AT&T's Digital Life could make its wireline broadband base even stickier

AT&T's (NYSE: T) recent launch of its Digital Life home control and monitoring service illustrates the telco's need to generate new wireline and wireless revenue streams.  

As noted by FierceWireless, AT&T kicked off the launch of Digital Life in grand fashion at this year's CTIA show in New Orleans, showcasing the capabilities in a Garden-District home.

In the home, the network sensors are connected via short-range wireless technologies such as WiFi, Z-Wave or a wireline-based HomePNA or HomePlug connection, while any information collected at the home is sent to the broader Internet via either an AT&T 3G wireless connection or over the user's existing broadband connection supplied by AT&T or any other service provider. 

This is not AT&T's first foray into the home-control market segment. In 2006, Cingular, the former name of AT&T's wireless division, launched a similar service as an add-on to its existing wireless plans for $9.95 that, after not getting any real traction, was shut down.  

One noticeable omission about the service is pricing. Verizon (NYSE: VZ) and Comcast (Nasdaq: CMCSA), which have launched similar products, have priced their respective home control packages from $29.95 to $59.99, depending on the type of service package a consumer or SMB chooses to buy.

While the new service is clearly focused on the wireless segment, Digital Life could impact on the telco's wireline side.

For one, AT&T could use the still nascent home control service as another bundled element to upsell existing DSL and its growing base of U-verse subscribers.

During the first quarter of 2012, AT&T added 718,000 new U-verse high speed subscribers to reach a total of 5.9 million, offsetting losses from DSL. About three-fourths of AT&T U-verse TV subscribers use a triple- or quad-play option, driving up ARPU for U-verse triple-play customers to $169 a month.

Outside of traditional consumer customers, the small to medium business could also be a target for this service. Interestingly, a big portion of new U-verse broadband subscribers consists of SMBs adopting the service that they purchase as part of a bundle that also includes wireless service.

The advantage that AT&T has with using its existing consumer or SMB customer base is the brand recognition and long-term relationships the telco has with these segments. Those customers that don't have a security system from a traditional company like ADT, a clear competitor here, might be tempted to purchase it from a company that it works with daily for its communications needs.

Jeff Heynen, directing analyst for broadband access and video at Infonetics, believes that these kinds of services are another way that broadband providers can create greater loyalty.

"The potential customer loyalty and incremental revenue attached to home automation services, particularly home security and home energy management, are too enticing for any operator to pass up," said Heynen.

Taking it one step further, Analysys Mason agreed that the home automation market is set for major growth. According to the analyst group's latest M2M forecasts, security and surveillance solutions in North America will generate $1.2 billion in connectivity-related revenue (wholesale revenue) for carriers by 2021. 

Besides being mainly a cellular service that allows users to access the cloud-based service from any device, the service does not require the user to be an AT&T subscriber, and it plans on being a nationwide service. Similar services from competitors are only available in select markets.

But with these new capabilities come new responsibilities and challenges for the telco. What happens if the house alarm does not go off or the consumer can't open their front door properly? AT&T will have to have a team that's equipped to take those calls and make on-site or remote repairs, something that's been traditionally done by the wireline technicians who have interaction with homeowners and businesses. 

Perhaps that's why the telco is going to initially trial the service in two markets this summer--Atlanta and Dallas. It can use the experience it gains in those two markets as a blueprint to learn how it would operate the service on a broader scale. 

AT&T is not the only service provider offering a home control service. Besides fellow ILEC Verizon and cable operator Comcast, now Time Warner Cable (NYSE: TWC), has stepped up to the plate with a home control/monitoring service suite.

Regardless of the challenges they may face, the fact remains that service providers like AT&T need to find new revenue sources like home control that are outside of their traditional telco comfort zone to make their customer base stickier.-- Sean