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Staking a Claim in the Connected Home: Provider Solutions

A Parks Associates Whitepaper Developed for Calix Staking a Claim in the Connected Home: Service Provider Solutions Purchased from Purchased © Parks Associates © Parks broadband provider broadband © Parks Associates © Parks 61% capture share of mind, share capture of broadband of broadband 39% U.S. Broadband Households Broadband U.S. Owners of Networking in Routers Home Network Routers Obtained Routers Network Home from Broadband Service Broadband Provider from other source Purchased from Purchased 76% penetration. market households in North America have in North117 million households America have 87% broadband— primary as their Wi-Fi connection use households . for long-term revenue growth and share of wallet for years to come. to years of wallet for and share growth long-term revenue for a foundation provide New operator-grade solutions for customer premise equipment (CPE) address critical frustration points for critical for frustration points address (CPE) equipment premise customer New solutions for operator-grade support to competitors. consumers while embedding technology from new service and differentiation revenue staking array of products that are home with a claim in the competing with a growing are operators However, voice interfaces, smart experience, and enhanced data privacy home controls, Wi-Fi and an improved of offers features. , the data in the connected a claim home will control winners in this land rush for The and The hybrid residential gateway — with modem/ gateway residential hybrid The serve — continues to router the majority of U.S. with the ability operators providing households, connected consumers the ultimate give to Consumer-classhome experience. solutions channels challenge through available that operators features offering this position by but a implement at scale, to been slow have networking solution that comprehensive opportunities all the potential addresses has not been introduced. In the face of competing offers, consumers consumers In the face of competing offers, the majority for of on operators rely continue to home networking solutions. broadband than 61% of U.S. of Q3 2017, more As households obtained a home network router and a similar provider their broadband through number obtained an modem. The evolution of the connected home continues to create opportunities create for to the connected home continues of evolution The service providers. Crafting a new approach to operator-grade solutions operator-grade to approach Crafting a new Service Provider Solutions Service Provider Staking a Claim in the Connected Home: Home: Staking Connected the in Claim a All rights reserved | www.parksassociates.com | © Parks Associates Raising the Bar for theBar HomeNetworksRaising have placedincreasing demandsonthehomenetwork. homeproducts media devices, usedfor mobiledevices speakers,andsmart streaming mediainthehome, smart devices, players, suchasDVD/Blu-ray While someconnected have beenindecline, streaming new broadband home. The proliferation ofconnectedhomedevices hasledto anaverage of9.1connecteddevices perU.S. gateway solutionsdesigned for customer segments withdifferentrequirements. homenetworking allapproach to hardware existfor infavor tradinginaone-size-fits ofintroducing opportunities New tiered aids customer acquisition andretention. relationship withtheircustomers. candifferentiate NewCPEs feature-rich operators by adding value that comprehensive setoffeatures thatare oftheirservice thehallmark anddeliver thereliabilityandsupport to rebuff thiscompetitionwhereOperator-grade solutionshavecancompete they onamore theopportunity devices to are increase projected to 442millionunitsby 2020. homedevice, home andannualsalesofallconnected smart Currently 20% 30% 10% 26% ofU.S. broadband householdsown at leastone 0% Overall Smart Home DeviceOverall Smart 421 421 Q4/2016 Q4/2015 Q4/2014 U.S. Broadband Households © Parks Associates © Parks Associates Staking a Claim in the Connected Home: Service Provider Solutions Cisco’s Cisco’s 1 2

