Alvaro Gallardo, director of smart home services at Orange Group, reveals that we may start seeing service launches in a variety of Orange markets this year, thanks to the emergence of viable business models and compelling service offerings.
Alvaro will be speaking at the Digital Home World Summit 2013 event, taking place in London on 18th-19th June. For more information and to register, please visit www.digitalhomeworldsummit.com.
Can you tell us a little about the marketing strategy used by Orange to monetize its digital home offerings?
Orange is starting to enter into the Smart Home market. In May 2013, our affiliate Orange Poland disclosed the first offering in the Poland called ‘Inteligentny Dom’, designed to be a comprehensive product that addresses customers’ needs.
Depending on their individual roadmaps, other affiliates could join during the next quarter by launching similar products. But we should take into account that the product should be adapted to many elements: operator’s profiles, competition, customer’s needs, distribution networks, etc…
But what is clear is that Smart Home is one of the candidates, likely the best, to become the 5th Play for telcos and cablecos, and that many players are already strongly betting on this segment, since it could be upgraded in order to provide many other services over-the-top, such as e-health, e-education etc.
Do you think user willingness to pay for these services is changing?
I do not think that it is changing, but finally there is a service which the customer is willing to pay for, what is a bit different.
The multi-screen capacity, the upgradability of the service (by adding new features and sensors), the reduction in prices (although still quite elevated) of equipment, plug & play capability etc, have all created the right conditions to see a notable adoption of these services.
Indeed, there is now a concept, innovative and really addressing core needs of customers regarding security, energy control, remote control of the home… It is totally new, and so we need to understand the market.
With that we are not saying that we will see 80%-90% penetration rates in the next years, but a constant uptake to double-digit penetration.
When do Digital Home services change from being a churn reduction tool to a revenue generator?
I guess that, on the corporate side, the minimum demand for any new service is its own profitability. And then, churn reduction.
The lack of a real Digital Home market has been due to the absence of good business models, where players were facing doubtful business models and no clear revenue model.
Now, new players (and we can include most of the US cablecos and AT&T) have set clear, strong ambitions on this market, with clear business models, monthly revenues and the right structures to deliver.
In this context, churn is still a very important tool to be considered as a value lever, but profitable revenues clearly take the lead in the internal and external communication of the companies.
What do you think will be the most profitable vertical in this segment?
The concept of verticals will gradually vanish, since what customers are demanding is exactly that: a mixed product whereby he or she could choose the services that meet a specific demand.
So talking about profitability vertical by vertical is going to become more and more difficult, and will depend on cost allocation.