Delivering the Digital Home: Providers Must Prepare to Change their Thinking to Appeal to Mainstream Consumers

By David H. Deans

As the concept of the Digital Home continues to make the transition from vision to reality, the demands of the mainstream market are changing the definition of what it means to be a next-generation broadband service provider. This transition is in part fueled by the changing definition of the Digital Home itself. Once conceived as a technology vision of a single, fully automated, centrally controlled entity, the reality of today’s Digital Home is being driven by growing demand for Internet-capable devices and services that allow consumers to easily access and share content anytime, anywhere. To capture this mainstream market, forward-looking providers are beginning to recognize that they, too, must move beyond the typical technology-centric carrier perspective to a true consumer orientation.

No one knows this better than Charlotte Burke, Bell Canada’s senior vice president of Consumer Internet Services. She has spent the last couple of years working hard to ensure the broadband provider is prepared for what’s next. Having reached nearly 70 percent penetration of its broadband market, Bell Canada is now deep into the territory of mainstream, non-technical consumers.

“Once you’ve achieved a high level of market penetration, you’re no longer dealing with early adopters, who are generally more tech-savvy then mainstream users,” says Burke. “You need to offer a simple, safe and reliable experience to customers in order to retain their business and sustain a competitive advantage. You also need to understand the customer, and offer targeted products and value-added services to meet their expanding needs.”

This shift in thinking is also being driven by another market force—commoditization. Providers find it increasingly difficult to differentiate their offerings by merely utilizing the latest network access platforms, billing software or broadband service related feature-sets. In fact, the time frame in which competitors can deploy similar service delivery platforms continues to shrink. Furthermore, hardware vendor consolidation has resulted in a limited number of alternative network infrastructure manufacturers with similar, if not identical, product capabilities. The result is that any competitive edge that can be gained from a hardware deployment tends to be short-lived.

Market research shows that mainstream consumers are more interested in the personal user experience than they are in hardware, software or even content. In particular, they want to know how service providers can cater to their unique application and support needs. For mainstream subscribers, how the service works, including customer care across the entire user lifecycle (installation, support, ongoing maintenance and upgrades), must be an integral part of the service offering. In fact, consumers repeatedly tell researchers that they feel as though they have been forced to learn more about computer, home network and broadband access technology than they ever wanted to know.

“The dynamics of the market are changing,” says Jeffrey Kagan, a telecom industry analyst. “Yesterday we competed on price. Today we compete on the differences in the services. But when all companies look alike and offer the same kinds of services and pricing, we’ll be competing on the customer experience.”

But are providers really prepared to make this transition to delivering truly consumer-oriented offerings? There has been a lot of talk recently about the “digital home” and “digital lifestyle,” but so far only a few providers have been able to deliver what consumers really want: the ability to make eclectic personal choices regarding media that transcend time and place. Most providers are simply attempting to package bundled service offerings that appear more flexible, yet too often, providers are beholden to content owners and consumer electronics vendors. In order to successfully execute a next-generation Digital Home strategy, providers must address four potential barriers to a positive customer experience: changes in consumer segmentation; the increase in technical complexity; the high expectation of personalized media; and new stressors on underlying business processes.

Rethink the “Average User”

With lower than ever broadband service prices, mainstream adoption of Digital Home services may force providers to reevaluate their consumer segmentation strategies. As an example, “average user” skills will matter less when the difference between the least skilled and most skilled consumer is so vast. Seventy-eight percent of early DSL and cable broadband adopters bought equipment directly; and performed a self-installation. Consumers who already own a home network have been online 27 percent longer than those who do not. They’re also 89 percent more likely to go to CE product vendors for support.

But more mainstream consumers, with their increased needs and expectations, are changing the profile of the “average user.” For example, consumers without a home network are three times more likely to look to the service provider for support. Research also indicates that consumers currently return between 30 percent to 50 percent of home networking devices to retailers with no trouble found.

To overcome the barriers to adoption of Digital Home services, providers must prepare for the inevitability of less technically savvy consumers at every step in the lifecycle—from marketing the service to installation, support, upgrades and ongoing maintenance.

Prepare for an Explosion in Complexity

It’s considered a given: soon providers will all have some form of voice-over-IP (VoIP), IPTV and home networking capabilities in their product portfolios. As consumer demand grows for these blended services that expand beyond basic high-speed Internet access and incorporate various rich media, the complexity involved in managing these services will continue to explode.

