Watching the home automation opportunity in 2013

Samantha Bookman, FierceTelecomHome automation as we know it has been around for two decades, but in 2013, it may finally come into its own. That's the consensus of industry analysts as well as service providers ranging from home area networking equipment manufacturers to Tier 1 telcos like AT&T (NYSE: T) and Verizon (NYSE: VZ). But what's driving the projected growth in home automation? And what could stop that growth in its tracks?

Analyst firms have sounded out the possibility of massive growth in this industry segment for the past year. ABI Research said in May that home automation systems would jump globally from 1.5 million units shipped in 2011 to 20 million installed units by 2017, at a CAGR of 45.2 percent.

While more uniform standards--such as Z-Wave, WiFi and powerline--have played a role, the biggest reason that home automation will take off this year is a pretty simple one: price. According to Matt Eyring, who recently took on the role of Chief Strategy and Innovation Officer at Vivint Inc., changing the pricing model for home automation systems makes these services more attractive to consumers.

"Home automation was very expensive. Introducing a subscription model to the industry changed that," Eyring told FierceTelecom.  Now, "it's a $60 or $90 per month proposition, and no money up front."

Vivint targets U.S. consumers with an entry-level home security system at $49.99 per month, and a home automation service starting at $68.99 per month.

By comparison, Verizon is hooking subscribers into its Home Monitoring and Control service with a $9.99 per month offer and the option to purchase accessory packages or a la carte security hardware like cameras and door locks. AT&T's Digital Life service is set to roll out nationwide in March, and while pricing has not yet been announced, the service features a wirelessly enabled control panel built by Cisco (Nasdaq: CSCO). Satellite operator Dish Network (Nasdaq: DISH) announced last summer it would introduce a home automation service. And outside the communications vertical, even retailers like Lowe's are getting in on the action, announcing a cloud-based smart home solution at last week's CES.

These consumer-focused packages are important, Eyring points out. Despite the fact that Vivint will be competing with other home automation providers, growth in this segment is a win-win.

"I think the fact that so many are getting into the space is a great thing," he said. "There's plenty of room, and there's education to the consumer about the value of this service. The growth of the market in early stages is going to benefit all the players."

Why is he so optimistic? Because home automation can have much more application than just security monitoring or programming the thermostat. Smart grid proponents have long looked to home automation as a key to successful energy management programs, for example.

"For demand response, you have to have aggregated homes to participate. The Vivint numbers will give you the kind of aggregated homes you need," said Eyring.

Vivint currently has 700,000 customers, with 500,000 of those taking its traditional security monitoring service. However, since the launch of its home automation and energy management services in 2010, nearly 54 percent of new customers have opted for one or both of those services in addition to home security.

Eyring, who came to Vivint from Innosight, a Boston-based strategy and consulting firm that works with Fortune 500 companies, feels that home automation is at "the inflection point of this industry really taking off." And those sheer numbers are important, because bringing bigger ideas like energy management and remote healthcare into the mix will be difficult—not just in a regulatory sense but logistically as well.

"There's always the vision that you can bring healthcare into the home. Demand response and energy is another one," Eyring said. "But they'll have to work through elements of industries that are highly regulated. Anytime you introduce highly regulated, multi-party payments, it's hard to figure out how it will work."

The difficulty of developing more complex business models has held up the advance of home automation in the past, and while technology and standards have caught up with the vision of a truly connected home, the profits for utilities and healthcare services may not yet be there. And that could slow further growth of home automation beyond the standard, self-contained home security and thermostat management model.--Sam