© Parks Associates © Parks home architecture the router from of devices distance non-media devices from bandwidth competition fluctuations in the network source the content from rates compression data • • • • • Factors Influencing the User Experience Influencing the Factors premium Wi-Fi performance Wi-Fi premium (IoT)Things supportuniversal Internet devices for of data security cloud edge to from habits, in particular, put a strain on strain on put a in particular, Streaming habits, media to households subscribe 69% of U.S. home networks— (OTT)media service least one over-the-top streaming at OTT services and many concurrently multiple offer accounts. streaming • • • Cisco Visual Networking Index: Forecast and Methodology, 2016–2021, Updated September 15, 2017, https://www.cisco.com/c/en/us/ September 2016–2021, Updated Networking and Methodology, Visual Index: Cisco Forecast Akamai, “State of the Internet: Q1 2017 report,” https://www.akamai.com/fr/fr/multimedia/documents/state-of-the-internet/q1-2017-state- of the Internet:“State Q1 2017 report,” Akamai, of-the-internet-connectivity-report.pdf solutions/collateral/service-provider/visual-networking-index-vni/complete-white-paper-c11-481360.html Visual NetworkingVisual consumer video-on-demand Index forecasts (VoD) traffic will nearly by 2021. double 1 2 Premium Wi-Fi performance promises better coverage and less congestion coverage better performance promises Wi-Fi Premium network seems Wi-Fi report households U.S. broadband their 37% of year, finds that in the past Associates Parks is reality: but perception a number of factors, could arise from perception This slow. This rapidly growing installed base of devices creates opportunities support gateway installed base of devices creates primary for in three rapidly growing This areas: speed. a need for have consumers and 19% report in the past year their problems coverage Wi-Fi households report of broadband Twenty-percent network working In stops extenders the past, range almost weekly. and multiple access points sought to Wi-Fi but each has their drawbacks. some of these issues, address If, for example, a household with five accounts streamed HD video simultaneously, they would require a minimum minimum a require would they simultaneously, HD video streamed accounts a household with five example, for If, Akamai, to the average the optimal viewing According experience. provide of 30 Mbps on a sustained basis to 15 Mbps. speeds above Only 48% of homes have homes stands at 18.7 Mbps. U.S. connection speed for Many communication providers have been waiting for connected device adoption to reach greater penetration penetration greater connected reach device to adoption for been waiting have providers communication Many support to optimized has come. them, and that day hardware out before All rights reserved | www.parksassociates.com | © Parks Associates desk. desk. anywhere inthehome, ratherthanhiddenundera suitablefor thedevices makes visibility more seamlessuserexperience. Improved product multiple nodes. They useasingleSSIDto provide a without diminishingthroughput whenconnecting improve coverage andmanagetraffic congestion systems may offer architecture dual-andtri-band to relegate thegateway to pass-through mode. These resiliency, andproductdesign. These typically devices to address thepainpointsofcoverage, congestion, router solutionshave emerged networking Mesh Problems at initial setupand conguration Di culty getting other devices toconnect devices other getting Di culty Di culty getting devices getting to to connect Di culty Di culty setting up network security upnetwork setting Di culty The Wi-Fi stops network working for Di culty managing passwords/ Di culty some reasonalmost weekly to the Internet using Wi-Fi Wi-Fi slow seems network Wi-Fi coverage problems Among 82%ofU.S. Broadband HouseholdsUsing Wi-Fi at Home No technical problems each other using Wi-Fi access credentials access Wi-Fi Network Technical Problems Other issuesOther 0% % Experiencing Speci ed Technical Speci ed Experiencing % Problems ease ofuse. providers canaddress consumerdemandsforservice where provideon homenetworks anotheropportunity home devices problems insettingupsmart Support upgrading to 802.11ax,withthefollowing benefits: reference comingfrom manufacturersare 802.11ac, thelatestWhile mostmodelssupport • • • • 10 Gbps. bandwidth, whichinthefuture may increase upto Built currently to deliver afull6Gbpswire rate and transmission efficiency greater power savings Designed from IoT theground up to support bands 5 GHz andinterference reductionfor boththe2.4GHz Provides for longer-range coverage andimproved user throughput by four timesthatof802.11ac thatincreasesImproves overall efficiency spectral 25% © Parks Associates 50%

