Telco Operators want to fight in the Home OS Wars

MWC 2018 has started with several announcements around Voice Assistants, the Smart Home and the war for the Home Operating system, like Telefonica’s Aura.

The Mobile Web Congress gathers the telco industry every year to present new products and initiatives (some of them never really getting to market). This year there have been several announcements both from telcos and Internet players like Google that are relevant in my ongoing analysis for the Home Operating System space. In particular I will focus on Telefonica’s announcements around their “Cognitive Intelligence” solution Aura; but also relevant aspects will be Vodafone’s play in the Smart Home with V-Home, jointly with Samsung’s SmartThings, and Google’s operator-specific functions in Google Assistant via their Assistant Carrier Program.

Telefonica’s Aura: An assistant or a ‘skill’?

Telefonica’s announcement is focused on their voice-enabled assistant called Aura. Aura will allow the management of the operator services: mostly around billing or finding out the data left this month in your tariff, but in Spain it will also offer programming information for the operator TV offering. Other operators have announced assistants in the past, like Orange’s Djingo, but Telefonica’s Aura is already available in six of its markets.

To access this assistant, specific apps will be available in some countries like Argentina or UK, but in others like Germany or Chile the function will be available via Facebook Messenger or Google Assistant.

During the presentation of Aura, Telefonica insisted in its open approach, considering a demonstration of Aura’s openness its availability in Google or Facebook’s platform.

But considering the behavior seen in the demonstration video, Aura would actually be a “Google Action”, a third party app in the Google ecosystem, while in Facebook Messenger it is a bot. Which means Aura is actually leveraging Facebook and Google’s open platforms by working on top of them.

It is here where Google’s announcement of their Assistant Carrier Program becomes relevant. Google presents it this way:

Our Assistant Carrier program helps mobile carriers use capabilities in the Assistant to give their customers more insight and control over their service. This includes helping people learn more about their plan, add new services (like international data roaming), get customer support and more. This gives carriers a new way to support their customers while reducing response time.

The functions that Google offers to carriers natively, without needing to invoke a specific action, are quite similar to the current capabilities offered by Aura. So my expectation is that Telefónica will eventually do this integration too, and Aura’s identity will become hidden within the Google Assistant experience.

I also found very interesting that Aura’s announcement didn’t include the current main player in the Home OS Wars: Amazon. Particularly considering that Telefónica (via their UK-based brand O2) is already providing Aura-like functionality via an Alexa Skill:

I guess there are two reasons for this:

• Alexa is not relevant in most of Telefonica’s markets, because it is only being available in two of them: UK and Germany (although these are precisely 2 out of the 6 markets Aura is available in).
• To showcase Alexa is difficult not to mention their main delivery channel: the Echo devices. And that would have created confusion when Telefonica announced their own connected speaker: Movistar Home.

Movistar Home: Telefónica’s Echo Show

A surprising announcement was Telefónica launching their own device to support their Assistant, the Movistar Home.

Again, other operators have announced smart speakers previously, like Orange’s Djingo or Deutsche Telekom’s Hello Magenta, but Telefonica’s approach comes with a screen (which makes me think of another past attempt in Telefónica in the connected device space: the O2 Joggler). This makes the device be more similar to the Amazon Echo Show, and allows one of the Show’s main functionalities: video-calls.

The product is not yet available (it is expected this fall), but with the information provided it looks like Movistar Home functions will include:

• The same “utility account management” functions available from Aura: check your operator bills, data consumption, ability to top-up, etc.
• TV content management, including turning the TV on, changing channels by voice and recording shows.
• Some Smart Home functions (with the single mention of turning lights on).
• Communications: calling and video-calling.

Communications in Movistar Home

Telefónica is trying to recapture one of their basic services (“calling”) through a new device, and the way Movistar Home is being presented as a reinvention of the fixed phone line resonates in an interesting way.

The idea of having a smart speaker becoming a hands-free option for your fixed line is already covered by Amazon with their Echo Connect accesory for the Echo speakers, but Movistar Home promises some interesting differential features:

• Turn a regular ongoing voice call into a video-call.
• Move video-calls to the TV.
• Move an ongoing call from Movistar Home to the mobile.

It is unclear how these specific features will work and I’m particularly interested in some open questions (how will video-calls be transferred to a mobile? Will it need a specific app or will be some device-limitation? Can I send the call to any mobile, or only one in range? How will devices be identified? Will there be a previous registration and will they be assigned a name?) but some of these capabilities, in the context of cross-family communications (grandparents video-calling grandkids, for instance) seem like an interesting revitalization of the traditional fixed phone line.

Also, being able to trigger emergency calls using a voice command (plus additional alternatives if the device is open to provide its own accesory ecosystem) feels like something that can be very useful for the elderly if the Movistar Home will support it.

