The Missing Piece in the Consumer Electronics Agenda

By Colin Dixon, Senior Analyst, The Diffusion Group

Recent consumer electronics (CE) shows have been everything they promised to be, packed with announcements from Hollywood executives, TV network operators, mobile service providers, and the CE and PC powerhouses that have dominated show floors for years. But beyond the usual hype, I am left with a general impression framed as much by what isn’t on CE conference agendas this year as what is...

What’s on the Agenda

Amidst the clatter and noise of all the new consumer product buzz, three broad themes come through loud and clear: anytime/anywhere video, device convergence and device integration.

(1) Video: Whether fixed or mobile, PC or TV, video is no doubt the centerpiece of this year’s conferences. Video is finding its way into virtually every facet of our lives, and in ways that are getting both bigger (Panasonic’s massive 103” plasma 1080p display) and smaller (the proliferation of 1-inch video displays on just about every new mobile phone).

(2) Device Convergence: Everywhere you look there are devices and services doing double, triple and quadruple duty in attempts to “simplify” our lives and un-clutter our home entertainment systems.

(3) Device Integration: As has been the case for the last several years, there is no shortage of networking solution providers promising to “seamlessly link” different devices and services in such a way that consumers can enjoy a more elegant experience.

The Missing Piece

Perhaps more significant is what seems to be absent from this year’s shows so far—namely, solutions positioned to manage all of these devices and services. Certainly, CE conferences have never been known for including much about network operations systems and support solutions. Then again, until this year, these shows were not even known for drawing cable, satellite and mobile operators (something which was saved for more service provider-specific conferences such as the now defunct SUPERCOMM).

Many of the new devices and services gaining momentum in the consumer electronics market will depend upon the support of some type of service provider, especially as it pertains to video services. Whether mobile, telco, cable or satellite, video operators will shoulder much of the responsibility for making all this “stuff ” work together, and keeping it working together over the long haul—a problem that becomes more complex as new devices and services are added.

Until recently, service providers and network operators have been able to keep tight control over the devices that are connected to their networks, a situation that has allowed them to closely manage the delivery of services and keep support requirements in check. This meant that when you signed up for cable TV, a technician appeared, installed a set top box under your television, and left when you could see TV. That box essentially provided a “lock” on the types of TV programming you would receive, and gave the service provider control over a privileged access point into the home. With ownership, though, came responsibility, so anytime the quality of service was disrupted, the video service provider got a call that set off a chain reaction of costly support interactions.

As early as next year, however, federal regulations will require cable operators to allow customers to buy and install their own equipment—a move that cable operators hope will not only decrease their per-subscriber set-up costs, but also move specific support costs off the books. That may sound great, but consider how this will impact providers in terms of supporting subscribers.

Suppose a customer buys Scientific Atlanta’s MCP-100 and archives a show to DVD that was recorded from his cable channels. If the subsequent recording looks grainy, who does the customer call? In the majority of cases, the service provider gets the call—not the subcontractor who installed the device; not the device manufacturer; not the DVD vendor; nor the other entities that may be responsible for this specific (poor) experience.

The Bottom Line

No doubt service operators need (and will increasingly need) help in managing this problem. Today, existing installation and support services do not scale to the complexity of the task at hand. Where are the solutions that would catch the hard disk starting to fail and warn the customer and operator before the loss of valuable data? Where are the companies that can help with troubleshooting complex home theater set ups? Where are the companies with solutions to help reduce the number of truck rolls to customer premises, many of which result from the simplest of problems?

Without such solutions, many of the flashy, cool, connected products and services being trumpeted so loudly will never be practical in the real world. And if service operators were to release them, they would see their thin margins evaporate in service calls and trucks rolls. The penalty for poor support has also risen greatly with converged services. Losing a cable customer only costs the cable subscription; losing a converged services customer can cost three or four times more.

Looking ahead to 2007, perhaps we’ll see some of these new consumer devices with built-in management features that help reduce the burdens of installation and maintenance. And perhaps savvy service providers will begin planning their deployments with customer satisfaction and ease-of-use in mind. Until then, they should keep this in mind: when your customer’s hard disk fails and they lose their wedding video, their son’s graduation photos and their entire music collection, you do not want to be the one they blame.

About The Diffusion Group
The Diffusion Group (TDG) is a strategic research and consulting firm focused on the new media and digital home markets. Using a unique blend of consumer insights, executive-level consultants, and hands-on technical experts, we produce more than just research—we create Intelligence in Action™. To sign up for the Diffusion Group’s free TDG Opinions newsletter, visit their Web site at www.thediffusiongroup.com.