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ABI Research Blog (102)

Elster – “System of Systems” Provider

Oct 3, 2011 12:00:00 AM / by Admin

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On 6 Sep 2011, Elster, one of the world’s largest electricity, gas and water measurement and control providers, announced the release of their integrated universal meter and radio platform, the REXUniversal meter. It will be commercially available in North America in the second quarter of 2012. This comes on the back of a recent announcement by Elster and Landis+Gyr to jointly develop integrated advanced metering hardware for smart grid applications.

Smart metering has come a long way whereby meter vendors traditionally have emphasized on functionality, building proprietary systems to stave off competitors. However, trends are taking shape that smart metering is treading or already ankle-deep into the phase of open standards and interoperability. This is in part if not largely driven by utilities’ demands for plug-and-play compatibility, thereby preventing any “vendors lock-in”. This also facilitates ease of introducing advanced features in smart grid products and solutions in retrofit exercises.

This aligns well with Elster’s pursuit or strategy towards developing open interface products and solutions in the smart grid solutions space, positioning itself has a key industry leader. With EnergyAxis and REXUniversal platforms in place, this opens up to a plethora of opportunities to untapped markets and channels through partnerships across the globe, especially to utilities that are not Elsters’ clients and vice versa for Elster’s partners.

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Emerging market series: Will Kenya's wholesale LTE network plan succeed?

Sep 29, 2011 12:00:00 AM / by Admin

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Many would compareKenya's recently declaredwholesalenetwork LTE planto Russia and question the actual possibilities of a cost reduction for the operators and the end consumers. Due to the monopoly the company has over the network, there might be a high chance that exorbitant prices would be charged to the operators who lease it. However, the difference between Kenya’s model and Russia’s lies in the fact that the Russian wholesale LTE network is largely controlled by Yota of which is allowed to control the prices at which the network is loaned. On the other hand in Kenya, the consortium was formed by the representatives from individual operators and is controlled by the government. Hence, the prices of the lease can be expected to be at reasonable levels.

The next matter of concern would be QoS. Many operators prefer to control their network coverage as they do not want to be left out of any areas where there would be demand and lag behind competition. But with the government ensuring no more LTE spectrum to be issued and with everyone else tied onto the wholesale network, it would still be a rather fair playing ground with competition now largely being centered around pricing of plans and its mobile services.

Although much has been said, it should be noted that Safaricom is preparing to launch LTE services in Kenya and may be the only independent 4G services provider as it is unsure how the Kenyan Government is planning to deal with them. Also, the Kenyan government might face reluctance from companies to lead the charge due to the low returns it receives for the amount of work they have put in to organize the consortium. Furthermore, it will be hard for revenue and expenditure issues (which are also top priority issues) to be ironed out before the stipulated deadline.

PS: I am now experimenting on a"blog series" idea so as tohave amore focused blogging as well as create a platform for analysts and readersto discuss about certain topics. The first theme that I came up with is the "Emerging market" series where I cover a range of topics from emerging markets. But I need yourfeed back on what you think of this idea (or probably what themes you would like to see)to carry on with this expermiement.

Please forward your comments to Lim@abiresearch.com. Thank you

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Nokia Conspicuous By Its Absence From Isis Handsets Announcement

Sep 28, 2011 12:00:00 AM / by Admin

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Given the length of Nokia's involvement ​in developing and launching NFC - for the first few years the ONLY NFC phones were Nokia phones - it was highly notable to me that Nokia was just about the only multi-device OEM missing from Isis' announcement this week.

Here it is incase you missed it: http://news.paywithisis.com/2011/09/27/manufacturers-add-support/

In brief this focused on a level of commitment gathered from various device manufacturers, specifically: HTC, LG, Motorola Mobility, RIM, Samsung Mobile, Sony Ericsson. All of these OEMs have agreed to implement NFC technology and standards that will form part of Isis commercial offering.

Interestingly, the announcement also included Device Fidelity, who's microSD card-based solution be offered to Isis customers in order to offer the service to those with (suitable) legacy devices.

This all reinforces my viewpoint that markets, such as the US, will have NFC provisioned almost solely by smartphones. Regarding those that have signed up, they are almost exclusivelyAndroid licensees. The primary exception to this is RIM, which is well entrenched within the US market and has been notably active of late with NFC in five new handsets.

Interestingly, Samsung and HTC are alsoprimaryWindows PhoneOEMs- but I will be writing more about this separately.

And this leads back to my first point - where was Nokia? Personally I do not read too much into the fact that it was absent - I see this as more of a reflection of Nokia's standing in the North American market than anything else. It continues to lack good relationships and distribution with the US MNOs and as such it will not be at the front of the queue when a US MNO JV (as Isis is) is signing up manufacturers.