Staking a Claim in the Connected Home: Service Provider Solutions

© Parks Associates © Parks that have experienced a tech problem contact experienced problem the a tech 13% of households that have Consumer Consumer Troubles Network Among U.S. broadband households broadband U.S. Among reported difficulty 14% reported difficulty connecting smart devices and an equal the router to number reported difficulty settings configuring technical 32% experienced in poor issues resulting performancedevice trouble 25% experienced network getting the and computing for to entertainment devices ease setup. ease setup. devices to and assign name, identify, setup of the SSID or to for can be provided recognition voice example, For devices. natural interface more the friction simple, This can reduce in setting up IoT locations in the home. arise, problems setup of where Regardless CPEs can smart Premium help resolving or mobile service for home device problems. provider pay-TV, broadband, these support in their provider. confidence reduce customer calls and increase Various factors influence user experience challenges, but solutions can be enhanced to factors but networking influence user experienceto challenges, be enhanced solutions can Various hardware All rights reserved | www.parksassociates.com | © Parks Associates device owners experience problems whensettinguptheirdevices. from home setupto dailyoperation, butapproximately ofsmart one-half Consumers simplifieduserexperiences across expect multipleinterfaces of homecontrol positionsoperators at homesupport centerUniversal smart Google Google Thread, andApple HomeKit. standards, includingZigbee, Z-Wave, Bluetooth LE, home foruniversal allofthemajorsmart support gateways are showing upwithwhatcouldbetermed protocols. reference Some designs for residential for ZigbeeandBluetooth LEwireless networking recently introduced XB6gateway includessupport FIOS gateway includesaZigbeeradio, andComcast’s also includesanembeddedZigbeeradio. Verizon’s with atleastonemodel, theAmazon Echo Plus, which offerfor cloud-basedhomeautomation userinterfaces More recently, withvoice assistants speakers smart homecontrol hubs.provided andsmart by security homecontrol was The firstgenerationofsmart

% Experiencing Specied Problem 40% 60% 50% 20% 30% 10% 0% conguring Di culty Problems in Setting Up Smart Home DevicesProblems (2015-2017) UpSmart inSetting settings U.S. HomeDevice Owners Smart Who Self-Installed Their Devices connecting the device the internet/ Di culty router to the to installation Di culty with the with physical device of the of Q1/2017 connecting to interact to the device the Di culty devices other with Q1/2016 Di culty use casesandgenerate revenue. recurring providers to roll bundlesaround outdevice favorite iteasierthanever for appsmake service white-labeled providers.this process easierfor Customizable service homeproductsto make for themostpopularsmart interoperability manufacturers are now pre-certifying compatibleand certify products. hardware Some to make choices abouthow tightly to curate, test, at leastfor basicfunctionality. Operators willhave removing theneedfor separate hubsandcontrollers, any aconsumermay device chooseand virtually methodsby supporting fragmented networking These solutionsseekto solve theproblem of learning how to how use ituse required have all Did not cables Q1/2015 the The device The defective broken was or advertised The device The work as did not © Parks Associates the above the None of None Staking a Claim in the Connected Home: Service Provider Solutions © Parks Associates © Parks © Parks Associates © Parks 45% Q4/16 Not Concerned Q4/14 38% connected health independent living from your smart your from products permission without your • • Concerned that someone could access the historical data that Concerned Concerned of broadband households express high high express households 76% of broadband about security of concern and privacy levels when using their connected devices. Q4/16 45% U.S. Broadband Households Broadband U.S. Very Concerned Very 39% Q4/14 your smartyour products permission without your home security ones and property loved of safety Concerned that someone will get access and control that Concerned • • Concerns About Hacking of Smart Products Over Time Hacking About of Smart Products Over Concerns 0% 20% 20% 80% 60% 60% 40% 40% Consumer concernsConsumer about data security smart headwinds for creating rising, are Almost half of consumers home growth. hackers about “very concerned” are of devices accessing and getting control of data. In the share the past two years, the and has increased “very concerned” has decreased concerned” “not of share about half. by With IoT device support in the gateway, recurring revenue services can be targeted to carefully defined customer defined customer services carefully recurring revenue to device support can be targeted in the gateway, IoT With top of the on layered to consumers, devices can be sold direct More as initial beachhead offerings. segments home network, application. a common through and integrated CPEs with unified smart for a varietysupport home opportunities revenue cases: of use for operators new offer By supporting interoperability at the gateway level, these new designs offer opportunities to simplify and improve opportunitiesBy offer new these improve and to simplify supporting designs level, at the gateway interoperability will further integration settings. of automation and configuration enable setup Voice experience. on the user Data security to the edge can boost consumer confidence and adoption confidence security the edge can boost consumer Data to Operators can become a driver of the connected home market rather of the connected market home rather a driver become can Operators home networking providing supportthan passively companies. other for All rights reserved | www.parksassociates.com | © Parks Associates with strong passwords. replacing defaultcredentials suchas to betaken, actions notifies theconsumerof to minimize damage, and quarantines at-risk devices statusofdevices, security continually evaluates the Advanced edgemonitoring botnet attack. malware orcompromised ina that mightbeinfected with behavior of edgedevices incoming trafficandthe thatmonitors both support more vigorous security for embedding opportunities createthe homenetwork Challenges insecuring been changed The password has never Less thanonce every 4yearsevery Among 82%ofU.S. Broadband Households Frequency ofChanging a Wi-Fi Network Password 41% Using Wi-Fi at Home Once every Once 2-3 years Some ofthelatest featuresSome security for gateways: • • • • • • • • • with contextual and meta-data matching andmeta-data with contextual Parental controls thatprovides time, configuration role, anddevice-based updated to by aclouddatabase asubscription prevention systemIntrusion (IPS)withsignatures threats thatare ofknown that canbehandleddifferent ways with granular controls traffic databasethatassigns toafiltering to predefinedclasses allnetwork by comparing assesses URL filtering trustworthiness profiles activity known for appropriate networking to thatcompares anomalydetection activity edgedevice Networking operating system Secure boot thatensures canopenwiththe onlytrusted software identify vulnerabilitiesandassessestheirrisk logto activity thatanalyzes eventsVulnerability detection the network andpreventiondetection (DPI)thatfilters incomingcontent inspection packet for intrusionDeep secure way forto devices thenetwork connecting thatoffersWi-Fi asimplifiedand Software-enabled protected setup(WPS) impossibleto duplicate virtually it (PUF)making usingaphysical unclonablefunction at form embeddedinto of cryptography thehardwareA challenge-response There isnopassword set 2% for my Wi-Fi network per year Once © Parks Associates Multiple per year times once ayear. password more than than Wi-Fi password. Less never changedtheir households have 41% ofU.S. broadband 20% changethe © Parks Associates Staking a Claim in the Connected Home: Service Provider Solutions

