Broadband providers are sneaking into the smart home

  • The smart home market might not be taking off as fast as predicted, but it's still poised to grow by billions in the next five years 

  • The market presents an opportunity for broadband providers to find new revenue through value-added services targeted at smart home devices

  • Smart homes have become a way for broadband providers to sell higher speed tiers

Just because it isn’t as futuristic as we pictured doesn’t mean it hasn’t happened yet: Smart devices are on the rise, and they’re creeping into the broadband world.

Our refrigerators aren’t making us sandwiches and we don’t have laundry folding robots (yet), but subtle smart home devices (a.k.a. any gadget with internet connectivity) like washing machines, smoke detectors and locks are starting to nestle into more homes. According to Parks Associates, 45% of homes in the U.S. have at least one smart home device.

Early predictions for the smart home market might have been a bit overzealous. “Some individuals and perhaps companies have had higher expectations for the pace of smart home adoption,” Parks Associates President and Chief Marketing Officer Elizabeth Parks told Fierce Telecom.

Parks Associates has kept its forecasts more “conservative,” Parks said, but she still believes the industry will grow by billions over the next five years. The research firm predicts the smart home market will have annual revenue of $12.6 billion in 2027 for core smart home product categories, including video doorbells and smart lighting. TVs, speakers and other smart streaming devices are not included in that category.

“It's still a really big market when you consider all of it, and we will get to the point where integration is there in a mass market way,” Parks added. “I do think we'll see services that have more revenue attached to them, and that continues to grow as well.”

Here’s where broadband comes in.

As providers lose entertainment revenue to streaming services, they can find new revenue through value-added services like bundled offerings that include smart home device integration.

Xfinity, for example, markets its Xfinity Home product as a “smart home security systems and monitoring” app to control home security cameras and Wi-Fi thermostats, among other things. Meanwhile, the AT&T Smart Home Manager app is included with all AT&T Fiber plans.

The smart device is important to broadband providers now because it's a revenue driver, Parks noted, and can even boost Net Promoter Scores (NPS). Added services can include anything from tools for parental controls to network monitoring that alerts users when their devices go offline.

“The smart home has always been part of the broadband story,” Parks added. “It just hasn't been the exciting hockey stick growth part, so some people maybe just don't see it as exciting or as moving as quickly.”

Do smart homes need speed?

Service providers want the smart home as part of their ecosystem because it will drive customers to buy other network services, but it’s also become another way to convince customers to take higher speeds.

See: This Quantum Fiber blog that touts 940 Mbps speed tiers as “engineered to support today’s smart home features.” Or these other smart-home-focused ads from Ziply Fiber, Lumos FiberGateway Fiber, Luminate and Belden. (We’re not picking on these guys, they just have the best “smart home fiber” SEO.)

Parks Associates' super power users segment, those that have 10 or more devices, are more likely to take higher speed tiers than those with less connected devices. Whether today’s smart homes actually need speed tiers near a gigabit, however, is another question.

“More and more devices are being connected, but the ramp up in the average home will take longer than the hype would lead many to believe,” said Bryan Darr, VP of government affairs at Ookla.

Darr said smart home device adoption certainly adds to data use and needed capacity, but this is not taking place at a level requiring gigabit speeds “unless consumers have a very large number of them, along with other significant demands at the service address.”

Wi-Fi, 5G could pave way for smart communities

One of the biggest obstacles to smart home market growth is the devices themselves. A simple search will conjure a ton of Reddit threads and Google results showing customers vexed by their devices disconnecting, randomly shutting down or failing in any number of ways.

So, if it’s not bandwidth, then what’s the problem?

If you ask Parks, smart home success is more about the quality of Wi-Fi in the home. That could be completely dependent on all sorts of things that have nothing to do with a broadband provider, she said: “You could have brick in your home, you could have some neighbor who's got some weird thing that's messing with your Wi-Fi.”

“We don't necessarily see people reporting problems with speed,” Parks added. "The network issues have to do with Wi-Fi for a lot of the part."

Ookla analyst Affandy Johan said service providers have been talking about smart homes for many years to encourage the take-up of their services, but developments in 5G could be the market’s watershed moment.

More use of 5G features such as enhanced mobile broadband (eMBB) and Massive Machine-Type Communications (mMTC) will improve wireless performance in a wide range of applications, Johan said.

In the meantime, he said smart home integration as part of a wider application such as smart cities and healthcare, shifting focus from smart homes to smart communities, “is where a larger conversation can be had in the near future."