Will Big Box Stores Clash or Crash at the HAN Gateway?

There is a multi-front battle being staged for control of the gateway to customers.  More players are joining the battle each day choosing sides and setting up their strategies to seize control of the gateway to the customer through the Home Area Network (HAN). The battle fronts are:

  • energy
  • information access
  • communications
  • entertainment
  • security
  • convenience
  • value.

These converging forces are transforming not just the energy landscape but each of the battle fronts along the value chain.  Because so many different players from different segments of the economy are now involved so is the government in ways that are both blessing and curse.

This same phenomenon is at work throughout the economy born of panic and desperation to stem to the losses from the great recession and grasp any lifeline to avoid drowning in red ink.  It gave us Stimulus II and the now huge deficits from throwing money at pet causes.  It gave us cash for clunkers which while immensely popular with those who wanted to buy new cars merely shifted those purchases forward a few months rather than lifting all the boats.

Energy. On the energy side, stimulus II provides billions for smart grid to speed the installation of smart meter technology and underwrite expanding wind, solar and other renewable energy technologies thus providing a lifeline to the cleantech investments of venture capitalists to speed the market clearing process of consolidation and flip. It also kept the deal flow for wind and solar energy projects going when capital dried up for project financing and fed the renewable portfolio standards needs of utilities all in a deliberate effort to boost the market share of renewable energy in the overall energy mix.

Information Access. On the information front the race for bandwidth and 4G and faster ways to stream video, satisfy our lust for internet speed and harness the value creating power of Apps and cloud-based storage of both software and data is turning the media and communications industries on their head.

Communications. Traditional telephone companies are now in freefall over loss of landline accounts as customers switch to wireless mobile communications.  Cable TV companies offer bundled of cable TV, broadband and VOIP phones at attractive prices to further erode telecom market share.  AT&T’s deal for exclusive iPhone access and now data access (albeit without long term contracts for new must have toys like iPad complement iPhone customer relationships to give us wireless, mobile access to any information we seek, anytime, anywhere at affordable prices.

Entertainment. Remember the fights over file sharing not long ago where music distributers made examples of college students for downloading songs?  Now those same media merchants are fighting to gain access to streaming media outlets for movies, TV shows and other content on demand and iTunes has shown them all how to make money by giving customers want they want, when they want it, at prices poor college students and now the unemployed masses can afford—all on those must have toys. Netflix has driven Blockbuster into the ground with convenience and pricing—and don’t forget no late fees—and now offers on demand streaming access to its enormous catalog with your Tivo.

Value. Marketers are learning that the market share game is not about pissing off your customers by locking them into long term contracts with crappy phones and gear, but by offering “got to have” equipment that is seamlessly integrated into a fast, convenient, reliable network priced to make it sticky.  So while AT&T tries to stick it to customers by charging premium prices for iPhone use, Sprint offers an ‘all you can eat’ plan of phone, data, web access and text with Droid and Palm Pre (not quite as cool as iPhone but adequate to the task).  And we buy those Sprint phones and service plans even though we’d still love to have an iPhone just to remind Steve Jobs that while his stuff is cool we don’t plan to let him own us either—and we all hate Ma Bell’s tactics.

Security. There are a few glitches to work out like interoperability standards so all these boxes, sensors and gadgets work together seamlessly.  If it isn’t plug and play we will NOT PLAY—and vendors get that. And don’t forget all those smart meters being installed.  Right now they are still just one way feeding the utility with 10 minute readings on our energy use.  California is among the first states to force utilities to start giving us access to that information—but don’t get excited.  You will need a data center the size of your family room to hold the computing power to manage that tsunami of data.  So expect vendors of home energy management solutions, home area networks, home servers and so forth to start spamming you and filling your mailbox with offers over the next year.  Be choosey.

And yes, the Obama Administration is proposing yet another $ 6 billion stimulus program[1] for Home Star[2] and Recovery Through Retrofit [3]programs to help finance home energy retrofits to improve energy efficiency.  Home Star is the home version of the Energy Star program of US DOE trying to brand energy efficiency and retrofit efforts in a nationwide program that will attract big box players like Best Buy, Home Depot, Sears and others to jump into the equipment retrofit, installation and energy management services segment all in the name, of course, of creating jobs.  But Home Star is the brainchild of Silicon Valley venture capital firms who want the Government’s help selling their networks, sensors, boxes and gadgets to get ready for the smart-grid enabled future.

So what?

This is only the opening salvos for the battle for control over the gateway to the customer.  The next round will include Big Box Stores, big names in IT and equipment, and (be careful what you wish for) stimulus III in the form of ‘cash for caulkers’ that seek to work on the customer side of the smart meter to get us hooked on the gadgets, sensors, networks and toys essential to assemble the parts of that Home Area Network (HAN) lifestyle they all hope we’ll see at the ‘next cool toy’ we all must have.

Who will control the gateway to the customer in the future?  That fight is just beginning.  Right now utilities control that gateway through the meter, but smart metering technology is challenging that control.  New players seek to offer us services and bundle packages of those services in an effort to aggregate customers for wallet share and market share growth.

Will we play that game as customers?  You bet we will the only question is how much will it cost and how much will I get in that bundle?

Oh and don’t forget to ask for the sports package with 100 mbps streaming video broadband speeds.

[1] http://energy.senate.gov/public/_files/END10173.pdf

[2] http://homestarcoalition.org/HOME_STAR_Overview.pdf

[3] http://www.whitehouse.gov/assets/documents/Recovery_Through_Retrofit_Final_Report.pdf