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Why AT&T May Dump Home Security Biz

Mari Silbey
8/21/2017
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Early to the home security market among ISPs, AT&T may now be looking to exit the business. A report by Reuters states that AT&T is exploring a sale of its Digital Life division as part of an effort to reduce debt following the presumed closure of the telco's $85 billion acquisition of Time Warner. Reuters posits that the business could sell for close to $1 billion. That would do little to touch AT&T's debt load, which reached $143.7 billion mid-year even before any Time Warner transaction, but reportedly the sale could be only the first of several as the operator looks to mitigate the impact of yet another mega merger.

Why does the potential sale of the Digital Life business matter? There are several reasons. First, AT&T Inc. (NYSE: T) has invested heavily in home security and monitoring over the years, but now appears not to like the payoff. The telco partnered with home automation company Xanboo to offer service way back in 2006 before ultimately acquiring that startup in 2010. It then teamed up with Cisco Systems Inc. (Nasdaq: CSCO) in early 2013, rebooting its home security efforts with the launch of Digital Life in April of that year. (See AT&T Dives Deeper Into the Smart Home and AT&T Launches Digital Life Service in 15 Markets.)

Second, home security and automation should fall under the same umbrella as other Internet of Things initiatives, but (to this editor's knowledge) there's never been any indication of crossover between Digital Life and AT&T's IoT ambitions. That may mean that a divestiture of Digital Life would be a good thing, but on the other hand, AT&T may be giving up on a platform and a stake in the home that it could have merged with other IoT technology efforts.

Third, if AT&T is indeed getting out of the home security business, it's doing so just as rival Comcast is starting to demonstrate serious traction in the space. Comcast Corp. (Nasdaq: CMCSA, CMCSK) announced last month that it now has more than 1 million subscribers to its Xfinity Home service (AT&T is estimated to have about half that), and the cable company closed on its acquisition of critical home automation technology from Icontrol earlier this year, setting the stage for further service development. (See Comcast Lines Up Fall Launch for 'Instant TV' and Comcast Gets Its IoT On With Icontrol Close.)

Fourth and finally, if AT&T drops Digital Life, there's likely to be an effect on Cisco, which helps power the service platform. It's unclear how invested Cisco is in the home automation industry, but AT&T has always been the vendor's prime case study reference for smart home services. If that goes away, the question is whether any new owner of Digital Life would boost Cisco's position in the space, or whether Cisco would slowly melt away from the home monitoring and control market altogether.


Want to know more about the Internet of Things? Check out our dedicated IoT content channel here on Light Reading.


AT&T isn't the only operator to try its hand at smart home services only to later consider an exit. Verizon Communications Inc. (NYSE: VZ) dropped the hammer on its own offering back in 2014. There were hints that Verizon would re-enter the market shortly afterward, but whatever those plans were, they haven't materialized publicly to date. (See Verizon Pulls Plug on Smart-Home Service.)

More recently, Verizon launched a 4G-based home automation hub, but that product works more like a traditional mobile device with consumers given the option of buying a data plan to go with the hardware. The hub supports a small number of smart home devices from Nest and Honeywell.

— Mari Silbey, Senior Editor, Cable/Video, Light Reading

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mendyk
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mendyk,
User Rank: Light Sabre
8/23/2017 | 9:25:32 AM
Re: That sign
Unlocked doors and windows -- this may be another reason that smart homes will be important to shelter the dumb people who live in them.
Joe Stanganelli
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Joe Stanganelli,
User Rank: Light Sabre
8/22/2017 | 6:27:25 PM
Re: That sign
@mendy: It may also have a perverse backfire effect.

Consider: A colleague of mine lives in a neighborhood of an especially well-to-do suburb that has suffered a spate off break-ins of late -- despite the fact that everybody in the neighborhood has state-of-the-art "smart" security systems.

...probably because almost nobody in the neighborhood actually bothers to lock their home or car doors.

Colleague tells me about the big neighborhood meeting the residents have to discuss the problem.

The resolution? More state-of-the-art video security and other security systems. Nobody brings up the idea of locking doors.

SMH.
Joe Stanganelli
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Joe Stanganelli,
User Rank: Light Sabre
8/22/2017 | 6:25:02 PM
Re: That sign
@mendyk: I wouldn't mind having that "enfeedbled Shih Tzu" sign, myself... #business idea
mendyk
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mendyk,
User Rank: Light Sabre
8/22/2017 | 3:58:34 PM
Re: That sign
It doesn't exactly scream "THIS HOME PROTECTED BY A STATE-OF-THE-ART ALARM SYSTEM, SO STAY AWAY IF YOU DON'T WANT TO DO SOME SERIOUS HARD TIME!" to me. The purpose of those signs is to deter potential intruders -- and the signs probably work better than the actual detection system. But this one looks more like an invitation to a cookies-and-milk party than a warning.
jbtombes
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jbtombes,
User Rank: Light Sabre
8/22/2017 | 3:48:05 PM
Killer app
The perils of this market remind me again of the old quip from a cable exec. Home security is a killer app: it's killed everyone who's tried it. (Looking at you, Steve Craddock.) The irony is that that, as Mari notes, Comcast seems to be doing pretty well at it. Don't know what the margins are, but 2Q YoY sub growth (security and automation) was 47%.
jbtombes
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jbtombes,
User Rank: Light Sabre
8/22/2017 | 3:41:00 PM
Re: That sign
So the "shield" design didn't do it for you.
avillezm
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avillezm,
User Rank: Light Beer
8/22/2017 | 3:05:24 PM
Interesting Pivot. . .
Very interesting, I wonder if the (usually very smart) folks at AT&T don't see much synergies between IoT in the home and what seems to be their booming IoT business on the mobile network side.  Maybe a case where they are calling it quits in a fight that they are already losing (broadband to the home). . . may be that they believe the play is through video to the home rather than home automation. . . Definitely an interesting move. . . I wonder what it is going to mean for theur wholesaler relationships. . . I belive other carriers have launched the solution under their own brands outside the US. . .
mendyk
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mendyk,
User Rank: Light Sabre
8/22/2017 | 10:25:16 AM
That sign
The AT&T Digital Life "warning" sign looks about as threatening as a "This house guarded by an enfeebled Shih Tzu" sign.
KBode
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KBode,
User Rank: Light Sabre
8/21/2017 | 6:01:22 PM
Home automation...
AT&T's been ringing the bell on home automation and security since BellSouth days. Interesting to see it dump the idea. Wonder what other areas AT&T intends to divest to reduce overall debt load?
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