Smart Home Service Expansion Accelerates into Smaller Markets

Dan Lehman, GM, security, Comporium SMA

Dan Lehman, GM, security, Comporium SMA

December 19, 2012 – If 2012 has been the breakout year for smart-home services, led by highly efficient, low-cost approaches to broadband-delivered home security, the year ahead should provide a clearer picture of the extent to which other components of such services are ready for the mainstream.
A key bellwether in that assessment will be Comporium SMA Solutions, a unit of Rock Hill, SC-based Comporium Communications that has built a home security and automation business providing managed service support for cable operators, including Comporium’s retail cable service. This move follows several years as a supplier in the traditional wireline home security business, which now has a customer base of nearly 60 communications companies operating in 22 states.

Going into 2013 Comporium SMA anticipates signing about a dozen Tier 1 and 2 MSOs to the service, according to company officials. So far, Comporium SMA has publicly identified two cable company customers for its wholesale service, Massillon Cable TV in central Ohio and Comporium Communications.

Getting the smaller Tier 1s and more Tier 2s on board will mean the lion’s share of cable customers in the U.S. will have access to such services by the end of next year. As previously reported, major MVPDs like Comcast, Time Warner Cable, Verizon and AT&T have launched internally managed security and home automation services, aggressively priced at entry levels below $30 with options to add a variety of service and hardware elements. AT&T has gone so far as to offer its service nationally as part of its Digital Life initiative on the LTE mobile network.

Comporium SMA represents the next wave, where smaller MSOs can more readily get into the business by leveraging the managed service capabilities the firm offers in conjunction with a reseller agreement it forged a couple years ago with iControl Networks of Redwood City, Calif., which also supplies the platform used by Comcast with its Xfinity Home Security service. As described by Dan Lehman, general manager for security at Comporium SMA, his firm’s managed service solution offers full, enterprise-class data storage and backup and recovery services, as well as technical and marketing support services, at much lower costs than if an operator maintained such services on its own.

“Comporium SMA provides a highly affordable, easy way for cable operators to take advantage of this significant new revenue source, not only for residential subscribers, but for business services customers as well,” Lehman says. “We expect 2013 to be the year of SMA (security, monitoring and automation) in the cable industry.”

Indeed, the combination of low prices, ease of use and growing consumer awareness that the broadband-delivered option is a far cry from previous modes of home security service has made the market ripe for cable operators to get into the business. As Lehman notes, a recent survey conducted by Security Systems News found that industry experts believe a 40 percent penetration rate could be achieved within the next five years.

In another recent report Bernstein Research says that even with just a five percent market share of the home security market, broadband service providers 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. Beyond home security there could be considerable upside in other areas such as energy management and home health care. “We believe cable and telco operators are likely to gain their ‘fair share’ of existing home security subscribers and that they will grow the market by targeting the emerging home automation market,” the researchers say.

So far, acknowledges Pamela Trimnal, director of marketing on the cable services side of Comporium, security has been the primary selling point for the MSO’s fast-growing SMA service, now available in all its operating territories, including York and Lancaster Counties in South Caroline and a handful in rural North Carolina. With a cable TV subscriber base of 62,000, the MSO has experienced a rapid uptake since the service was first rolled out, starting with a soft launch in 2011, Trimnal says. “We’ve seen leads doubling in the second half compared to what we saw in the first half,” she notes, adding that in some cases the appeal of the SMA service is drawing new subscribers to Comporium’s other services..

The iControl platform offered by Comporium SMA includes a broadband-connected compact controller with touch screen and security panel that provides consumers remote control of their security system, live video feeds, access to such information as traffic, weather and sports news and a series of energy management tools. Running advanced chips mapped to the Zigbee personal access protocol, the controller supports connection to a wide range of security, lifestyle and home safety devices, allowing operators to upsell customers to new services and applications over time with support for features such as email or text alerts and software upgrades on wirelessly connected sensors.

