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Connected Homes December 2017/January 2018 Viewpoints

Technology Analyst: Michael Gold

2017: The Year in Review

Developments in home networking and speech recognition signaled the emergence of a three-way oligopoly consisting of Amazon, Apple, and Google. But this oligopoly is tempered by each company's strategy of recruiting numerous electronics and appliance vendors—in some cases, the same vendors—to develop and certify compatible speech-controllable audio speakers, thermostats, security cameras, and other electronic items. Each vendor also pursued use of speech services beyond the home, including helping users to control in-home devices from anywhere—though the safety of such solutions remained in doubt. In the realm of new services, multichannel pay-TV systems expanded their partnerships with Netflix, and mobile communications companies experimented with the expansion of fixed-wireless connections to homes. The sections below discuss these and other major developments that occurred during 2017.

Speech Interfaces Drove Industry Realignment

Three major alliance ecosystems are emerging, centered on Amazon, Apple, and Google. The alliances began to restructure the home-networking market, though it remains unclear whether an oligopoly will simplify home networking or add new layers of complexity. Each oligarch's cloud-based virtual assistant recognizes speech and provides a compelling, artificially intelligent user interface that (among other duties) controls, monitors, and automates lights, climate controls, security and safety cameras, other home appliances, and portables that roam in and out of homes. Each oligarch's home-networking efforts emphasized voice-controlled multiroom audio as a key application, and each partnered with many brands of audio equipment.

Amazon's success stimulated imitation by other companies, including Baidu, Alibaba, and, most notably, Google. During recent years, Amazon's Echo and similar conversational appliances gradually gained the capability of controlling a great number of connected devices by early 2016, including thermostats from Nest, a sister company of Google (Alphabet is the parent company). Google itself initiated efforts to enable voice-based home automation, control, monitoring, and surveillance during 2016, but most of these capabilities did not become widely available or useful until 2017. Still, Google lagged far behind Amazon in terms of the number of compatible devices and use cases ("Alexa Skills").

Amazon's success also apparently stimulated Apple to liberalize its policies for hardware partners. During 2017, Apple chose to let partners certify their devices' compatibility with HomeKit (and thereby with its virtual assistant, Siri) without the former requirement of using a special chip. With Apple's new software-based authentication protocol, software updates enabled users of (for example) IKEA's Trådfri lighting controller and Logitech's Circle 2 security camera to gain Siri-based control without buying new hardware. Amazon's virtual assistant Alexa can still manage the greatest number of devices, but Apple's new security protocol is helping Siri, Apple, and Apple's hardware partners to catch up.

Nevertheless, in one sense, Amazon and Apple both needed to catch up with Google. By late 2016, users could already talk to Google Assistant to enjoy speech-controlled multiroom audio, including in households that already possessed multiple brands of wireless speakers. During 2017, Google further advanced its lead in speech-controlled multiroom audio; several brands introduced speakers that have the equivalent of Google's Chromecast Audio dongle inside, enabling Android phones to "cast" audio to multiple home devices without additional hardware or other purchases. By the end of 2017, more than a dozen brands of speakers were compatible with Google Cast and Google Home.

Apple announced but did not deliver its own smart speaker, HomePod. Apple apparently also embargoed its manufacturer partners, who want their hi-fi speakers to be controllable via Siri; compatible speakers remained unavailable. Siri-controlled home audio could become a reality in 2018. In contrast, Amazon introduced speech-controlled multiroom audio in late summer 2017, including establishing compatibility with preexisting home networks that contain speakers from Sonos, the best-selling brand of Wi-Fi hi-fi speakers. Amazon's Echo remained the best-selling Wi-Fi speaker, but product reviewers do not characterize that unit as hi-fi.

Amazon Reinforced Its Overall Lead in Speech-Based Control

Near the end of the year, Amazon listed nearly 800 products with preintegrated Alexa compatibility (in the "Smart Home" section of its catalog of Alexa Skills; other sections list more than 20,000 additional Alexa capabilities). Google and Apple had far smaller collections of compatible hardware. Amazon introduced at least seven new speech-controlled products. The term smart speaker does not describe all of Amazon's conversational appliances, including Echo Show and Echo Spot, whose screens make them especially suitable for serving as bedside alarm clocks that deliver streaming wake-up music. The screens also serve as monitors that help users keep an eye on babies, pets, and images from security cameras. Echo Plus became the only conversational appliance that is also a mesh-network hub. Its compatibility with the ZigBee mesh-network protocol (but, regrettably, not with competing protocols Insteon, Thread, or Z-Wave) has the potential to reduce needs for additional networking gadgetry and to enable rapid installation of many brands of compatible in-home devices.

Open Licensing for Virtual Assistants

Amazon's Alexa and Google Assistant each became available via smart speakers manufactured by other brands. As a result, users can access these virtual assistants without owning any hardware from Amazon or Google. (Do not confuse these products, which have built-in Alexa or Google Assistant capability, with other speakers or other products that these virtual assistants can control remotely.) Google Assistant became available on speakers from several companies, including household-name brands JBL, Onkyo, and Sony, with Panasonic promising to supply similar speakers in 2018. Alexa became available on speakers from Sonos (the Sonos One model) as well as speakers from a number of lesser-known brands. Alexa also became available on a navigation system from Garmin and in some vehicles from Ford. (Again, vehicles that allow occupants direct access to Alexa differ from vehicles that Alexa can control remotely.)