apart and buck the tide of commoditization. opportunities, and the revenue new efficiencies, CPEs enable operational premium These smart value that will expedite more user experience home adoption and capture enhanced operators. for Communication service claim in the connected virtue an established home by Communication have of providers competitive in today’s no means secure that claim is by but relationships, their existing customer environment. expand their and broadband, from revenue increase effectively, compete to want If operators add value. will need to they in the home, footprint value-added that can set operators features offers CPE, as described in this whitepaper, Premium Protecting and expanding the operator’s claim operator’s the and expanding Protecting Cloud-based SDN platforms provide remote of home networks to reduce operational costs and operational costs and management of home networks reduce to remote provide Cloud-based SDN platforms support, technical and optimization, proactive automation analytics-based They can provide revenue. increase network, deep visibility the subscriber’s With into service for truck rolls calls. and reduce times, response faster integration, voice With of them. the subscriber aware is even issues before resolve be able to may operators with a remote of the network navigate to and reboot without having subscribers troubleshooting can initiate or contact control support via phone or web. services and voice by for bandwidth can be initiated new orders such as increased side, On the revenue can also Operators the subscriber. for speed and convenience unprecedented provide to in real-time automated reaching their consistently experienceto subscribersfor a better that are bandwidth upgrade offer proactively substantial have operators the subscriber base, from bandwidth limit. By big data gathered applying analytics to behavior. the subscriber’s to tailored new developing services that are advantages for and features By introducing and emphasizing more rigorous data security features into the gateway, operators can position position can operators gateway, the into data security rigorous more and emphasizing By features introducing security privacy of consumer of mind through of peace that as guardians updates themselves providers and shifting constantly mitigate threats. home network. the enterprise-level security for Hybrid local-cloud applications solutions can leverage virus real-time service matching that can provide authentication signature for real-time a involve might This can controls Consumer-facing manual updates. any botnets without requiring out the latest and shield protection and children for controls access visibility the home network granular into provide and more to also be introduced all devices on the network. them access to partitioned give guests that does not access for Software defined networking (SDN) platforms enable operators to Softwareenable operators networking defined (SDN) platforms support, connected homes and monetize manage All rights reserved | www.parksassociates.com | © Parks Associates Turn homecomplexity into revenue smart of partners. allows for features therapidintroductionofnew advantageofvastecosystems thattake systems), theEXOS-powered for Alexa(andothervoice-activation built-in support GigaFamily providers to control experience, removing theconnected for complexity subscribers. With systems, providers. madespecifically for service The EXOS-powered GigaFamily allows service EXOS willbeimplemented designed inthenewly Calix EXOS-powered GigaFamily premises provider technology. —for cutting-edge Notanymore. —notto theirservice Consumers have to always theconsumerelectronicsindustry looked Want to offer the world’s mostadvanced premises systems? enhanced security, andabetter overall experience. provider, owning thehomeanddeliveringonsubscribers’ demandsfor improved support, EXOS, operators provider canevolve from to beingaconnectivity becomeanexperience to create significant operators new withaclearopportunity revenue sources. Ultimately, with Managing thisincreasingly complex andchaoticenvironment ischallenging, butEXOS presents inthefuturemobile subscribers technology —across experience. thefullwireless andsmart providers to goontheoffensiveresidential customers now —andbusiness andsupport The OperatingSystem Calix Experience OSthatwillempower (EXOS) service isacarrier-class transformhard-won theirbusinessmodels. positioninthehomenetwork, associated withthecomingwave ofIoTopportunities and, devices the ratherthansurrendering callsforthe burdenconsumerelectronicsindustry. ofsupport They mustembracethe Operators supplier, mustnotbecontent withtherole ofconnectivity whilecontinuingto bear www.calix.com

