With a new boss and a radically different proposition, Deutsche Telekom's smart home business is reaching out to prospective European partners.

Iain Morris, International Editor

March 15, 2017

5 Min Read
Can Major Surgery Rehabilitate DT's Smart Home Platform?

Providing connectivity for household appliances besides phones, computers and TVs has long seemed like an obvious opportunity for telcos. But when it launched its Qivicon platform in 2013, Deutsche Telekom was clearly eyeing a more pivotal role in the "smart home." Having watched Qivicon struggle to make a big impact so far, the German operator is hoping that some invasive surgery will now put a spring in the platform's step.

Under the original offer, customers with the requisite home hub could use smart home gadgetry from a range of Qivicon partners, including heavyweights such as Samsung Electronics Co. Ltd. (Korea: SEC), Royal Philips Electronics N.V. (NYSE: PHG; Amsterdam: PHI) and Huawei Technologies Co. Ltd. Deutsche Telekom's subscribers could choose from several service packages, but Qivicon was also made available through other providers. Dutch telco incumbent KPN Telecom NV (NYSE: KPN) became a licensee in the Netherlands, while an energy company called EWW launched services in Austria.

Yet Qivicon does not seem to have taken off. Deutsche Telekom AG (NYSE: DT) does not break out details of smart home revenues or customer numbers, and so it is hard to assess the exact impact that Qivicon has had. But it is probably not significant. Fixed network revenues in Germany last year fell 1.5%, to about €9.66 billion ($10.3 billion, at today's exchange rate), while those from broadband and "broadband-centric options" were static, at roughly €4.04 billion ($4.3 billion).

Qivicon progress has certainly looked halting. At first, Deutsche Telekom was able to quickly attract product partners, without which Qivicon would lack much appeal. But it has signed up few since late 2015, leaving it with about 40 in total today.

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Licensees have also been slow to emerge. Besides KPN and EWW, some energy companies in Germany are also offering Qivicon-based services, while a utility called Hitch does so in Norway. But deals in larger European markets have yet to materialize. When UK mobile operator O2 last year said it would offer smart home services based on AT&T Inc. (NYSE: T)'s Digital Life platform, it seemed as if Qivicon had lost out. Only weeks earlier, Holger Knöpke, then head of Qivicon, had been dismissive of US-based competition, arguing that European operators wanted partner providers "in their time zone." (See Is DT's Qivicon in a Quagmire?)

Knöpke, though, is no longer in charge of Qivicon, and new boss Thomas Rockmann is making a big break with the past. Gone is any mention of Qivicon in Deutsche Telekom's latest marketing materials. Instead, the talk is all about "white label" smart home services, as Deutsche Telekom tries to broaden the platform's appeal. Henceforth, partners will be sought not only for new products but also for the applications that smart home customers use.

Importantly, providers can also now integrate the platform with third-party gateways and technologies, including the Alexa digital assistant developed by Amazon.com Inc. (Nasdaq: AMZN). "Needing to have the Qivicon home hub as a separate gateway is a barrier if you want to reach out to the mass market," Rockmann told Light Reading on the sidelines of the recent Mobile World Congress trade show.

Next page: The jury's out

The jury's out
The impact of these various changes may not become apparent for a while, but they seem partly to reflect lengthy discussions between Deutsche Telekom and customer groups in recent months. Rockmann says he is now in talks with "lots of big companies across Europe" about prospective business. "We've tried to lower barriers and make it simpler," says Rockmann, "We are convinced that new partners will come soon."

Yet turning Deutsche Telekom into a major smart home force will be no mean feat. In late 2015, Knöpke said there would be room for only three to five smart home platforms globally in the subsequent five to seven years. Technology giants including Apple Inc. (Nasdaq: AAPL) and Google (Nasdaq: GOOG) are also trying to corner this market. For an operator with a substantial IT services business like Deutsche Telekom, which last year complained that Europe has lost the consumer technology battle to the US, the market for the industrial Internet of Things may be the much brighter opportunity. (See Industrie 4.0: Rebooting Germany.)

Deutsche Telekom remains undeterred, however. "Digitalization is coming to living rooms, and telcos are already there," says Rockmann. "From a brand perspective, it makes sense to introduce these products as a telco." Besides enjoying a revenue boost from smart home products, services and licensing agreements, Deutsche Telekom could also benefit from churn reduction at its broadband business, giving customers a new reason to stick with its service.

Unsurprisingly, Rockmann will not provide any hard predictions about revenues from smart home activities. In 2009, under previous management, Deutsche Telekom unveiled a series of lofty growth targets for the 2010 to 2015 period, including bullish ambitions for its "connected homes" business, only to miss them badly a few years later. But analysts believe the overall smart home market is poised for rapid growth. In a report published last month, Strategy Analytics Inc. forecast that global consumer spending on smart home products and services would rise from $76 billion last year to about $157 billion in 2022. The question is how much of that growth will be captured by the telcos.

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

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About the Author(s)

Iain Morris

International Editor, Light Reading

Iain Morris joined Light Reading as News Editor at the start of 2015 -- and we mean, right at the start. His friends and family were still singing Auld Lang Syne as Iain started sourcing New Year's Eve UK mobile network congestion statistics. Prior to boosting Light Reading's UK-based editorial team numbers (he is based in London, south of the river), Iain was a successful freelance writer and editor who had been covering the telecoms sector for the past 15 years. His work has appeared in publications including The Economist (classy!) and The Observer, besides a variety of trade and business journals. He was previously the lead telecoms analyst for the Economist Intelligence Unit, and before that worked as a features editor at Telecommunications magazine. Iain started out in telecoms as an editor at consulting and market-research company Analysys (now Analysys Mason).

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