All I Want for Christmas Is a Digital Home
Digital Service Providers (DSPs) -- including broadband, television, communications, and wireless service providers -- must assume an expanded role in the digital home. They are facing competitive threats from both fellow DSPs and alternatives to the services they have provided for decades (voice, video, data services, communications, etc.). From Vonage to Google, DSPs have more competitive challenges today (and risk to their bottom-line profitability) than ever before, and they must work harder and smarter than previously to keep their own customers happy and to differentiate from their competitors.
There is a duality to their position, though, as DSPs operate in a risk/opportunity paradigm. The digital home opportunity is a significant “greenfield” area of development. With hundreds of millions of households worldwide establishing the basic connection points to enable multidevice connectivity, it is an open field as to which companies can most successfully mine this new opportunity.
The DSP will leverage two-way communications (operator to the home, and device-to-device in and around the home) to build new services, increase customer satisfaction, and grow revenue per subscriber (ARPU), doing so through deployment of home network equipment and delivering connected-home applications spanning entertainment, communications, technical support, and home, health, and energy management.
As history has shown, the digital home is not yet a “set-it-and-forget-it” experience for consumer or service provider. Instead of a world where all IP-connected devices easily self-configure, announce their capabilities, share similar interfaces, and function with out-of-the-box ease, installation is typically fraught with trial-and-error, missteps, and -- to the detriment of the DSP -- a customer support call.
In other words, as DSPs pursue digital home opportunities, they must consider the impact to their brand, customer service, and overall revenues. Particularly important are the processes to connect and configure services and devices. These tasks must be accomplished in a much more automated way, and DSPs must manage solutions in a significantly more granular manner than what they have done in the past.
The Wish List
Today, less than one-half of U.S. households with a home network have a configuration where printers and centralized files are accessible to multiple devices on the home network. The DSP could be a significant player in changing these dynamics.
The demand for enhanced home network configurations is 30-150 percent higher in households that are already receiving at least a basic (broadband-sharing) home network from their service provider when compared to networked households in general. (See Figure 1.)
This demand is an opportunity for a service provider to provide branded home network configuration tools that enhance their customer support credentials. Such services can build loyalty and establish the service provider as the go-to entity for additional home technical support services, which operators can build into new revenue-generating services.
Beyond broadband services and customer premises equipment, DSPs can play a more active role in the activation and proper configuration of wireless devices, including smartphones and tablets. With worldwide smartphone connections approaching 400 million by year-end 2014, these devices will have active roles as controllers, entertainment displays, and communications platforms blending fixed and mobile connections (voice-over-Wi-Fi and femtocells).
In order to facilitate both efficiency and scale for service and device activation, DSPs will need activation solutions that provide both minimal configuration and the ability to reach a variety of devices beyond the modem, residential gateway, and/or the set-top box. In other words, as consumers add more devices to the home network, providers need solutions that can scale to include these new devices with little to no reconfiguration requirements.
Wrap It Up!
Bundling of core access services -- broadband, television, home phone and mobile -- increases customer satisfaction. Depending on the number of services on the bundle, the percentage of consumers indicating very high satisfaction improves anywhere from 10 to 20 percent. (Overall, 62 percent of broadband subscribers are highly satisfied with their service.)
Bundling value-added services within a DSP’s core offerings may have an even more significant impact on customer satisfaction. In examining consumers who receive a typical value-added services package (a home network router/residential gateway, parental controls, Internet security, and access to premium tech support, to name a few), the percentage of customers giving their broadband service provider high ratings for satisfaction rises to 80 percent!
Beyond bundling, however, which value-added services will play the greatest role in both improving customer satisfaction and loyalty and contributing to new revenue streams? Parks Associates research finds that the presence of exclusive entertainment content (for example, video and music offerings), home networks, and a variety of customer support and assistance offerings (data backup, premium technical support, parental controls, and managed Internet security) increases the percentage of highly satisfied broadband customers by 8 to 18 percent. (See Figure 2.)
