Comcast leads cable's push for cut of $13B home security and automation market

ADT says it's not feeling heat from Time Warner Cable, Comcast, AT&T, Cox, Mediacom
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While holding a prototype of the smart light bulb that Comcast (Nasdaq: CMCSA) plans to begin selling to subscribers in December, SVP Mitch Bowling threw out some stats that show why the nation's largest cable operator is so bullish on growth prospects for its Xfinity Home automation and security service.

Bowling

More than 41 percent of its Xfinity Home customers are new Comcast subscribers, and 64 percent of those customers are buying the company's complete triple play of cable TV, high-speed Internet and telephone service. About two-thirds of subscribers to Xfinity Home, which includes automation features like thermostat controls and the ability to control lights with mobile devices, have never had a home security service, Bowling said.

"We are appealing to a broader set. Now there's a reason to buy," Bowling said in an interview at The Cable Show convention in Washington, D.C., earlier this month. "The product is attracting people who are interested in having a smarter home, but aren't just interested in security," he added.

Cable expands broadband platform
The cable modem, first introduced by Comcast, Time Warner Cable (NYSE: TWC) and other cable operators in 1996, is the device powering new home security and automation services. Comcast and other cable MSOs are also beginning to test ways to offer subscribers home healthcare solutions ranging from smart scales linked to a home network to the ability for doctors to monitor patients remotely with devices like blood pressure sensors and blood glucose readers.

Xfinity Home

Following the debut of Xfinity Home in 2010, Time Warner Cable and Verizon (NYSE: VZ) launched their respective IntelligentHome and Home Monitoring Control services in 2011. Cox Communications rolled a home security service and automation service on several cable systems last year. Mediacom became the smallest cable MSO to enter the sector last month, deploying a managed service from Comporium Communications that runs software from iControl, which also supplies a platform used by the major MSOs.

Rather than limit home automation and security service to cities where its U-verse TV and Internet service is available, AT&T (NYSE: T) is using its nationwide wireless network to power the AT&T Digital Life service that it introduced in April. The $30 monthly price undercuts Comcast's $39.99 Xfinity Home fee and the $33.99 monthly that Time Warner Cable charges IntelligentHome customers. It matches the price Cox charges in Arizona, Virginia and other markets where it offers Cox Home Security.

Verizon charges FiOS subscribers just $9.99 monthly for Home Automation and Control, but it doesn't offer subscribers a professional home monitoring service that alerts police and fire departments when alarms are triggered. That's a feature offered by the cable MSOs. 

ADT dominates $13B sector
Home security and automation providers generated $13 billion in revenue last year, according to IMS Research. ADT Corp. is by far the biggest provider, with 6.5 million customers. It has a market share of 25 percent, with its three biggest competitors (Protection 1, Monitronics and Vivint) controlling just 9 percent of the market combined last year. 

ADT insists it isn't losing business to Comcast and other telecom players that have entered the sector, with CEO Naren Gursahaney telling investors on the company's first-quarter earnings call last month that just 1 percent of ADT subscribers who drop the service are jumping to a service from a new entrant. But the Boca Raton, Fla.-based company recruited one of cable's most experienced interactive TV executives last October to help it respond to the competition, naming former Canoe Ventures CTO and Bright House Networks veteran Arthur Orduña chief innovation officer. 

"I'm not concerned at all about losing market share. Such a large percentage of households don't yet have home security. That's one of the reasons I'm here, because there is such a tremendous upside to what ADT could do," Orduña told FierceCable last week.

Orduña

Orduña said the six monitoring centers ADT operates nationwide also help it compete. The monitoring centers, which are staffed 24 hours a day, responded to about 20 million alarms last year, he noted.

Cable's expansion into home security and automation is driving business to iControl, a Redwood City, Calif.,-based software company whose investors include Comcast, Intel (Nasdaq: INTC), Canadian MSO Rogers Communications (NYSE: RCI) and ADT. Its OpenControl platform is used by ADT and cable MSOs Comcast, Time Warner Cable and Cox to offer interactive home security services that can be controlled with smartphones, tablets and Web browsers, along with home automation features such as thermostat controls and carbon monoxide and flood sensors.

Expanding into home healthcare
Last year, Comcast tested its first home healthcare product, teaming up with UnitedHealth Group on a pilot program with 310 subscribers in Philadelphia and Knoxville, Tenn. Aimed at fighting obesity, the test involved delivering a 16-part video-on-demand reality series called Not Me, which tracked six adults who were at high risk for developing Type 2 diabetes.

ADT markets a "personal emergency response system" to seniors who can press a button on a pendant to communicate with a representative at one of its call centers who can alert authorities to medical emergencies. But Comcast and other telecom players haven't yet launched similar alert systems or advanced home healthcare solutions that could help doctors and families monitor the aging population with cameras, motion sensors and devices that can allow doctors to track the blood pressure and pulse of patients remotely. Telemedicine firms have also developed smart bath mats that detect diabetic foot ulcers in addition to tracking an individual's weight.

Johnson

Jim Johnson, EVP and GM of iControl's cable division, said he expects that cable MSOs will launch remote healthcare services within the next three years. "We're still in the proof of concept phase in that segment of the market. It could be 12 months to 36 months away from a commercial launch. I think it will definitely happen," Johnson said.

Comcast's Bowling said the MSO is teaming up with its technology vendors to build a "device development kit" that would include home healthcare products. "We want to be the hub that connects that [home healthcare] into the home," he added.

While Time Warner Cable hasn't yet announced plans to launch home healthcare solutions, CEO Glenn Britt has repeatedly told analysts that he sees potential from the sector. "At the risk of sounding a little dreamy, there is a lot going on in healthcare. I don't think we've fully come to understand the implications of the Healthcare Act, and how that's going to change behavior," Britt said on an earnings call last year. "I have a feeling that [IntelligentHome] is going to be bigger over time than just home security."

Time Warner Cable COO Rob Marcus told analysts on that same earnings call in August 2012 that the MSO counted 7,000 IntelligentHome subscribers. But Time Warner, which has launched the automation and security service to nearly all of its cable systems in the last year, hasn't disclosed its subscriber count since then. Comcast, Cox and Verizon also don't break down subscriber counts for their home security and automation services.

New pricing and products at Comcast

AT&T Digital Life

Comcast unveiled a standalone version of Xfinity Home at The Cable Show convention which subscribers can order without taking its cable, Internet or phone services. It also began offering subscribers a $9.95 monthly version of the service that doesn't include professional home monitoring.

 

Comcast also demonstrated a new smart thermostat at the convention called EcoSaver that it says can reduce utility bills by relying on real-time weather data to adjust heating and air conditioning.

Bowling said other advanced products are in the works and confirmed that the MSO could eventually add automobile home security to its portfolio. Last year, Comcast filed a patent application involving technology that could allow subscribers to receive alerts on their TV or a mobile device if their automobile is tampered with. The patent application also details how subscribers may be able to have their home automation systems programmed to open the garage door and turn on the lights inside their home as their cars approach the driveway.

Security cameras can see, but not hear
While the cable MSOs and ADT supply customers with video cameras that can monitor any room in their homes, none of the providers offer the ability to listen to audio captured from the devices. iControl's Johnson said federal wiretapping laws have prevented security companies from offering audio, although any consumer with high-speed Internet access can buy webcams from manufacturers such as Dropcam to monitor both video and audio from cameras in their homes.

Bowling said Comcast plans to eventually enable audio through its Xfinity Home video cameras, noting that the cameras it has deployed do contain microphones that haven't been activated. "They [microphones] are not functional. Those will become functional later. It will become a consumer choice--that's a future development," he added.