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Connected Homes December 2018/January 2019 Viewpoints

Technology Analyst: Michael Gold

2018: The Year in Review

Contributions by Christian Feest
Feest is a technology analyst with Strategic Business Insights.

Markets propelled some new product categories and use cases to success in 2018; others are heading for the scrap heap. Smart-speaker markets matured from early-adopter to mainstream status in the United States, with market development in China now potentially in position to do likewise. Nintendo followed on its recent successes with transformative hit products that work with TVs but do not depend on them. Large players focused on connected home-security technologies for home entryways, including options for secure in-home package delivery when residents are not at home. Behind the scenes, suppliers of wireless network technologies started tooling up for next-generation Wi-Fi; other standards ran into market-development snags. Sections below detail some of these and other top stories about connected-home technology and market developments during the year.

Smart Speakers and Triopolies

In mid-2018, analysts at Canalys reported that markets were on track to reach 100 million smart speakers installed worldwide by the end of the calendar year. Several US analyst firms collaborated on a survey that concluded that some 47 million US adults—roughly 20%—lived in homes that contained smart speakers as of early 2018, up from less than 1% two years previously. In early 2018, Apple entered the market with a high-fidelity product. Various vendors integrated touch screens with smart speakers. Otherwise, smart-speaker technology has not changed greatly in the past two years, but market development has been a major success story for commercialization of connected-home hardware and services. The same is true of business development. Just as medium and large businesses adapted to the World Wide Web in the 1990s and mobile apps in the 2000s, businesses are now telling customers and prospects what to say in order to connect and transact using smart speakers.

Late-2018 market estimates saw smart speaker markets growing rapidly in China, potentially indicating that in 2019 the product category will see the kind of success there that it had in the United States in 2018. The Amazon, Apple, and Google triopoly in virtual assistants is matched by a comparable Alibaba, Baidu, and Xiaomi triopoly in China. And Tencent's Xiaowei virtual assistant is in some ways China's counterpart for Microsoft's Cortana; neither Cortana nor Xiaowei has a dedicated smart speaker, but both are available via apps and by other means.

Apple was slow out of the gate with its HomePod smart hi-fi speakers, which finally became available after a delayed release. At a list price of about $350 per speaker, the product is too pricey for typical households. But several brands finally released wireless hi-fi speakers compatible with Apple's AirPlay 2 devices during 2018. The devices make it easy to implement multiroom audio using a smartphone as an audio source and using Wi-Fi instead of wires or "sneakernet" (carrying a smartphone from room to room). Now that Apple users have optional Siri-based control ("play Mozart in the bathroom") of third-party hardware, as of 2018 the Amazon-Apple-Google triopoly in virtual assistants is also a triopoly in speech-controlled multi-room-audio systems. Each company has a business ecosystem of hardware partners for home-entertainment systems. The industry leaders have taken steps to simplify installation and music playback. But customers have to select product models carefully or else buy all their electronics at an Apple Store to ensure compatibility with audio gear from partner-suppliers such as Bang & Olufsen, Bose, Denon, Libratone, Marantz, Sonos, Yamaha, and so on.

Home Entryways and Market Entryways

Amazon.com launched a service that deters package theft by enabling delivery personnel to enter a home having a connected door lock from Kwikset or Yale. Complete strangers enter homes and leave packages under the watchful eyes of cameras. Amazon intends to integrate its system with Amazon Home Services, which connects users to repair crews, housekeepers, and dog walkers. Walmart is currently testing in-home delivery, apparently in response to Amazon's service introduction. Door locks that are compatible with Amazon are not compatible with Walmart and vice versa.

Amazon also acquired Ring—maker of a unit that incorporates a doorbell button and an exterior-mounted camera. Similar smart doorbells from many vendors notify mobile apps to begin streaming video when a visitor rings a chime, and they generally let users stream video of an exterior entryway on demand. Remote users can monitor visitors before unlocking and after relocking connected deadbolts—for example, when housekeepers need to enter and exit unoccupied homes.

Yale also released a Nest-compatible (but not Amazon-compatible) door lock, after about two years of developments and delays. Reportedly, when a household member unlocks a door, a Nest security system automatically disarms. Disarming procedures are a traditional annoyance for users of burglar alarms, who can even owe penalties for false alarms. If successful, this type of capability could be a minor breakthrough toward making home-security systems more attractive and usable.

Shake-Ups in Big Entertainment

Traditional US pay-TV services were on track to lose between 2% and 3% of their subscriber base in 2018—part of a slow but steady decline that indicates changes in the role of infrastructure-based services. The contraction occurred in a year when 2 million to 3 million new households developed in the United States—a further indication of the industry's missed opportunities. Over-the-air broadcasters in the United States, who are also seeing competition from streaming video, made experimental uses of a second-generation digital broadcast standard. The standard assumes a smart TV or set-top box that is broadband connected via Wi-Fi or Ethernet. Google-like custom advertising is a possibility. Digital "lighthouses" will continue to broadcast using the existing standard during a long transition period.

Shareholders of The Walt Disney Company and 20th Century Fox agreed to allow Disney to acquire the legendary film and TV studios. The deal comes with a number of pay-TV and streaming channels (such as National Geographic) and intellectual property rights (such as for the hit franchise X-Men). Disney prevailed over Comcast in a bidding war, and received approvals for the merger from regulators in China, the European Union, and the United States, among others. The Rupert Murdoch family, which liquidated its interest in most of 20th Century Fox, will retain ownership of over-the-air Fox stations along with Fox News and Fox Sports. The "big six" studios are now the "big five," namely Columbia Pictures (Sony), Disney, Paramount (Viacom), Universal Studios (Comcast), and Warner Bros. AT&T's merger with Time Warner is proceeding, but the US government continued in its attempt to reverse its previous approval of the merger.

