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Where does home monitoring fit in the telco ecosystem?

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Samantha Bookman, FierceTelecomBehind all the bluster and speculation about drops in video subscribers and service providers' new dependence on broadband subscribers is a quieter market niche that IPTV providers and cable MSOs are looking to fill. Home monitoring and automation is coming of age, as major service providers like Verizon (NYSE: VZ) and Comcast (Nasdaq: CMCSA) roll out new offerings.

Verizon, for example, made a significant investment in Motorola Mobility's (NYSE: MMI) 4Home last fall, and just a few weeks ago officially launched its 4Home-powered home monitoring service. Starting at $9.99 per month, subscribers can remotely monitor doors and security cameras, turn lights off and on, and manage energy use via a PC, a mobile device, or through their FiOS TV set-top.

Canada's Rogers Communications (NYSE: RCI) has also jumped into the pool, launching its Smart Home Monitoring Service in August. Comcast offers an Xfinity Home Security service, and SureWest (Nasdaq: SURW) has been selling home monitoring since 2008 via a partnership with Xanboo, a company AT&T (NYSE: T) acquired in December 2010.

But where does home monitoring fit within the IP ecosystem? It's become quite clear that broadband is going to be the main revenue driver for traditional telcos and MSOs alike--a change that some resisted fiercely just a few years ago. Home monitoring as it's structured today takes advantage of both in-home networks and cloud services: Verizon's service works by placing client software on the subscriber's home network, embedded into a device, and keeping server software in a cloud environment.

It's too early to tell exactly how important home monitoring will be to providers' bottom lines, but ABI Research sees the service as having tremendous potential. Already in 2011, the research firm estimated that there are 572,000 subscribers using home automation services provided by telcos and cable companies, and it believes that number will grow to 12 million by 2016.

Despite this optimism, the growth of home monitoring has not been without its hiccups. In the same week that Rogers launched its service, Cisco (Nasdaq: CSCO), caught in the throes of a restructuring process that has it paring away services to regain profitability, cancelled its Home Energy Controller console. One could say that Cisco's financial troubles led to the decision, but Microsoft (Nasdaq: MSFT) and Google (Nasdaq: GOOG) canned similar products.

Part of the problem may be that the change in how home monitoring technology is deployed and used happened too swiftly for providers to react to. Cisco's console was a dedicated control unit set up in the home with limited remote access; products like 4Home's can be monitored remotely and are backed up by Verizon's large network and server platform.

Sam Lucero, practice director, M2M connectivity at ABI, said home automation presents significant challenges.

"Telco and cable operators now have to develop and deploy software management platforms to specifically enable the management of home monitoring services," he said. "This challenge has resulted in a swift consolidation within the small market that is privately-held home monitoring software platform vendors, with 4Home being acquired by Motorola Mobility, iControl and uControl merging, and Xanboo being acquired by AT&T."

If indicators are to be believed, then, home monitoring is no longer just a nice niche service to add to a subscriber's bundle; it's practically necessary to get into the business of offering home monitoring. However, it remains to be seen if consumer demand for home monitoring meets the expectations of analysts and the providers themselves.--Sam