The three Alexa-enabled speaker models that JBL released during 2017 caught analysts' attention because earlier in 2017 Samsung acquired Harman International—the conglomerate that is the parent of JBL as well as AKG, Harman Kardon, Infinity, Mark Levinson, and other famous names in consumer, commercial, and professional audio. However, no speaker emerged that is compatible with Samsung's Bixby virtual assistant. Various reports indicate that such speakers will appear in 2018. In contrast, analysts do not expect Apple to engage in open licensing for Siri when HomePod launches in 2018. Apple partners will focus on Siri compatibility, but users will not likely have the ability to talk directly to Siri via non-Apple hardware.

Multichannel Pay-TV Services Embraced Netflix

Traditional multichannel pay-TV services saw continuing incremental subscriber losses, but some three-quarters of US households continued to enjoy the services at the end of the year. Based on mid-year estimates, eMarketer predicted that about 5.5 million US adults cancelled multichannel pay-TV during 2017. Some of the defectors adopted substitute "skinny bundle" streaming multichannel services such as DirecTV Now, Hulu, PlayStation Vue, Sling TV, or YouTube TV. Roughly half of US households subscribed to Netflix, and the majority of households that subscribe to Amazon Prime, Hulu, and other streaming services subscribed to Netflix as well.

In fact, a majority of US households now have multiple video subscriptions. About half the households who subscribe to traditional multichannel pay-TV also have Netflix. The multisubscription trend is far more prevalent than the so-called cord-cutter trend (whose followers remained overwhelmingly dependent on coaxial and fiber-optic cables for streaming services).

As a result, perhaps streaming services are not truly competitors with infrastructure-based multichannel services, but are rather partners or candidates for partnership. This is especially true of Comcast, the largest multichannel service provider in the United States, which made Netflix available through its set-top boxes in 2016 and added compatibility with Netflix's ultra-high definition (4K) content in 2017. In 2017, similar Netflix partnerships emerged in the United States and elsewhere, including with Charter (United States), Shaw (Canada), and Altice (United States, France, Portugal, Israel, and the Dominican Republic).

Service Providers Experimented with Wireless Last-Mile Connections

As indicated above, the vast majority of so-called cord-cutters remained dependent on coaxial and fiber-optic cables for broadband service, with satellite-broadband services having only a limited ability to support binge-streaming. However, millions of "cord-nevers" continued to use mobile phones (or, more rarely, other cellular devices) as their exclusive means of online access at home. In the United States, that population saw good news during 2017 as cellular services relaxed caps on data traffic and promoted cut-rate unlimited-data plans.

Fixed-wireless services also saw increased activity. Many organizations experimented with fixed-wireless technologies for use in rural Asia, Africa, and the Americas. AT&T doubled the number of US states where it provides fixed-wireless broadband service, including new connections in rural parts of California and Texas. Verizon conducted precommercial trials of fixed-wireless service in 11 US cities during 2017 and started preparing to launch the service commercially in 5 cities in 2018. Verizon plans to make some use of technologies that will be part of next-generation (5G) cellular networks (though these technologies will be far from mature in 2018).

Google Fiber, which is part of Google's parent company Alphabet, rolled out new services in a few cities, notably Nashville and San Antonio, but the business unit experienced a major round of layoffs early in the year. Alphabet now seems to be pivoting to emphasize fixed-wireless services for multidwelling units, a market that the company entered in earnest when it acquired Webpass in 2016. Google itself started testing both fixed and mobile broadband access using frequencies near 3.5 GHz, which are at least partially available for unlicensed and licensed uses in many places in the United States and elsewhere.

Look for These Developments in 2018

Watch for Apple's renewed effort to deliver video-streaming services, in an attempt to compete with Netflix and other services. Apple indicates it will spend billions of dollars on original programming for the service, which might rely on Apple TV set-top boxes. Watch for a potential boost in true cord-cutters in the United States, who fully abandon cables and fiber-optic connections in favor of cut-rate unlimited cellular-data plans. At the same time, watch for trials of fixed-wireless broadband services in multiple developed and developing nations. These trials will often be part of long-term efforts toward a 5G cellular infrastructure (large-scale deployments will not likely start until late 2019 at the earliest).

At the same time that speech technology is aiding usability, users are becoming more technologically savvy. However, technology is still too hard to use; based on developments during 2017, it now seems likely that, for the indefinite future, only rare experts will ever be able to use Siri to control a Nest thermostat. But as "digital natives" begin to dominate the population, the two trends—improvements to both technology usability and tech knowledge—seem to work together to accelerate the pace of the commercialization of home automation and control.

Usability improvements promise to yield an improved scope of home-network automation applications—combining networked things and speech control from inside or outside the home—affecting entertainment, safety, security, resource use, child care, and health applications. At the same time, a greatly increased market scale is possible, as Apple's expected 2018 market entry into speech-controlled multiroom audio seems to reflect a new reality: Tinkering with home networks, once an electronics hobby that was far from fashionable, is finally proceeding into mainstream popular culture.