The Smart Home question

The information currently available does not help to understand to what extent Movistar Home will help to provide a control elements from the Smart Home. Yes, the videos show the device being used to turn on and off lights, but which devices are compatible? Will the Movistar Home include some sort of hub like the Amazon Echo Plus does? Or is the device only linked to some specific provider API (like the one for Philips Hue)? Too many questions on what the strategy will be to expand the usage to more devices or to create a Smart Home strategy.

Users that already have some kind of smart devices will probably have a solution to control them already, so the advantage here for Movistar Home is unclear. And the drive to buy additional connected devices after a smart speaker acquisition is not a clear path. Amazon has faced the same issue, and that is why their Echo Plus option, not only includes a Smart Home Hub but it also adds a Philips Hue bulb, so that it can jumpstart users into the connected devices space .

This is why I find Vodafone’s play with V-Home quite interesting. Vodafone is providing a kit of devices (security cameras, smoke detectors, water leak sensors, smart lighting and smart heating) managed via a home hub (the Samsung SmartThings Wifi hub), an alarm system service and cloud storage for video security recordings.

The Operator’s advantage

This space, providing kits for the Smart Home and supporting them, is where I see the operators having an opportunity in the Home OS.

Because operators like Vodafone and Telefónica not only provide a billing channel and connectivity to customers. They also have people trained to go to customers’ homes and install the connectivity and devices required for their fiber or DSL lines. So providing kits and support for their set-up and usage may be a key factor to break the adoption of the Smart Home in some markets.

And mixing Telefonica’s Aura/Movistar Home approach with Vodafone’s V-Home we could see customers getting more value from an assistant-enabled speaker that allows them to manage their home environment with a connected thermostat and smart lighting that has also been provided and installed by their operator. This could work as a fidelization tool, as customers will become more cautious of changing provider if they are unclear on how this will affect how they control their home lights or temperature, and open a path for operators to become the ultimate utility provider for their customers.

The Operator’s disadvantage

But supporting it with an operator-specific device like the Movistar Home can make it harder to create this kind of ecosystem.

Telefónica may launch soon in Spanish-speaking markets and Brazil, which can give them an advantage while Amazon or Google are still not selling their devices there. But they will eventually, and when Amazon lands in Spain it will come with their backing of over 15,000 Alexa skills already available and over 40 million devices worldwide for potential network effects.

The value of a connected device is not just its availability but its capability to create an ecosystem in which developers will want to provide additional value with applications and new associated devices. An operator-specific device like Movistar Home has limitations here:

• It reduces the potential reach of the user base, as at most operators cover at most 40–50% of a specific market, usually much less.
• It provides an artificial segmentation as you can only reach those operator’s customers that also have the device. That doesn’t necesarily fit any of the target audiences for the developer’s app.
• It reduces opportunities for network effects (if there is such a thing of network effects in the smart speaker market). Amazon is trying to create said network effects with Alexa Calling and Messaging services, and Movistar is aiming for the same thing with their video calling function… but in both cases it requires both parties in the communication to be part of the network. In Amazon case this can be solved by just buying an Echo device, but for the Movistar Home it will not only require buying a device but also being a Movistar customer. Other apps built for the device and dependent on netwok effects will suffer the same limitation.

On top of this, to get developer engagement a key element will be to provide good development programs and tools to create applications for the devices. Amazon has a program that rewards developers that build skills for their Alexa ecosystem. Will Telefónica be able to do something similar for Aura and the Movistar Home?

All of this will be considered by a developer when they decide wether to create an application for Amazon Alexa, Google Assistant or Aura (and this is always a decision, because resources to develop applications are always limited), and an operator-centric offering will have a hard time in this context.

Partner rather than compete

So while I see Movistar Home as a great initiative to expand the awareness of the potential voice-control functions for operator services and a great initiative to evolve the fixed communications, I think this will prompt other operators (like Vodafone) to push generic devices through their channels and try to support similar functions leveraging those pre-existing ecosystems.

I expect someone like Vodafone to start selling Amazon Echos and Google Homes, and provide access to their services via skills in those devices.

But there is still an opportunity for operators if they can also become enablers of the Smart Home, and they can seriously influence the Home OS wars based on:

• Helping their customers to get and connect additional Smart Home devices, leveraging their home-installer workforce.
• Exclusivity or preferred partnerships approaches, that will give preference to one speaker or another.
• Ability to link their services and communication offering into these devices (that is, providing the turn call to video-call and move to TV functions but on top of any connected speaker).

So we may end up seeing Telefonica’s Aura working on top of an Amazon Echo (which we sort of do today) or a Google Home rather than just in the Movistar Home. But exposing these capabilities across more devices, and leveraging some of their exclusive advantages in the “last mile to the customer” can turn them into very relevant actors in the Home OS.