With proper activation of services and devices, DSPs are able to deliver both core and value-added services features in a proactive and cost-effective manner. Many customers sign up initially for a few basic services -- perhaps just a broadband connection. However, as service providers roll out new services (voice-over-IP, IPTV, Web camera monitoring, etc.), these companies not only want to activate the accompanying hardware but make sure the back-end systems (billing) are notified if/when the customer has activated the service and should be billed accordingly.
With the increased number of devices being added to the home network comes the risk that customer support calls will grow substantially. In fact, one-quarter of consumers reporting a networking-related problem contacted their broadband service provider for assistance, regardless of where they purchased the home networking equipment. Assuming that support calls for home networking alone will remain on their current trajectory, the cost to DSPs will total in the hundreds of millions of dollars annually. DSPs must implement solutions that provide for more automated, remote, and dynamic resolution of device and service configuration issues.
QoS is essential to maintaining subscriber satisfaction and reducing churn. Without QoS, a scenario in which one household member’s VoIP suffers from pauses while another family member downloads a file is highly possible. That same scenario would cause a delay in video, and customers will not tolerate these service problems.
Finally, remote management capabilities allow service providers to update CPE firmware and software remotely. This ability is particularly critical with video-related services, for which remotely enabled firmware and software upgrades deliver QoS for smooth voice conversations and video viewing. Customers may be willing to put up with a slight “crackle” on a phone call or a small delay in receiving an e-mail, but a bad image during the big football game can ruin a good viewing party!
Cha-Ching! Current and Desired Value-Added Features From a DSP
Consumers respond favorably to the idea of receiving services such as PC tune-ups, virus detection and removal, home network support, peripheral problem resolution, and help with common PC applications from their DSP. Three-fourths of consumers also indicate a preference for receiving a variety of technical support services from a single vendor, which bodes well for the DSP, which can bundle the cost of premium care services onto the customer’s existing monthly bill. (See Figure 3.)
Happy New Year for Providers
The facts and revenue potential call for action. In total, the premium care opportunity for service providers will grow from $2.4 billion in 2010 to $4.5 billion in 2014.
Parks Associates also forecasts that more than 8 billion devices will be connected on the home network by year-end 2015.
Our recommendations for DSPs as they evaluate different customer support solutions include the following:
• The solution must enable granular metrics and provide a roadmap for extensions. Data and metrics matter to the service provider, and any customer support solution must account for these numbers from all links in their service portfolio -- including home networking equipment or other digital lifestyle equipment. The mantra from service providers is metrics equals management, so the solution must fit well with existing and emerging standards for remote management, including TR-069.
• The solution must also allow for the migration of applications, including minute and localized measurement. The ability to pull specific data about quality of service (packet loss, latency, etc.) from individual set-top boxes and other entertainment receivers is a critical next step to many remote management systems offerings. Tools that enhance the provider’s ability to analyze and aggregate data will also be important to mining the data for new opportunities for cost reduction or revenue generation.
• The solution must scale to consumers’ changing needs.
In initial rollouts of enhanced customer support solutions, the majority of subscribers will be content with significant amounts of automation in terms of troubleshooting and self-help. Most do not want to be involved in the process of diagnosis or repair; some will not want to know about a problem, only that their equipment and services are working as promised.
However, as customers grow more accustomed to their service provider as an experienced provider and even a trusted digital home advisor, the solution must take into account the likelihood that customers will want to customize its use to fit their particular lifestyle. The service provider may not want to remain a hidden fixer; there may be significant value in branding certain aspects of customer care.
On a simple level, this branding may entail something like proactive messaging in the form of e-mail or instant message that alerts customers to new virus outbreaks and offers solutions. On a more advanced level, the carrier may want to deploy a customer-facing and subscription- or fee-based support solution and value-added service that extend its basic offerings.
About the Author
Kurt Scherf is Vice President, Principal Analyst, Parks Associates. He studies developments in home networks, residential gateways, digital entertainment services, consumer electronics, and digital home technical support services. For more information, visit www.parksassociates.com.
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