners of smart speakers with voice assistants (such as Amazon Echo or Google Home) are three times more likely to own a smart home device than consumers who do not own smart speakers.

Having multiple IoT devices in the home is becoming common— among consumers who own either a connected entertainment or smart home device, more than 60% have more than one.

The consumer experience is what influences the next purchase of smart home devices. © Parks Associates | © Parks All rights reserved | www.parksassociates.com

HOLD Changing Dynamics of the Smart Home: Opportunities for Service Providers

From the rapid adoption adoption the rapid From of voice assistants to to assistants of voice the video doorbells, “making is theme common every living easier day technology.” through From smart alerts fall prevention, lighting to for From missed medication, or the ability access help to system) with a PERS (personal emergency response services emerging many have seniors now device, continue living independently that enable them to and family comfort caregivers to while providing members. • Whether a solution has broad appeal or is designed to to appeal or is designed Whether a solution has broad willing consumers are challenges, specific life address buy. to

Voice assistants allow people to multitask hands- people to assistants allow Voice can select change the A person music, free. multiple send commands to and temperature, smart devices while cooking dinner. time and effort doorbells and provide save Video access to remote allowing peace of mind by access delivery providing approved personnel, and sending the dog walkerto or housekeeper, notifications when a family member arrives home. Internet and entertainment access services provide age- time and allow limit screen to a way parents in a seamless manner. content appropriate • • • Solutions can be the smart device itself or a service such as with the device, being used in combination IP that provide subscriptions for the premium solutions Connected calls. and e911 video storage multiple aspects of address today available lives. consumers’ Consumers are embracing technology technology embracing are Consumers their lives. and improve simplify to Capitalizing on Technology to Improve Everyday Living Everyday Improve to Technology on Capitalizing All rights reserved | www.parksassociates.com | © Parks Associates Consumer Desire for anEasy, Experience Seamless a large opportunity for service providers for service to fillthiscustomera large need. opportunity Convenience plays consumers amajorrole creating are intheactions likely tosupport, take when seeking provider. homedevice, 28%reached outto eitheramanufacturerorindependent support with theirsmart in 2018. While 43%usedavailable information found to inproductmanualsorontheinternet resolve the issue atleastoneproblem setupgrew owners device home device whoexperienced during The percentage ofsmart But thisprocess canbepainful. themselves isincreasing rapidly. of consumerswhoinstallandsetupproducts the setupprocess more intuitive, thenumber As adoptionincreases andmanufacturersmake the life oftheirdevices. consumers wantapain-free process throughout continual protection ofdataandprivacy, From to the setupandtechnical support, experience problems. set uptheirdevices themselves homedevice owners whosmart ofdevice owners and one-half entertainmentconnected Approximately of one-third 100% 50% 25% 75% Overall Smart Home DeviceOverall Installation Smart Methods 0% Q1/2016 U.S. Owners of Smart HomeDevicesU.S. ofSmart Owners Friends orfamilymembers Q1/2017 the lastyear. orfamilymemberhelpina friend set upadevice themselves orhad owners have eitherinstalledand homedevice outoften smart Nine The top five most common problems: • • • • • communicating withotherdevices (9%) physically installingdevices (13%) configuring settings(13%) learning how to usedevices (13%) devicesconnecting to theinternet (14%) Myself © Parks Associates Q1/2018 Changing Dynamics of the Smart Home: Opportunities for Service Providers 40% © Parks Associates © Parks © Parks Associates © Parks loss of loss of wireless an unresponsive difficulty getting poor device difficulty using 32% connectivity 27% device 22% software and apps to properly work 16% performance 16% features device Frequent Issues with with Issues Frequent Smart Devices Home 20% 0% to work properly work to device performance Device unresponsive Device Loss of wireless connectivity Di culty setting device up the Di culty using device features Di culty device using Smart Home Devices: Common Technical Problems Technical Smart Common Devices: Home Di culty getting software/apps Technical issues resulting in poor in poor resulting issues Technical U.S. Broadband Households that Experienced Technical Problems with Smart Problems Home Device Technical Experienced Households that Broadband U.S. Nearly 40% of smart home device owners who set up their devices Nearly 40% of smart devices set up their who owners home device help the professional have to report prefer themselves they would