Looking at the broaderopportunity, I see good things for Nokia as it builds closer relationships with MNOs in other countries - in effect being their new best friend in the face of mounting competition between MNOs, Apple and Google, for customer ownership. Its most recent steps for basic NFC inclusion in its Symbian handset reinforces this point and I expect to see more with the next generation of Windows Phones.

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Merchants and NFC: Payments, Great. Now Tie It To This…

Sep 27, 2011 12:00:00 AM / by Admin

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I presented at a great conference two weeks ago focused on mobile solutions for retail called RAMP http://retailramp.com/ . It was very well attended, particularly by merchants. Lots of discussion about NFC and mobile payments particularly – along with NFC couponing, offers, loyalty and rewards.

But there was also a lot of… whining. Despite investment and evangelizing from Google and ISIS, many merchants were whining. Someone needs to prove NFC works. I don’t want to be a first mover. I don’t understand why consumers want NFC, etc., etc.
Yes, there are no NFC phones yet. But there will be a lot of them coming to the U.S. in 2012 and it will become a tsunami of phones after that. No less than 50 different models are in testing or production as of this writing. That means that a great deal of Americans will have NFC phones in their hands over the next few years.
That’s exciting, but perhaps what is more so for merchants are some innovative thinking by NFC solutions providers who are focused on enhancing in-store experiences – using NFC technology to enable line busting, cutting edge customer service and content discovery.
I think Narian Technologies http://nariantechnologies.com/ is a company merchants will quickly turn to because they have thought through and can deliver solutions that will improve bottom line. According to Narian CEO Einar Rosenberg, merchants should pay more attention to sales that are lost when shoppers are in stores than incremental sales brought through coupons and promotions. He says merchants typically see 2% increase in incremental sales from upsell promotions and coupons. However, physical merchants lose a whopping 50% of incremental sales by failing to close opportunities in store. For example, their “Line Pager” solution sends an alert to a customer’s phone when it is their turn to order, a capability well suited for the grocery deli counter. The “Service Pager” is designed for use in restaurants to allow diners to place orders, ask for the check or top up beverages. The “Communicator” solution enables consumers visiting a chain store to speak with a topical expert in another store if all the clerks in the location they are in are tied up. The Narian solutions make use of NFC tags and currently require the consumer to have an Android phone and appropriate downloaded mobile app.
Another company to watch is Xius http://www.xius.com/ , which is selling passive and active NFC Smart posters that will power remote ordering food & beverage systems for drive throughs and hospitals. Imagine being able to touch your smartphone to access the drive through menu and ordering system – no need to yell and be yelled at incoherently by fuzzy speakers anymore. Or find and purchase a vast array of prepaid recharge – for phones, debit cards, online games, and gift cards -- at a tiny kiosk in a convenience store. This type of solution saves physical retailers valuable space and increases yield.
Last, there is Vivotech http://www.vivotech.com/products/vivo_server/index.asp , which envisions a personalized in-store, NFC-powered shopping experience. In Vivotech’s view, a customer enters the store, taps a touch point, reader or smart poster etc. The merchant now knows you are there, and can make offers. As the customer goes down aisles, they can tap on shelf tags to get product information, price checks, etc. The merchant could also make offers at that point, based on the customers actions. This interaction also represents an opportunity for financial institutions and other players. Then customer goes to the checkout, taps their phone once at the POS to calculate coupon redemption, loyalty reward points and payment.
These are technology solutions that make consumers retail experiences more convenient and more personalized. Consumers want that. Watch for innovative first-mover retailers to jump on these solutions and incorporate them with NFC mobile payments, and get a leg up on their competition.
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The Numbers Behind Vivint’s One Millionth Installation

Sep 27, 2011 12:00:00 AM / by Admin

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In August, Vivint (formerly APX Alarm) reached an important milestone as a company when the one millionth installation of its home security/home automation system was carried out in the Alabama home of a Mr. James Owen. At the time of this writing, the company is said to be serving around 560,000 customers.

Is Vivint’s customer retention so poor that it has managed to lose some 440,000 customers since it was formed twelve years ago? An anonymous industry source with close ties to Vivint informs me that the reason for the discrepancy is that for the first 8 years of its lifespan, the then APX Alarm sold of its customers to rival security companies as part of its dealer program.

Since 2007, the company has kept hold of its own customers and I am led to believe thatin the last two years alone, the company has taken on board approximately 150,000 new subscribers in 2010 and 2011 - 300,000 in total.

According to ABI Research's recent report entitledHome Automation and Monitoring, approximately 557,000home automation systems were shipped in 2010, meaning Vivint had a 27% market share.