For example, feature-rich combination access-point and multi-port routers are beginning to replace single-port modems as the de facto standard customer premise equipment (CPE) for new broadband connections, while wireless local area networks (LANs) are upstaging wired Ethernet as the preferred means of in-home connectivity. In more advanced settings, these basic combinations are both being superseded by integrated residential gateway CPE that incorporates both wired and wireless networking, enabled by a high-performance, multi-standard Wi-Fi router and comprehensive firewall capabilities. Consumers can even choose from a variety of modem modules to suit the chosen wide-area network (WAN) access media, and maybe even incorporate an integrated or tightly coupled VoIP ATA.

The increased diversity and exponential growth of network-ready consumer electronic devices compounds the situation even further. This perplexing array of devices, which includes networked printers, video game consoles and digital cameras with built-in Wi-Fi, foreshadows a very troubling era for the non-technical consumer.

“Home networking is a growing challenge for Internet providers,” says Burke. “The demarcation point has evolved and providers are now supporting the network right up to multiple IP devices. Our goal is to deliver fast, effective support tools designed to segment connectivity issues in an increasingly complex broadband home.”

Michael Greeson, president and principal analyst with The Diffusion Group, adds: “The real experience for the average consumer is still far too complex. They’re not interested in reading a user’s manual. They’re not interested in becoming an expert in networking.”

Fortunately for providers, the intimidation factor hasn’t completely curtailed consumer interest in Digital Home services. However, advances in the design of digital products such as the iPod have most definitely raised the bar of expectations for a user experience that delivers a simplified, “appliance-like” usability. These expectations present a major challenge—and an opportunity—for service providers. A superior customer experience can become a mainstream growth enabler. Likewise, a less than inviting experience can quickly translate into a growth inhibitor. Providers should not underestimate the importance of the human factors discipline as it becomes a key ingredient of the converged multi-service competitive battlefront.

The Expectation of Personalized Media

Some consumers have demonstrated their zeal for greater control over their digital media experience by embracing flexible video-on-demand (VOD) services. As a result, the user interface for cable television’s electronic program guide has received much attention of late. This development has also reinforced the notion of increased control, where consumers further customize their user experience based upon personal preferences toward media-shifting—in addition to the more common time-shifting.

We know that strong consumer interest for nomadic, rich-media applications drove the iPOD and TiVoToGo phenomenon. These products were the trailblazers that brought media mobility to the forefront of an otherwise immobile digital media landscape. But this emerging trend is only the beginning of expanded usage models that will enable consumers to essentially enjoy any digital media format while on the go. For example, TV experiences will be enhanced by new consumer electronics innovations like the SlingBox personal broadcaster. They will also adapt to managed online offerings like Orb Networks’ remotely controlled digital media access service. On-demand media library streaming and other similar offerings will ultimately drive broadband service provider innovations, essentially seeding anticipation that subscribed digital media services will follow the customer.

Before, wireless “roaming” was merely about network access. In the near future, it will also include redirecting various digital media subscriptions via authenticated digital rights management (DRM). The impact for providers is significant. Consumer expectation for personalized media anytime, anywhere has increased dramatically. This expectation changes the technology requirements, the support requirements and the entire business model required to meet consumer demands. Apple with its iPod has proven that the providers who can transform their businesses to do so will lead their markets.

Embrace Change

While most broadband service providers agree that transforming their business processes to effectively serve the “digital-everywhere” connected consumer is a necessity, it is also a very significant undertaking. The expanded job skill demands of the customer service agent are potentially daunting, and the associated learning curve has many service providers deeply concerned. In addition, the traditional boundaries between organizations like product development, sales and support must become more transparent in order to effectively serve mainstream consumers.

The good news is that for the providers willing to invest the time and effort in driving strategic change throughout their organizations, the investment often translates into meaningful points of competitive advantage. Unlike technology alone, which provides a short-lived (and shrinking) advantage, the ability to develop distinctive business processes has proven to be one of the toughest qualities for competitors to replicate.

The lesson for providers who want to win the Digital Home? Prepare to change everything.

David H. Deans is the principal consultant of Deans & Associates, a telecom sector market analysis and consulting firm. He has authored numerous published articles on technology applications, public policy, customer care and organization development.