next set up a device. time they Many consumers are not yet comfortable with the setup process for smart for comfortable not yet home devices. with the setup process consumers are Many the device that lifecycle throughout consumers experience problems other technical Beyond setup problems, operation. continued for need resolution cause frustration and support for that demand recurring issues demonstrate These services this market despite opportunity, company no single exist; however, the support dominate up to Approximately has stepped space. technical support a one-fifth have households U.S. broadband of their internet-connected entertainment, health subscription for single company and smart and no home devices, and wellness, than 14% of this market. more has captured Service this market into can step service within their providers existing service as their them a competitive footprint, give relationships the sale of ongoing supportadvantage for subscriptions. All rights reserved | www.parksassociates.com | © Parks Associates Security Issuesare Security Top ofMind potential risks beforepotential risks any damagehappens. provide peaceof mindto consumersby identifyingandaddressing providers can capabilities, service in cloud-basedcybersecurity products. ofsmart ongoing technicalWith support innovations address consumerneedsas itrelates to installation, setup, and providers withtrainedfield cantechnicians, service support to facilitate capabilitiesandtheability in-home technical support From theirongoingrelationship withhouseholdsto having appealing. consumerstype ofservice very findingthis ranked numberoneinterms ofappeal, withmore thanhalfof that protectdevices fromServices unauthorized access are higher thanthelikelihood ofexperiencing atechnical issue. Parks Associates research findsthatconsumers perceive the likelihood ofexperiencing breach asecurity as figure included below. ofhouseholdsare highlyconcerned issueslistedOne-third inthe withallthesecurity regarding theirpersonalinformation security. anddevice average,information—on broadband respondents admitted onmore to concerns thanfourrisks specific data andaccessto devices. theirconnected Householdsalsohave multipleanxietiesregarding theirpersonal andunauthorized accessoftheirpersonal ofconsumersare aboutprivacy concerned More thanthree-quarters are higherthanthoseassociated withtechnical problems. For consumers, breach associated therisks withasecurity Companies calling youCompanies basedonyour calling onlineactivities Companies collecting yourCompanies viewing/usage collecting behavior Someone hacking yourSomeone orstreaming media TV Companies collecting yourCompanies viewing/usage collecting Someone hacking yourSomeone pay-TV provider Companies sellinginformation about behavior ontheirown /app Someone hacking anonlineservice Someone device to obtainyour information Not concerned 1-3) (Rating Someone hacking yourSomeone Concerns Personal about Information Security to obtainyour information to obtainyour information to obtainyour information you to othercompanies on allwebsites/apps U.S. Broadband Households Concerned 5) (Rating 20% 0% 20% Very concerned 6-7) (Rating the home. devicesconnected in needs regarding their capitalize on consumers’ in auniquepositionto providers areService 40% 60% © Parks Associates 80% Changing Dynamics of the Smart Home: Opportunities for Service Providers 50% 40% © Parks Associates © Parks 30% © Parks Associates © Parks 20% ISPs rank at the the at rank ISPs of providers top consumers that access trust to their and manage with 65% data, as ranking ISPs either their first, or third second, most trustworthy with company to regards security and privacy issues. 10% 0% U.S. Broadband Households Broadband U.S. 80% with your devices © Parks Associates © Parks Installs devices for you devices Installs various device features various device Manages online privacy Teaches you how to use use to how you Teaches Resolves technical problems technical Resolves generated by the equipment the by generated with device and home and device with Sends personalized suggestions that can improve user experience user canthat improve Protects against being monitored/ controlled unauthorized people by High of Smart Support Appeal Device Home Services Provides online tools that help you you help that tools online Provides Helps to get devices connected and get devices to Helps capable of sharing data/information Backs up all records, data, and video video and Backs data, records, up all 40% Monitors and protects and Monitors personal data/ Helps set up and con gure new devices new con gure set up and Helps resolve technical problems on your own problems your on technical resolve Proactively resolves potential problems potential Proactively resolves 0% U.S. Broadband Households Broadband U.S. and Manage Consumer Data and Manage Consumer Ranked most trustworthy as the company trustworthy most company Ranked 2nd or 3rd as the of consumers are willing to purchase a comprehensive subscription subscription a comprehensive purchase