All of this is also good news for SaaS (Software as a Service) vendor Alarm.com, which provides the core technology behind Vivint's offering. Alarm.com also counts GE Security, FrontPoint Security, Protect America, and TYM Security among its customers and if each is performing as strongly as Vivint, Alarm.com holds a lofty and indeed, enviable position in the home automation software platforms market.​​

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Open Consortium for Smart Energy Profile 2

Sep 27, 2011 12:00:00 AM / by Admin

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On 16th August 2011, the HomePlug Alliance, Wi-Fi Alliance, HomeGrid Forum and ZigBee Alliance agreed to create an open consortium for Smart Energy Profile (SEP) 2 Interoperability, enabling a myriad of organizations from these alliances whose technologies support communications over internet protocol (IP) to certify SEP 2 in accordance to a consistent test plan. This partnership among alliances, leverages on the cumulative work and technological advances of many industries to bring smart grid benefits to consumers.

The joint certification and test program, selected by the U.S. National Institute of Standards and Technology (NIST) in 2009 as a standard profile for smart energy management in home devices, will be used to certify wireless and wired devices that support IP- based smart energy applications and end-user devices such as thermostats, appliances and gateways. It will address devices operating on one or more of a variety of underlying connectivity technologies and provide the smart energy ecosystem – including utilities, product vendors and consumers – assurances of application and device interoperability. The program would utilize the processes and best practices recommended by the Smart Grid Interoperability Panel (SGIP) for smart grid testing and certification programs.

With this announcement, the outreach of the profile would be tremendous, aided by channels these alliances offer. Beyond interoperability amongst legacy and new devices targeted in the smart energy space, what can we see beyond this partnership? Perhaps, from a stack perspective, product engineers can now cherry-pick the best PHY/MAC interface to suite their requirements with appropriate software and hardware architecture. This alleviates the rigidity that comes along with applying the same PHY/MAC in different regions, especially in emerging segments such as smart energy and healthcare. Also, continuous innovation will be an ongoing occurrence at this layer (makings things cheaper and better) and this benefits everyone.
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Qualcomm's embedded chipsets for smart grid communications

Sep 20, 2011 12:00:00 AM / by Admin

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Qualcomm Incorporated showcased its new innovations in cellular communications for smart grid last week at GridWeek 2011. Its new embedded chipsets will be targeted at a new generation of smart energy devices which range from smart meters, electric vehicle charging stations, substation routers, communication nodes, to smart devices securely and reliably connecting with utility systems in near real-time.

One of the many companies using Qualcomm’s new chipsets is Ambient Corporation. Ambient provides a smart grid communications platform which includes communications nodes equipped with 3G cellular capabilities. The majority of US utilities are using cellular communications for their smart grid networks and the UK government recently announced its commitments to build a cellular network for its smart grid. Currently, Ambient biggest customer is Duke Energy, based in Ohio, Indiana and Kentucky, and has been using Ambient’s smart grid platform since 2008.

Consert Incorporation is an intelligent load management technology company. Consert’s Virtual Peak Plant load management system provides reliable, real-time, fully-integrated load management through the pairing of utility and consumer offers. Consert plans to use Qualcomm’s technology in a rollout of 140,000 home energy management systems in Texas for utility company CPS Energy.

Additionally, SmartSync and Digi International will be using Qualcomm’s new smart grid chipset technology. SmartSync will be deploying 3G cellular-enabled smart meters for Texas Electric Transmission and Distribution service provider (TNMP) and over 150 other utilities across the US and Canada. Digi International’s smart grid products will be used to connect and securely manage local or remote electronic devices over the network or via the Web through its Digi X-grid solutions, and iDigi Device Cloud.​

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Smart Grid Communications in the UK

Sep 20, 2011 12:00:00 AM / by Admin

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The UK government has committed to a cellular-based solution for its smart grid. It announced a tender for 4.59 billion (US $7.5 billion) worth of contracts to build a new wide area network (WAN) for its smart grid. This new commitment will help the UK meet European Union mandates to support national smart metering by 2020.

It is a bold step by the UK to use a wireless network rather than prime power line communication (PLC) standard which are used in most other European countries for smart grid. The UK government is expected to use general packet radio service (GPRS) or global systems for mobile communications (GSM) technologies rather than 3G or LTE, because smart meters do not require huge bandwidth, and 2G is a cost effective and well known technology.

One of the conditions for telecom companies participating in the tender is they will need 100% coverage of the UK. The tender is split up into 3 regions/contracts; Northern Great Britain which includes Scotland, central Great Britain which includes Wales, and Southern England. Each of the three contracts will be split up into services; telephone and data transmission services, IT services, consulting, software development, internet, and support.