Staking a Claim in the Connected Home: Service Provider Solutions

[email protected] / Parks Associates Parks Home, Connected Director, Research

Brad Russell, Brad leading-edgeBrad Russell explores smart issues in connected , consumer home data privacy and data-driven He has and security, applications. IoT devices platforms, and in startups, a background technology and online media. Brad communications, astute balances the art more insights that lead to generate to and science of market research business decision making and value-generating practices. Texas in advertising his BS degree and marketing the of Brad received from two leading seminaries He also earned from with MDiv and DMinat Austin. degrees Parks Associates has made every reasonable effort to ensure that all information in this report is correct. We assume no Associates has made every assume no effort reasonable Parks that all information in this report We ensure to is correct. — DISCLAIMER Published by Parks Associates. © Parks Associates, Addison, Texas 75001. All rights reserved. 75001. All rights reserved. Texas Addison, Associates, © Parks Associates. Parks by Published Russell. Brad by Authored ATTRIBUTION— in the Printed without permission the publisher. in writing means, from any or by form in any No part be reproduced, of this may of America. States United responsibility for any inadvertent errors. start-ups through market reports, primary studies, consumer research, custom research, workshops, executive executive start-ups workshops, market through reports, research, primary custom consumer research, studies, and annual service subscriptions. conferences, (IoT),Things expertise entertainment includes the Internet media and platforms, and digital of company’s The home networks, Internetgaming, services, and health, mobile applications and services, digital support management, and home control services, energy advanced advertising, , consumer apps, and security. systems or contact us at 972.490.1113 visit parksassociates.com information, more For Parks Associates is an internationally recognized market research and consulting and consulting market research recognized is an internationally Associates Parks products and services. technology consumer specializing in emerging company small 500 to Fortune from companies ranging capital for research creates Associates in 1986, Parks Founded and Security ID: @bradrusselltech Twitter concentrations in ethics and cross-cultural leadership. Data Privacy Smart IoT EXPERTISE: Electronics, Consumer Connected Home Devices and Platforms, Calix, Inc. (NYSE: CALX) pioneered Software Defined Access and cloud products focused on access networks Software and Access and cloud products CALX) pioneered Inc. DefinedCalix, (NYSE: Its the revolutionaryplatform portfolio and software systems of Intelligent combines AXOS, the subscriber. Access network data analytics for cloud products innovative the experience Cloud, OS, with Calix and EXOS, access, for they their enable communications service transform to providers Together, and subscriber experience assurance. at website the Calix visit information, more For winning servicebusinesses and be the of tomorrow. providers www.calix.com. About Calix About About The Author The About Author INTERNATIONAL RESEARCH FIRM ResearchResearch && AnalysisAnalysis for Digital Living

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