willing to are 60% of consumers Most Trustworthy Company to Access Access to Company Trustworthy Most Pay-TV provider Pay-TV Social media site Video sharing sites sharing Video Device manufacturerDevice provider Ad-based video serviceAd-based Internet serviceInternet provider Proactively being able to access access being able to Proactively to home networks remotely identify and correct technical as the ability as well issues, privacy, security, manage to resonates and device updates, with consumers. positively Support Services are Offerings. Viable Parks Associates finds 40% of finds 40% of Associates Parks households broadband U.S. find smart home support services technical that resolve appealing and 51% find problems against unauthorized protection be appealing. access to Nearly $9.99 per month. to support service is lowered when the price Subscription video service Support Services Have High Appeal. of consumers are likely or very likely to pay for support services covering support for pay services or very to likely likely covering are 43% of consumers $29.99 per month. at smart offered when home devices All rights reserved | www.parksassociates.com | © Parks Associates to address consumers’ problems prefer inthemethodthey advantage. isadistinct today’s provider’sIn lifestyle, intheirchoices. connected consumersvalueflexibility Aservice ability ideal positioncompared to manufacturersandeven retailers. providers already services. possesstheinfrastructureneededto offerService support These assetsputtheminan Technician remotely logged into your device 100% self-help apps, chat, phone, orrolling atruckwithtechnician. providers canoffer ofoptionsforService avariety support— 50% 25% 75% 0% $9.99 permonth Likelihood to Pay Services Home Device for Support Smart Face-to-face store inaretail Social networking website networking Social Preferred intheFuture for Method Support U.S. Broadband Householdsthat have Resolved Technical Over the Webcam/Video call Webcam/Video Problems withHelpofaProfessional Technician Smart HomeDevice Intenders withSpeci edPriceSmart Presented Via online chat online Via Over email $14.99 permonth In-home Other 0% $19.99 permonth 30% $29.99 permonth © Parks Associates © Parks Associates Not likely Likely Very likely Neutral 60% Changing Dynamics of the Smart Home: Opportunities for Service Providers Companies may misstep any number of ways. number of ways. any misstep may Companies support to the resources having Whether that is not change direction, or not being willing to change, market underestimating timing and technology a new product or servicedirection, offering can be exceptionally are technology platforms difficult. New market but sometimes even vulnerable, leaders can smart device software platform Google’s stumble. one even was abandoned before (Android@Home) examples exist in it. Numerous manufacturer adopted home servicesprevious of the early entrants as many of effort amount a tremendous developing focused quickly that became platforms their own out of date. until an industryWaiting takes on a clear direction While failure. helps prevent technologies specific the market still evolving, is moving are standards Vendors proprietary from open platforms. away to developing embracing this direction and are are applications that work with these open protocols. Many of the earlier home service of the earlier home Many efforts failed early. too market the entered because they Timing is Timing everything With any new technology, innovators are the majority are innovators new technology, any With small. are numbers and their overall of buyers, quickly how the majority of consumers Forecasting will embrace a new type of solution is incredibly smart For example, been thermostatshave difficult. have than a decade and market more for in the U.S. households, only 13% penetration among broadband while smart speakers assistants have with personal 28% with years gained rapid acceptance in just three adoption. Most early entrants in the home services with Today, speed of adoption. market overestimated than a quarter more at least of households owning purchase to than 50% intending and more one device, a smart home device the next in service 12 months, confidently invest. can now providers is difficult, transformations technology Predicting can changes and the speed of technology failure. to contribute foresee being able to adoption rates, Similar to whether a particular solution will fail or take off in Examples from foresight. the marketplace requires almost every to exist. Sometimes the first online consumer eBay’s market succeeds (e.g., but often earlyprocess), entrants adopt a solution Betamax). Unique ’s that ends up losing (e.g., Microsoft’s can drive success (e.g., market forces the with IBM for Innovations players operating platform). can resurrect Apple was nearly once thought past their prime (e.g., bankrupt 1990s). in the late challenges Another contributing factor that creates that hinder adoption and market success is not having solutions provide to in the ecosystem