There are two very interesting aspects to the UK government’s new communication initiatives for smart grid:

The government has set up a central data and communications company (DCC) to control the access to the data from the deployed smart meters. This takes away the security responsibilities from energy utilities and will help instill greater consumer confidence in data privacy. The US and other European countries have been debating possible solutions to smart grid security and will take particular interest in the UK’s smart grid model.

The choice to use GPRS or GSM, which are 2G technologies. 2G may be very well known and cost effective but how long will GSM and GPRS networks continue to run. Mobile operators are already planning for 4G in 2G allocated frequency spectrum which will seriously reduce frequency capacity. Additionally, the functionality of 2G isn’t great and the DCC may struggle to interact with consumers and provide real time and accurate information.

Nevertheless, the UK government’s investment in smart grid communications is good news for the energy community and no doubt be a positive for telecom companies that are eager to get into the smart grid market.

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Netflix Shuns the Bundle as Operators Embrace It

Sep 19, 2011 12:00:00 AM / by Admin

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Today, Netflix CEO Reed Hastings sent out an email to subscribers, posted to its blog , and with a YouTube video announcing that, in addition to the pricing increase, they would be separating their DVD operation into a separate business, Qwikster, led by Andy Rendich (former head of DVD operations). They highlighted, again, the different (business) needs of the two. Reed Hastings said, “Over the long term, DVD and streaming are gonna get more and more different. Streaming has incredible television shows, streaming is instant, streaming is fairly global, streaming has many things that make it different from DVD. And that over time, both DVD and streaming will be much better because they are separate…”

As a business professional, I understand their quandry… it is a lot simpler to fully manage profit & loss statements on a service by service basis. Furthermore, silo’ed operations – such as that of a cable company that uses a separate technology platform for their multiscreen solution compared to their traditional VOD services – can be easier to get up and running faster (no disrespect meant to the many great cloud video platforms being launched). However, the long term costs – in terms of duplicate metadata creation, managing subscriber plans in multiple places, and trying to provide a seamless user experience on multiple systems, decreased the perceived benefits over time.
Most importantly, however, Netflix has failed to see things from the customer perspective. Customers want integration of their entertainment experiences, and want to be able to select content regardless of the source. Today, customers must already navigate a fragmented world of live TV, YouTube for short content and some web TV shows, hulu or broadcaster portals (i.e., fox.com) for recent TV shows. Long tail content is split between Netflix, operator VOD, DVD sales and reruns. Netflix and Qwikster sites won’t be integrated – which will fragment the queues and decrease the value of ratings (something Netflix got right from the beginning). This change goes against the grain of the value of the bundle – with cable providers and telcos moving their attention from triple play bundles (phone, TV and internet) to quad play bundles (adding wireless services). The ‘carrot’ announced to customers of Qwikster is the addition of game rentals (for XBOX 360, Wii and PlayStation 3) to the service as an add-on.
Judging from comments on the blog, and on YouTube, Reed Hasting’s statement at the start of these announcements “I messed up. I owe everyone an explanation” is just the beginning to its US fan base, and possibly to investors. Netflix is a great company. Their move to the fast growing TV markets of Latin America provides great potential (as DirecTV has shown) – although low broadband penetration will provide slow growth potential. In my mind, the DVD service helps increase the value of the streaming service – due to both technological (i.e., low broadband penetration) and content (release window) limitations. Netflix’s failure to recognize the power of the bundle in customer’s minds will continue to be a source of friction.
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The US and EMV

Sep 19, 2011 12:00:00 AM / by Admin

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EMV migration in the US has been a talking point for some time. EMV card deployment remains limited in the US, deployed by banks and financial institutions to their tier 1 customers or those that travel abroad frequently.

In a new twist to the US EMV saga, Visa recently announced in August this year that is was going to support EMV migration in the US.
This announcement had a lot of people excited and was labeled by some as the starting point for a full nationwide EMV migration program. This is not the case and is just a support program by Visa to encourage merchants to adopt a dual contact and contactless readers to support EMV payments when presented an EMV payment card.
This program could certainly prove to be the starting point, additional driver or catalyst that pushes EMV migration, but my feeling is that in a country, which has so far avoided migration will continue to do so for some years to come.
The Announcement by Visa is also most certainly been influenced by the impending US NFC (Near Field Communications) market. With NFC starting to come to market and with expectations high, it makes perfect sense to deploy as much EMV infrastructure to support NFC contactless payments as possible.
This is a good strategy by Visa, by offering support they are simply asking the merchants to come to them. By even partially deploying EMV terminals into the US could greatly increase Visa’s position in the EMV market. Visa are looking to take as much market share as possible in the US early on and adopt a market position that will benefit Visa’s future.
For ABI Researches view on how we believe this announcement will affect the US payment cards market please see our Insights - Visa To Support EMV In The US and How Long Can America Avoid EMV?
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