Future speech-controlled automation of security, climate-control, and other systems will likely resemble the speech-controlled multiroom audio capability enabled by Apple, Amazon, Google, and their overlapping lists of partners, who are now competing to supply magical experiences along the lines of "play party music everywhere" or "make it louder in the kitchen" (to hear music over the noise of appliances). In effect, the new audio use cases from Apple, Amazon, and Google are prototypes for location-independent speech control of many other kinds of nonaudio devices supplied by, potentially, the entire roster of the world's equipment manufacturers and hardware brands.

During 2018, analysts will also be watching to see if China's homegrown efforts will encompass significant home-automation benefits. During 2017, China began incubating its own three-way competition among speech-based virtual assistants from Alibaba, Baidu, and Tencent. Circumstances call for monitoring the market performance of these products, including outside of China. Also, China-based speech recognition start-ups Megvii and SenseTime each received enormous investments during 2017; analysts will also be monitoring whether these start-ups aid progress in home automation and control. Some signs indicate that the start-ups might improve cybersecurity by introducing trusted speech-based authentication, initially for financial transactions. Such trust could serve equally well for ensuring that only an authorized user can use speech to control security cameras and burglar alarms, for example.

Analysts are also watching for the integration of robots with virtual assistants. For example, Bosch's Mayfield Robotics unit intends to deliver its wheel-driven Kuri during 2018. Also, Sony's four-legged animal-themed Aibo robots have been unavailable for more than a decade, but the company is preparing to return to the market in 2018—this time with speech capabilities, albeit at a cost of thousands of dollars. Other vendors, especially those based in China and South Korea, have signaled that they are interested in adding mechatronics to table-mounted smart speakers, some of which have displays of various kinds. Another multi-thousand-dollar product that is available for preorder and that may become available in 2018 integrates a virtual assistant with a pseudo-hologram. Japan-based chat leader Line acquired the product's developer, Vinclu, in 2017; an animated character seems to float in a jar, thanks to a simple top-mounted projector and a tilted clear-glass projection screen (also known as the Pepper's Ghost illusion, which appeared in public performances at least as early as the 1800s). But beware of companies calling their products "robots" in a poetic sense, despite lacking any type of mechatronic components at all. Any device that contains no moving parts (or only buttons and switches) is, after all, only a robot in a user's imagination.

In the already-developing market, in which Amazon, Apple, and Google will be contending in 2018, watch for the ways that smart speakers accumulate features and become something else whose nature remains far from clear. Increasingly, conversational appliances promise to incorporate displays, mechatronics, and mesh-network capabilities for home automation and control. At every location in a home (and perhaps its immediate exterior), many users want access to a combination of speech-recognition virtual assistants, audio on demand (which different speakers in different rooms will typically need to synchronize), and wireless coverage, including Wi-Fi as well as at least one mesh-network standard.

Progress in market development for mesh networking—with or without voice control—also remains highly relevant to analysts' agendas. Amazon's inclusion of ZigBee in its Echo Plus product, which the company released in time for the 2017 gift-giving season, reflects users' concurrent needs for simple interfaces, simple installation, and reduced costs; with mesh-protocol compatibility, users can simply tell systems to control, monitor, and automate many different connected things without incurring the cost and effort of integrating a new separate router (such as Insteon Hub, SmartThings, or Wink Hub). But ZigBee is far less common in retail self-installed products than are other protocols (Insteon and Z-Wave). Moreover, conversational appliances have yet to fulfill needs for meshed Wi-Fi, which can be important for providing whole-house coverage in multistory dwellings and other homes.

Many mesh-network opportunities remain to be exploited; the technology is likely a requirement for wireless connected things that don't impose excessive requirements for battery maintenance. Doubts about the cybersecurity of existing solutions is leading to interest in new standards. Two new mesh protocols are likely to see progress toward mass-market commercialization in 2018—Google's Thread and the Wi-Fi Alliance's HaLow. The latter protocol is based on the IEEE's 802.11ah standard. Analysts will be observing how well the new protocols resist unauthorized hacking. The increased number of mesh standards could be counterproductive in the short term, adding many new incompatible products and increasing installation challenges for home users. However, indications of customers' and brands' allegiances to new and existing standards are likely to yield insights about the future directions of markets for connected things in homes and elsewhere.

Also, cybersecurity in general may be inadequate for allowing home-network markets to support disruptive technologies for home security. Alternatively, suppliers may make progress toward providing safety and security in ways that enable the control and monitoring of home devices when users are away from home, but that do not grant similar privileges to burglars and pranksters. Signs indicate that Alphabet, Amazon, Apple, Netgear, and others are trying to solve the problem; in 2018 they are very likely to take interesting steps toward enhancing users' safety and security. One example that appeared in relatively primitive form in late 2017 was Amazon Key, which lets delivery drivers leave packages inside people's homes and lets users view the delivery on their smartphones. But whether today's electronic door locks are safe, and whether indoor security cameras can become mainstream products, remains to be seen in 2018.