What Did Not Happen in 2018

Competitive developments mean that some technology pathways saw reduced activity and others become dead ends; still others might be merely delayed. Yale's Nest-compatible door lock was apparently too little too late for the Thread wireless protocol, which saw no other new compatible products. Although many brands of devices work with Nest via cloud services, most brands seem reluctant to use the wireless technology that is inside Nest-branded devices, perhaps out of fear that parent company Google will choose to release copycat products.

Somewhat similarly, the Wi-Fi Alliance seems to have abandoned the HaLow standard, which is based on IEEE 802.11ah specification. HaLow would have enabled small devices that run for long periods on coin-size batteries to join Wi-Fi networks. No party saw fit to bring the technology to market, and a planned compatibility-certification service did not materialize. Also similarly, few significant product releases were compatible with Bluetooth Mesh, which players standardized in 2017.

Bosch cancelled release of a promising home robot, Kuri; refunded customers who had preordered; and apparently shut down its Mayfield Robotics business unit. Other, less surprising absences from retail markets included robots that suppliers including Aeolus and Ubtech demonstrated to much fanfare at trade shows during the year.

Challengers did not overcome Sony's lead in virtual-reality headsets during 2018. But generally, virtual- and augmented-reality markets had disappointing growth and, except for Sony, remained collections of niches. Magic Leap seemed not to impress analysts, journalists, and developers who experimented with the company's first model of augmented-reality (AR) eyewear. Fully mobile operation is possible, but the eyewear requires a belt pack and might tend to see most use indoors. The product has a rudimentary lightfield display, but product reviewers did not indicate that Magic Leap's AR images were significant improvements over those of existing AR products. In theory, lightfield displays are capable of near-holographic image quality.

Look for These Developments in 2019

Power users, researchers, and developers will be watching for a number of developments in 2019:

  • The first Wi-Fi 6 devices are likely to appear on the market, potentially consisting of routers and notebook computers. A key development to monitor is whether suppliers will see these offerings as premium or will "throw them in free of charge." The latter choice would be better for orderly market developments. Most existing computers, smartphones, and other Wi-Fi gear will be unable to take advantage of the new standard at all. Companies may want to subsidize market development at first, encouraging users to upgrade sooner. Wi-Fi 6 might even appear in some popular smartphones and tablets during 2019. Alternatively, early Wi-Fi 6 offerings might be costly and mainly be for a niche of users who feel the need for data-transfer speed, with major price reductions coming later.
  • Launches of large constellations of low-Earth-orbit satellites seem likely to commence, with players including Airbus, Boeing, China Satcom, OneWeb, and SpaceX among the champions. The players expect that their customers will include many homes needing broadband service. Although the satellite networks will take a few years to become fully operational, earthbound technology and entertainment industries will have a better idea of the outlook for a mass market in space-based communications by the end of 2019.
  • Disney indicates it will introduce a streaming-video service in 2019 and will stop licensing new movies to Netflix. Walmart has also announced plans to start a streaming-video service. News leaks also strongly suggest that Apple will introduce a streaming-video service in 2019, though the company has not confirmed this leak. Reports indicate that Apple is currently producing or funding production of exclusive content, much as Netflix produces many of its own movies and TV series.
  • Virtual multichannel streaming services could see large growth in 2019. The services are fundamentally different from Netflix and other subscription video-on-demand services. The multichannel streaming services emulate traditional cable and satellite pay TV by offering a number of popular live and prerecorded TV channels. Some of the leaders in the field are DirecTV Now, Hulu TV, Sling TV, and YouTube TV. Subscribers will be some mix of households that resist traditional pay TV plus households that discontinue subscriptions to traditional offerings. Virtual multichannel services can deliver highly customized video advertising.
  • Traditional broadcasters and pay channels have been developing technologies to deliver YouTube-like customized video advertising, but these efforts saw challenges during 2018. Watch to see whether the traditional players can make technological progress toward delivering household-by-household addressable advertising in 2019. Generally, traditional pay-TV players face a gauntlet of challenges from streaming services and mobile-communications services and face threats from future satellite constellations. Sooner or later, industry restructuring seems inevitable. AT&T's acquisition of Time Warner, assuming it withstands a current challenge from the US government, will be one indicator of that restructuring.
  • Vaporware robots that did not appear in 2018 (and others that did not appear in previous years) are a reminder that if something sounds too good to be true, it probably is. The principle applies not only to connected homes but to all technology domains. Start-up Aeolus received much publicity for modest demonstrations of a large wheeled robot and ambitious claims that the robot would be able to do household chores such as picking up items from a floor or fetching a can of beer. Watch for overpromises not only in robotics but in other application domains, including home automation. As in robotics, artificial intelligence promises eventually to enable new and compelling applications in home automation, but the technology is still not trustworthy enough to allow fully computer-based control of door locks, burglar alarms, and other safety-critical hardware.
  • Watch for new applications of artificial intelligence (AI) in home networks. In late 2018, Samsung released a costly TV set that uses machine learning to add synthetic detail to images that appear on its 33-megapixel (8K) display. In addition to enhancing images, AI could also enhance additional applications including indoor climate controls, physical security, and cybersecurity.