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5 September 2017

As AT&T exits smart home, Comcast expands in that market

Following news that AT&T is looking to offload its much-vaunted Digital Life smart home wing, to help ease its $85bn acquisition of Time Warner, rival US service provider Comcast has made a serious move to expand its smart-home-as-a-service (SHaaS) offering – announcing a deal with SunRun to push solar panels to its subscribers, as well as expanding its Xfinity Home platform to include more smart home devices.

The expansion is significant, as it is a counter to stalling growth in TV and broadband sales. As that market nears saturation, and as fears of customer churn set in, the likes of Comcast need a way to make their offerings more sticky. SHaaS offerings are perfect for this requirement, giving a service provider the chance to raise a barrier between them and a rival, should a customer decide they want to jump ship.

In such a situation, the SHaaS provider simply has to ask for all of the leased smart home equipment to be uninstalled and returned, for the customer to see what a problem that process would be. After all, what’s an extra $15 per month, if the customer has to take out a dozen lightbulbs, three security cameras, two door locks, a plethora of connected outlets, and a smart HVAC system. It might sound a little anti-consumer, but it definitely sounds sticky.

Comcast is using its existing customers as a way to reduce the cost of acquiring a new customer, hoping to upsell the existing user-based rather than relying on the offering to bring in entirely new customers or poach them from rivals. It comes following a quarter which was branded the worst-ever quarter for subscriber loss in the US pay TV market – where the big-six collectively lost 723,000 subs, according to JPMorgan.

But it comes at a time when rival AT&T is looking to bin Digital Life, its rival smart home service that it was recently talking up as a significant licensing opportunity. Aiming to share the design with other operators, in return for a fee, AT&T had already signed Telefonica O2 in the UK as a customer – but there has been precious little news since that was confirmed. A rival approach from Deutsche Telekom called Qivicon has been making progress in Europe, with DT warning about the threat from overseas platforms.

So it looks like DT won’t have to worry about an AT&T incursion, at least until a rival picks up Digital Life and runs with it. There are no rumored buyers currently, and Reuters believes that the division is worth around $1bn. A likely buyer would be a home security company, like ADT or, and Verizon also bailed on its Home Monitoring and Control service, back in 2014.

Comcast has disclosed that it currently has over am Xfinity Home customers, since it launched the service in 2012. It has doubled the subscriber-base in the past two years, and Strategy Analytics currently reports that it holds 10% of the US interactive security market – not bad at all, compared to market leader ADT’s 20% share.

With the SunRun deal, Comcast has signed an agreement that makes SunRun its exclusive supplier for rooftop solar panels. The 40-month deal sees Comcast commit to spending at least $10m on sales and marketing, which then provides it with access to a share of the consumer sales. Comcast is also set to gain 9.99% of SunRun’s stock, if it can hit a target of 60,000 customers.

Solar panels are the first step towards offering a comprehensive Home Energy Management System (HEMS), with a storage battery the next increment that Comcast will want to target. While a smart thermostat will help coordinate the home, and a smart meter will bring the electricity utility into the conversation, when Comcast signs a battery deal, it will be a clear indicator that it is very committed to SHaaS paying off.

Comcast’s acquisition of Icontrol, the company that builds the software platform for Xfinity Home, is another fairly clear indicator that the company is committed to SHaaS –  – although it’s worth pointing out that the SunRun-$10m is a pittance to the giant, should solar fall through.

“Jon Kaplowitz, MD and GM of New Business for Comcast Cable, said “We believe the residential solar industry will continue to expand over the next decade as consumers look for more cost-efficient, independent and cleaner alternatives for their energy. By working with Sunrun, Comcast can help customers take more control of the price they pay for energy, save them money and help contribute to cleaner communities.”

The other thrust from Comcast is a trial expansion of Xfinity Home. Three pilot markets will see broadband customers offered connected security cameras for $10 per device per month. These test customers can purchase six cameras for $99 each, and the fee covers installation, access to the application, and cloud storage.

The deal is being pitched at apartment and condo residents, who might not need the full-stack of home security that a traditional alarm and CCTV system might provide, but want to be able to see and record what is happening in their homes. The included cost of the installation is a big deal, given that many buyers will have refrained from pulling the deal because they don’t want to self-install and deal with the set-up troubleshooting.

The service providers that already have CPE (customer premises equipment) relationships with consumers are well-placed to exploit this opportunity. That CPE can be iterated upon to include additional smart home radios, to add new protocols to the system to connect new devices. WiFi will only get them so far, and a low power protocol like Zigbee or Z-Wave will be required to efficiently communicate with battery-powered devices. Bluetooth Mesh is looking to crash this low power party.

Being able to offer the installation as part of the service is a big positive for the service, especially as Comcast can pitch it to customers that it thinks are more likely to commit to the contract. Thanks to the scale of its operations, Comcast should also be able to rely on manufacturing economies of scale to drive down costs in a manner that start-up rivals might struggle to compete with.