Verizon Gambles on Home Automation

2:00 PM -- Home automation has loomed as a potential source of revenue for telecom service providers for several years now, but there have been few bold ventures into this realm, and for good reason.

As skeptics are quick to point out, delivering home automation on a mass-market basis requires a level of expertise and customer support for which telecom service providers may not be prepared, all to deliver a product that consumers may not know they need.

So why is Verizon Communications Inc. (NYSE: VZ) venturing where others, such as Microsoft Corp. (Nasdaq: MSFT), have gone, only to face defeat (or worse, apathy)? (See Verizon Tests Home Monitoring.)

For one thing, Verizon's test of home automation is actually an effort many years in the making. Within its own R&D facilities in Waltham, Mass., Verizon has been developing home-automation applications and services for many years now, and publicly demonstrating them for at least the last four years.

Verizon has also been working with -- and investing in -- partners such as 4HomeMedia Inc. , which developed the software that enables the connections with electrical meters and a variety of devices in the home. Motorola Inc. (NYSE: MOT) ended 2010 by acquiring 4Home. (See Verizon Invests in 4Home and Motorola Acquires 4Home.)

The other difference from previous efforts is that Verizon is now in position to combine cloud-based intelligence and applications with advanced in-home wireless capabilities that can use auto-discovery and other techniques to reduce in-home complexity.

Of course the major challenge remains to convince consumers that they need to use an iPhone or their PC to lower their thermostat or turn off lights. That's a challenge technology can't solve. Verizon will have to convince consumers that they can save enough money on their utility bills or by eliminating separate home-security systems to justify the cost of the new service.

I think this is a risk worth taking, if a home automation service can generate incremental revenue, and it's highly likely Verizon won't be the last broadband ISP jumping into this risky pool.

— Carol Wilson, Chief Editor, Events, Light Reading

Jeff Baumgartner 12/5/2012 | 5:16:22 PM
re: Verizon Gambles on Home Automation

With Comcast, Suddenlink and AT&T all in this market now, I wonder if it's really much of a gamble anymore.  Might be more of a gamble not to do it if this SP-focused part of the home monitoring/security market ends up taking off. JB

cnwedit 12/5/2012 | 5:16:20 PM
re: Verizon Gambles on Home Automation

I still see it as a gamble for all of these players and this is why: If this is going to be mass-market, it could require a level of customer support that could swamp the existing service provider resources. Plus, services will have to be relatively cheap to convince customers to sign on, especially at a time when a lot of them are trying to cut their cable/telecom bills.

A lot of companies have gone down this path and pulled back for these and other reasons. While this may become table stakes for broadband service providers, I don't think we're close to that stage yet.

The one existing service that broadband ISPs could displace is home security, where companies such as ADT have cash cow operations that collect $35 to $40 a month for doing almost nothing.

I think everything else is still something of a gamble.


rjmcmahon 12/5/2012 | 5:16:18 PM
re: Verizon Gambles on Home Automation

I spoke with brinks home security biz dev a decade ago about their security business.  Even with the $40 per month to "do nothing" it takes them 7 years to get a return.  The cost per sale is very high.  This goes to your point that home automation/security is a high touch business and $40 per month is likely too low even when doing nothing more than sales. 

paolo.franzoi 12/5/2012 | 5:16:17 PM
re: Verizon Gambles on Home Automation


I was under the impression that you paid for your installation costs as well as the monthly service for monitoring.  The comment you have it sound like the installation costs are covered by a long term monitoring contract.

Am I reading your post incorrectly?



rjmcmahon 12/5/2012 | 5:16:16 PM
re: Verizon Gambles on Home Automation

The equipment costs can be paid up front or paid over time in the monthly bill, and this is part of the equation in the 7 year return.   But the key take home point was that brinks home security did a lot of neighborhood analysis before sending in a salesman in the first place (crime rates had to be increasing, the houses at the certain values, etc.) because their costs to close a sale was a substantitive part of their business - lots of residences (read salesman's time) that never buy.

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