enough vendors an important are vendors These and drive excitement. part of continuing solutions as they can help service keep changes. up with rapid technology providers Service providers may be suspicious of entering the space. Several well-known companies such as AT&T, Verizon, Verizon, Service Several well-known of entering be suspicious the space. such as AT&T, companies may providers the smart entered home services space only to Telekom Deutsche and Telefonica, Orange S.A., Telecom, British service these large when traction. gain succeed struggle to It we can as “How ask questions such to is prudent avoid service can confidently did not?” By today examining keyproviders providers attributes forays, of these unsuccessful. previously others were where and succeed now miscalculations previous Healthy Skepticism is Expected Regarding Investing in Services is Expected Investing Regarding Skepticism Healthy All rights reserved | www.parksassociates.com | © Parks Associates Take Advantage of Today’s HomeDynamics Smart their smart homeofferings.their smart failures andhave regrouped, retooled, andrelaunched Telekom, Vodafone, and Verizon have evaluated their large providers. Telecoms suchasOrange, Deutsche ofthe canbeseenby there-emergence viable market toEvidence enter thatthetimeisright adesirableand to protecttheir ability personaldata. capabilities, andconsumers’support confidencein based ontheirrelationship withconsumers, their unique positionto beableto address theseneeds providersongoing technical are issues, ina service to setupandFrom device concerns cybersecurity toA seniorcanusePERSdevices continue livingindependently. andgive accessto thedogwalker.delivery Afamilycanutilize parental controls access. for internet/entertainment to remotely videodoorbell ofusecases.allow package Amillennialcanuseasmart accommodate avariety providertop offlexibleproductplatformsto deploy allows solutionsthatcanadaptandchange aservice to witheachhousehold, butthelayer ofcloud-basedcapabilitieson vary The specificproductsandservices adoption. productsandsolutionsinnumbersapproaching Consumers are mass-market now embracingsmart enter themarket. the timingisbetter to and hasturned market key indicator that the isavendor support This evidence of consumer expectations and challenges rise aswell.consumer andchallengesrise expectations With theincrease inadoptionofcomplex devices, connected are reduced. adoption increases for timelinesmarket any productorservice, new alternative planswhenslower growth initially. isexperienced As were discontinued. Companies cancombatthischallengeby having ofdifferentiated offerings.the dearth Asa service result, programs were longerdueto slower adoptionrates, changesintechnology, and intentions andstrong businessplans, experienced thepayback periods providers enteredWhile thelarge service thespacewithgood Impatience for success determines failure. early entrants experienced. early respond to that technology changeswithouttherisks customized while being ableto for theirmarkets withtheirsuppliers, cannow offerworking bundles providers,streams whileminimizingrisks. Service the spaceconfidentlyandcapitalize onnew revenue consumer, companiesto enter allow smallerservice toin thehomeandprovide the technical support to remotelyalong withtheability managedevices protection for thehome network, andprivacy security level cloud-basedplatforms thatallow proactive technologicalRecent innovations, suchasenterprise- Changing Dynamics of the Smart Home: Opportunities for Service Providers

unmatched Wi-Fi performance and coverage, thanks to the latest and greatest ‘Wi-Fi 6’ technology (802.11ax) technology 6’ ‘Wi-Fi and greatest the latest performance thanks to and coverage, Wi-Fi unmatched the hardware (PUF) built in to cutting-edge Unclonable Functions like security Physical with features always-on operation, making network disruptions a thing of the past optimal performance all connectedensure devices to advanced instrumentation and analytics for • • • • Smart and manage the smart deliver to Home Enablement Services ready people and processes get your help you playbook— customized your develop to operations team get with your We’ll subscribers. your home experience for called a Smart Guide—that Home and covers and workflows, delivery architecture system use cases, Services installation lock down to onsite team will work with your Professional best practices. Calix deployment system best practices people in actual scenarios. deployment and troubleshooting and assist your customer Smart Services Home Enablement Empower your and support marketing your teams Empower vision of a smart opportunity subscribers’ your a revenue home into By while tacklingTurn complexity. the chaos and service Cloud, the Calix through providers the network/behavioral analytics and machine learningleveraging delivered with smart issues associated churn. satisfaction as address Equally and reduce can proactively increase home devices to newimportant, subscriber that help service services insights into behavior