Battle for the Digital Home

Battle for the Digital Home The Telecommunications Executive Network (TEN) always succeeds in stimulating some interesting industry debate, and last week’s seminar ‘Monetising the Digital Home – Business Models for the New Frontier’ was no exception. Chaired by Jay Chinnadori, Managing Director of Sumtotal.com, and featuring speakers from the BBC, Sony, TalkTalk and Virgin Media, the panellists set out their visions for the Digital Home and discussed the business models, customer demand and technology enablers to make all this work.
 
Here is my summary of the key discussions points:
 
Customer Experience - Unsurprisingly, the customer experience was right at the top of the list of concerns for the panellists, with the need to provide an easy-to-use service, delivering high quality video and using the power of search and recommendation to help users discover related content that may be of interest.
 
However, when talking about the customer experience, it was pointed out that the customer who has that experience is actually the end-user and not always the subscriber who pays for the service. For example, a family member or visitor who streams video over a Wi-Fi / home broadband connection to a smartphone. So the quality of experience needs to be related to the end-user and not just the account owner.
 
Sony’s Renaud di Francesco added that as video is now driving the internet, the infrastructure needs to catch up with this demand to alleviate problems of IP network congestion and the so-called capacity crunch. Furthermore, it is not acceptable to categorise and give higher priority to data packets on the basis of those which directly generate revenue. Network traffic must be managed on the basis of end-to-end service delivery.

Over_the_top-(2).jpgVideo Content - Quality is not only a concern for the customers, but absolutely critical for the premium content providers who must provide an end-to-end quality of experience or risk damaging their brands considerably. This means not only having managed delivery of content wherever possible, but also making sure their great content can be viewed on a large TV screen for the maximum enjoyment. This may be on broadcast TV or on-demand streaming, but the TV screen provides the best channel for collective / shared viewing experiences, compared with PC / tablet / smartphone which are better suited to personalisation.
 
The panellists agreed that there is a real need to focus on managed content delivery rather than pure over-the-top (OTT) content, with Alex Green from Virgin Media commenting that in his company they now call this ‘through the middle’. Hearing this reminded me of the old debate about walled garden / open garden / gated garden content in the mobile industry ten years ago. Apple has shown that walled garden models can work, but they seem to be the exception rather than the rule. For the rest of the industry, openness and partnership models provide the best route to expanding the market so that everyone wins.
 
Home Networking - The Home Network is at the centre of the Digital Home, but there are many issues that need addressing in order to make this a reality for all but the most hard-core techies. Home Network interference is acknowledged as a big problem for many, and the panellists discussed the question of which technology is best for the Home Network infrastructure – Wi-Fi, cabling or powerline? Though Wi-Fi is the most widely used today there seemed to be genuine interest in the powerline option for the future.
 
Interestingly, my attention was drawn to a TV advert from BT a couple of nights ago, who is now promoting its Home Hub 3 as the most advanced Home Network router with ‘Smart Wireless’ technology to automatically manage interference and provide the best possible connectivity. Clearly the issue of home network interference is one of rising significance when an industry heavyweight such as BT focuses on this in its mass market advertising.
 
There was also the question of which device should manage the Home Network - the connected TV or another box or hub? There was no clear answer to this; however a valid point was raised that whichever device manages the Home Network of the future, it will need to be much more efficient than it is today. Most households currently have many parallel connected devices (TV, PC, games consoles, smartphones, …) and connected networks (wired broadband, Wi-Fi, 3G) and these must be optimised both in terms of bandwidth efficiency and power consumption.
 
The Home Network was probably best summarised by Neil McArthur from TalkTalk who commented that the situation today is not so much ‘plug and play’ as ‘plug and frig around’! Clearly standards are going to be crucial to the success of the Digital Home, but according to the BBC’s John Denton, these are still 3 or 4 years away.
 
So what needs to happen to make the Digital Home a success for both provider and customer? In addition to the standards issue highlighted by the panel, there’s the critical issue of business model for the service providers and how they will actually make money? Inevitably, much of this will come from advertising streams, however the fragmented nature of viewing due to on-demand and time-shift viewing means that advertising itself will need to change considerably. Connected TVs will ultimately enable more targeted advertising and traceability from advert to purchase, but taking this step may be seen as a leap of faith with so much traditional advertising revenue at stake.
 
There’s also the issue of education amongst the consumers. As one of the panellists commented – customers are already buying connected TVs, but then what do they do? Many of them buy the latest technology without fully understanding its capabilities and how it can be used. So it’s going to take some deep pockets and serious marketing power to get the message across to the users. There may be some niche technology providers who can gain traction amongst the techie consumers, but it’s likely to the big brands who will be the ultimate winners.
 
Though the Digital Home could be a very wide area of discussion, much of the debate centred on video content and ‘Smart TVs’ – TVs that can be connected directly to a broadband connection and have a range of inbuilt applications such as YouTube and Skype. What I’m wondering now is if we will see integrated end-to-end services based on Smart TVs that work in the same way as Amazon’s Kindle – you buy the TV and it comes with a bundled data connection that you can use to stream/download whatever video content you choose. Food for thought perhaps?