Can Telcos Win in the AI-Led Smart Home Market?

Subscribe To Download This Insight

1Q 2018 | IN-5067

At MWC 2018, Telefónica, Deutsche Telekom, and SK Telecom promoted plans to compete in the voice assistant smart home market. While telcos have a direct access line into the smart home through their broadband and video service, how should they position their smart home offering? In a very competitive market, can they scale up and win against more developed AI voice assistants?

Registered users can unlock up to five pieces of premium content each month.

Log in or register to unlock this Insight.


Telcos Ramp Up Their Smart Home Efforts with AI-Powered Assistants


MWC 2018 showed telcos increasing interest in vertical markets. Particularly, the show revealed that telcos are actively targeting the smart home with innovative solutions. At MWC 2018, Telefónica announced Aura, an AI platform and digital assistant capable of interacting with customers and controlling smart home devices and services. Similarly, Deutsche Telekom detailed its intelligent assistant, which can be activated by the words “Hello Magenta” to control multiple home devices. SK Telecom went a step further by unveiling HoloBox, an AI hologram device that allows the user to communicate with an AI-powered virtual avatar. Shortly after MWC 2018, Orange, which had previously announced its AI-powered virtual assistant Djingo for its smart home in April 2017, announced Djingo’s availability for its Orange banking service. These announcements show that the telco category is innovating beyond connectivity, however what should be the end goal of these innovative services?

AI Voice Assistants Showcase Telcos' Ambitions to Move Beyond Connectivity


Well-established players compete in the AI smart home market, including Amazon with Echo and Alexa, Apple with HomePod and Siri, and Google with Google Home and Google Assistant. Telcos moving into this space will be in direct competition with web and tech giants.

Telcos’ AI assistants will provide enhanced customer interactions and will be central to any attempts to create telco-led smart home ecosystems. To do so, partnerships must be at the center of telcos’ strategies. Partnerships can integrate the telcos’ assistants with other AI platforms, but also with original equipment manufacturers (OEM) and startups to expand the role of the telco smart home ecosystem and the number of compatible devices. Besides Telefónica, Deutsche Telekom, SK Telecom, and Orange, other telcos have already targeted the smart home, such as Comcast with its Xfinity platform. ABI Research expects more telcos to launch similar products, as successful AI assistants could also become strong differentiation elements among competing telcos.

Telcos with a strong fixed-line and pay TV offering (a strong foothold in the connected home) will look at integrating their voice assistants on multiple channels with special attention paid to a leading home-based device, such as a home router or set-top box, while mobile-centered telcos will work on a handset-first experience. This trend will create opportunities for AI developers and companies like IBM, as many operators will look to outsource their AI voice assistant solutions.

What Should Be the End Goals for Telcos' AI Smart Home Play?


AI-powered voice assistants are the telcos’ attempt to take center stage in the smart home. Voice assistants provide an improved customer experience, the potential to create a smart home ecosystem, and a differentiation element among competing telcos. Of these three benefits, telcos should pursue the first two, while the latter should not be their end goal.

An AI assistant can provide a new and enhancedway for customers to interact with the telco, whether in the smart home or on the smartphone, thus addressing the telco’s traditional weak spot of customer service. For instance, Telefónica’s Aura is meant to transform the interaction between customers and the operator. Aura is branded as a fourth platform capable of leveraging data and information from the network and physical assets (first platform), unified IT system (second platform), and products and services (third platform). Aura will be available through multiple channels and will allow the customer to ask information about Telefónica’s products and services, access the Wi-Fi routers (provided by Telefónica), and access other services. Aura will also be able to make personal recommendations, such as on services, thanks to its machine learning skills. Aura can be accessed through Telefónica’s own channels, as well as through third-party services, such as Facebook Messenger, Google Assistant, and Microsoft Cortana.

Orange’s AI assistant’s role in customer interaction goes a step further. Its virtual assistant, Djingo, is going to enhance the user’s interaction with Orange Bank, which is the telco banking service arm. This move is built on the company’s acquisition of the Groupama bank in April 2016. Djingo is available 24/7, is powered by IBM Watson, is the first point of contact for bank users, and can perform actions such as blocking or unblocking cards.

Compared to many competitors in the smart home market, telcos already provide high ARPU home services, such as broadband and pay TV access. Therefore, the first option for telcos to develop their voice assistant-centered ecosystem will be through the bundling and upsell of existing services. However, telcos should not be entrenched in their traditional models; while bundling could work for certain markets, especially leveraging subsidized devices, a flexible go-to-market approach is essential and alternative monetization options should be tested.

Besides finding the correct business model, providing a seamless and uninterrupted experience centered on the assistant is another key challenge for telcos. Once the AI assistant is launched, customers will look to use it across different channels such as the smartphone and the smart home hub, to interact with all telco services. The assistant must become a central engine for all of the telco’s products and services, including music, games, video, devices, etc.

In a competitive smart home market, telcos should always aim to bring added value to their customers and partners. When faced with the likes of Google and Amazon, it is unlikely that telcos will develop a technology-based advantage; therefore, they should build their advantage on business models and customer experiences. A possible way to do so is for a telco to emphasize its role as a trusted partner and guardian of data and privacy, strongly emphasizing security, transparency, and the user’s data ownership. An example of this approach is Aura, which is set to allow the customer to decide whether they want to share their own data with third parties or not. While this approach has obvious appeal, the average customer may not be overly concerned about their own generated data and this frame of mind could be hard to change in the short term.

Partnerships are essential enablers of the smart home ecosystem and telcos know this. Examples include Vodafone partnering with Samsung to develop and market IoT smart home products and services across multiple European markets, and Telefónica’s integration of Aura with Google Assistant, Facebook Messenger, and Microsoft Cortana. Partnering with established players will increase the telco’s reach; however, there is a risk of marginalization into larger ecosystems. As such, Aura could become a mere satellite of a wider assistant (e.g., Google Assistant), which could strike similar partnerships, thus creating an entire roster of telcos’ AI at the service of Google’s AI.

In fact, one of Google’s initiatives to support the expansion of its Google Assistant is the Assistant Carrier Program, which allows carriers to use capabilities of its assistant to interact with their customers, such as helping people learn about their data plans or adding new services. Besides Telefónica, Sprint, Koodo, Telus, and Vodafone are working to integrate their services with Google Assistant.

Telcos need to be bold and innovative to unlock opportunities in new vertical markets; if telcos maintain a flexible approach and a clear end goal, they will play a significant role in the smart home segment. In this market, telcos need to strike the right partnerships, while ensuring their offerings and services deliver added value to their customers and partners.