offer Cloud can provide the Calix providers ARPU and marketing subscriberthat match needs and maximize ROI. Want to offer the world’s most advanced smart most advanced home systems? world’s the offer to Want cutting Now, looked the consumer industry to consumers have cutting-edgeHistorically, for technology. their serviceedge comes from provider. smart premium they are home not typical gateways; BLAST are residential and GigaSpire MAX new GigaSpire The Calix featuring: systems Are you ready to re-invent ‘smart home’ for your subscribers? your for home’ ‘smart re-invent to ready you Are standards-based, only hardware-independent, modular, is the world’s (EXOS) Experience Calix System Operating The always-on smart home operating system. service can quicklyEXOS, providers newWith services deploy smart a range of pre-integrated that leverage home solutions and thousands of smart Service devices. can quickly providers their services change and adapt embrace to needs of their subscribers. and meet the evolving new technologies For subscribers, the smart home shouldn’t be a confusing mix of connected and devices. Ita confusing mix of connected be sensors and devices. the smart be a should subscribers, home shouldn’t For seamlessly. that works together ecosystem and robust manageable of the broadband services products and on top created being delivered that are companies have Consumer-brand and chaos turndisorder, confusion, time has come to the potential The network that service built. have providers all subscribers. is accessible to that ecosystem with the smartassociated secure and open, managed, an home into But there is no time to waste. is no time to But there It start is time to new smart offering services home pace with the market. that are keeping to bring possible these It’s compelling new services opportunities, the essential position as new revenue and retake your market to create quickly, enabler of the smart future. home of the Smart Calix The service Home and Business solution enables of the smart unlock the full potential to home. providers The GigaSpire MAX also features built-in Alexa functionality and support for universal Internet of Things (IoT) Alexa functionalityThings built-in and support Internet universal also features of for MAX GigaSpire The first! it a world’s Zigbee and Z-Wave—making as , technologies—such Turn smart revenue into home complexity Turn All rights reserved | www.parksassociates.com | © Parks Associates About The AuthorAbout The information, visittheCalix website atwww.calix.com. homeandbusinessinto revenue new streams. ofthesmart thecomplexity Fordata analyticsandturn more operatingmodel, by embracingaDevOps leveraging optimize experience networks thesubscriber big premises oftomorrow. andsmart generationnetwork helpourcustomers buildnext Ourplatforms andservices global provider platforms, required ofthecloudandsoftware systems, to deliver andservices theunifiedaccess master andthecloud. and monetize theirsubscribers thecomplexinfrastructurebetween Calix istheleading providers rely onCalixCalix, (NYSE: communicationsservice platforms Inc. CALX)–Innovative to help them About Calix For more information, visitparksassociates.com usat 972.490.1113 orcontact systems andsecurity. consumerapps, consumerelectronics, advancedadvertising, energyservices, , andhomecontrol support digital health,mobileapplicationsandservices, andtelevision services, gaming, Internet homenetworks, The company’s of digital and mediaandplatforms, includestheInternet entertainment expertise Things (IoT), conferences, subscriptions. andannualservice studies, consumerresearch, custom primary research, reports, through market workshops,start-ups executive Founded in1986, Parks Associates creates research capitalfor companiesranging from Fortune 500to small responsibility for any inadvertent errors. foranyinadvertent responsibility United States ofAmerica. ofthisbookmay bereproduced,No part inany form orby any from means, inwriting thepublisher. withoutpermission Printed in the ATTRIBUTION—Authored by Published Ernst. Denise by Parks Associates. ©Parks Associates, Addison, Texas reserved. 75001.Allrights DISCLAIMER — Parks Associates has made every reasonable effort to ensure that all information in this report iscorrect. to ensure We that allinformationinthisreport Parks reasonable effort assumeno hasmadeevery Associates from Iowa State . herMBAfrom earned ofChicago’s University Denise andherBSinIndustrial School Booth data, itwilltell you whatdirectionto take.” execution auniqueperspective. Hermotto andchannelmanagementbrings is atthe“look inlaunchingproductsfrom andsales.development, to marketing, Herexpertise providers, for product leadingnew worked withexperience bothmanufacturersandservice recentlyDenise joinedParks Associates’ Home Energy team. Shehas Management Smart , Ernst Denise consumer technology andservices. products research andconsulting company specializinginemerging Parks Associates isaninternationally recognized market

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