“In the past people had to log into different interfaces for energy management and security,” Lehman says. “Now they access those two key services and other applications on the same interface, which, over time, will allow operators to sell to customers who are looking for home automation rather than just focusing on the security application.”

For example, Comporium’s cable operations have begun to sell the platform on the basis of the appeal of certain applications to niche demographics, such as grown children of elderly parents whose wellbeing can be monitored by keeping track of whether certain doors indicating normal activity are in regular use. “We’re also marketing the product to working parents who want to keep track of latchkey kids coming home after school, Trimnal says. “You can set a rule where the camera records your kids waving when they come in and the system sends an alert to your smartphone to let you know they’re home safe.”

Other applications include control over household lights using Zigbee-connected rheostat devices linked to fixtures; door lock controls, coming in 2013; connected water and smoke detectors, and connected thermostats that can be set to control heat at different times of day or with remote inputs. Lehman says Comporium SMA has chosen thermostats supplied by Centralite at a cost of $135 to end users. While some early broadband home energy management services had trouble with erratically performing thermostats, the Centralite devices have performed flawlessly on the iControl system, he adds.

But just what the upside will be beyond basic home security is debatable after years of promise and low yields on the full-scale smart-home proposition. 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.

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 evenly split on the question. While 51 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,” 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.” But this would no longer be the case if service providers can leverage demand for a security component to network services to the point where the added conveniences associated with smart-home apps become a routine aspect of household operations.

Early service launches envision such possibilities with tiered plans that give consumers options to expand the apps in conjunction with buying more gear. For example, the Comcast service offers a “Preferred” tier at $39.95, which, like the basic plan at $29.95, requires a three-year commitment as well as a $199 one-time equipment fee. Preferred service offers anytime monitoring of a homeowner’s security system with features such as security history, as well as control of automated lighting and thermostats. Basic and Preferred include a touchscreen keypad allowing users to adjust settings to suit specific needs as they arise.

While these services use motion sensors to support home security, the Xfinity Home Security Premium service, priced at $59 per month with a $499 upfront fee, brings four video surveillance cameras into play to provide a remotely viewable video perspective on what’s going on around the home. This tier also includes a pair of controllers for small appliances and lighting, a programmable thermostat and the lower tier sensors and other components.

For its part, Comporium Communications is offering two basic service versions, one priced at $34.99 without a security camera and the other at $39.99 with. In either case the upfront equipment cost is $99, Trimnall says. If the subscriber takes two or more services in the triple-play bundle these monthly prices are discounted by $10, she adds.

“We also recently began offering a $69.99 bundle with broadband service,” she notes. The basic service includes three alarm contacts on doors and windows, a motion detector and the full range of alerts and other features supported by the controller. The basic service with camera includes one indoor camera, with outdoor cameras priced as extras. The basic monthly service fee covers up to six cameras.

Comporium executives also believe there’s a powerful benefit to be exploited by operators who want to use the platform to deliver local information to the controller screen, thereby putting information that would otherwise have to be searched on the web, if it could be found at all, within easy reach of household members. “We term this the fourth screen opportunity,” Lehman says. Everything from billing information to local traffic and emergency alerts to school lunch programs, parent meetings and athletic team schedules can be fed to the controller screen, he says.

While the availability of the iControl platform has made it far easier for broadband service providers to offer appealing smart home services, operators still must arrange for enterprise-class data storage, support full backup and recovery, find a way to set up the monitoring and reporting system that ties in with police, fire and other agencies to report problems, provide training for personnel, obtain licenses and figure out how to market the service options. Comporium SMA provides turnkey support for all these requirements, Trimnall says.

The company’s central monitoring station provides support for all its MSO customers, with staff constantly monitoring feedback from subscriber controllers across the wholesale customer base, she notes. “We provide extensive a-to-z training on how to sell, install and market these services,” she says. “And because we’re already licensed to operate in 23 states, we can save operators considerable time in the certification process.”