At this point, consumer demand for home security is such that even with just a five percent market share, NSPs stand to add in the range of $300-$400 million to EBITDA by 2014, which would represent about a one percent increase in industry-wide EBITDA, according to a report released earlier this year by Bernstein Research.
Bernstein speculates there will be considerable upside beyond home security as demand for home energy management and other home-automation applications kicks in. But will it?
Advocates point to the convergence of standards, increasing volumes of interoperable equipment at lower prices and the consumer price-friendly bundling tied to broadband fixed and mobile networks made possible by NSPs’ entrance into the market as reasons for optimism. But in a recent survey of over one thousand IT experts, academics and service specialists conducted by Elon Univeristy’s Imagining the Internet Center and the Pew Research Center’s Internet & American Life Project, opinion was fairly bleak on the question.
Fifty-one percent agreed with the statement that “the Home of the Future that has often been foretold is coming closer and closer to becoming a reality,” and 46 percent preferred this assessment: “[T]he home of 2020 looks about the same as the home of 2011 in terms of resource consumption and management.” Strikingly, however, even the respondents who chose the positive outlook evinced negative or cautionary attitudes in their survey comments, say researchers Janna Anderson and Lee Rainie.
“Most of the comments shared by survey participants were assertions that the Home of the Future will continue to be mostly a marketing mirage,” they write in their survey report. “The written responses were mostly negative and did not mirror the evenly split verdict when respondents made their scenario selection.” As a result, they conclude, “this report reflects the naysayers’ sense that there are difficult obstacles that are not likely to be overcome over the next few years.”
Reasons for doubt start with the lack of consumer awareness or interest, not mention a strong current of resistance to what some see as the intrusive presence of home automation. In one typical response to the survey Tracy Rolling, product user experience evangelist for Nokia, bluntly states, “Nobody really wants a smart home…Proprietary technology and a lack of organized protocols and formats means that this is not going to take off for a very, very long time.”
Even the futurists have their strong doubts. Mike Leibhold, senior researcher and distinguished fellow at the Institute for the Future, comments, “People have simply too much to do already to focus scarce attention on properly managing their resource consumption in fine detail. Also, people seem to resist the idea as invasive of smart grid top-down monitoring and control of resource consumption. Conservation technologies are promising, but behavior changes will be very slow.”
But while these and many other comments advise against over exuberance about the upside potential for smart-home services, they typically don’t take into account the idea that strong demand for one application, namely, home security, satisfied by well-conceived NSP solutions that serve to acclimate people to getting sensor-based automation services they can control remotely could create a foundation for adding more such services. If that’s the case, the upside could indeed be great for NSPs who get it right.
Two observations from survey respondents illuminate what that means. Says Wesley George, principal engineer for the Advanced Technology Group at Time Warner Cable: “Smart systems are only as good as their user interface. Your grandmother has to be able to understand these systems. If she can’t, they’ll fail.”
And, says Jane Vincent, while it will take beyond 2020 to get to anything like ubiquitous smart-home service usage, when it comes the “Home of the future will be a mobile home. That is, everything that people need to be connected and efficiently manage utilities, shopping, communications, and everyday life matters will be accessible anywhere they are via a mobile device and their mobile or Wi-Fi provider.”
Putting the smart home on the smartphone could take a whole lot of the spooky futuristic quality out of the proposition. In which case the upside for NSPs could be considerable.