How can Telcos adapt to their customers’ changing digital needs?

By Praveen Shankar, Partner, Advisory, UK&I Telco Sector Leader, EY

Our annual survey of UK consumers shows households are benefitting from an increasingly connected world. Half now believe that the internet is fundamental to their social lives and more time is being spent online than ever before. Mobiles are playing a key role, with 25% of respondents using them as their primary home internet device, up from 16% in 2016.

This surge in both connectivity and home mobile device use is helping to put the smart home firmly on the household radar. Nearly half (49%) now say that they are familiar with the features and benefits of smart home or internet-connected appliances/security products, while only 24% disagree. Meanwhile, over 30% of households think they will likely own a range of products – from smart heating to smart security – within the next five years.

Yet if operators are to make the most of this positive adoption scenario, they need to meet a number of challenges head-on.

Tell a value story

Telcos are widening their service propositions. Bundles of Broadband/TV/Fixed Telephony/Mobile are now mainstream. However, operators have yet to articulate their smart home value proposition successfully. The capability is there, and consumers are warming to new products but operators must communicate their offerings with more clarity.

Take time to build more trust

Households are worried about the safety of their data, with 71% saying they are cautious about disclosing personal and financial information over the internet, even when using a website they know and trust (up from 61% in 2016 and 52% in 2013). And 81% are concerned about the ability of hackers to access their connected appliances.

Of course, technical improvements to cybersecurity are important, but building relationships and trust is essential. If customers don’t feel they can trust you, they won’t let you into their home, no matter how smart your products are.

Solve practical problems

While households are aware of the features and benefits of smart home products, they need more of a helping hand. 37% of survey respondents would not feel confident installing smart home kit – a vital sign that Telcos must come closer to their customers and provide the right support at the right time.

Rethink the approach to pricing

Just 19% of households believe that the prices of smart home products or connected appliances are reasonable, suggesting that this may act as a brake on future take-up. While consumers are already warming to a new wave of smart speakers and home assistants, the diversity of use cases means that telcos should carefully consider the value proposition – premium pricing may only work for a small set of early adopters in many cases.

Make the most of a complex ecosystem

As trusted suppliers of connectivity, entertainment and mobile devices, telcos are in pole position to deliver smart home devices. However, they are one of many service providers seeking gains. In our survey, 19% of consumers would favour a broadband provider, but 17% would turn to a technology specialist, while 15% would opt for a utility supplier. Interestingly, only 4% cite their mobile operator.

Operators are just one of many types of provider in a landscape that is becoming more competitive. Telcos should consider how they can stand out from the crowd – but pay attention to new partnering opportunities too.

The road ahead for operators

When it comes to the smart home, ‘native digital’ companies are leading the way in terms of digital home products. But, as the trusted providers of connectivity to billions of homes through their mobile and broadband services, telcos retain a huge advantage. The challenge is to build existing customer relationship, trust and understanding to deliver targeted, easy-to-use smart home products that meet real needs and add value.

For those who set their sights clearly on achieving this target, the future looks bright. For those who don’t, the danger is clearly highlighted in our survey: they risk become a utility that can only compete on price.

Further reading

Decoding the digital home

Taking stock of the smart home

Contact: Praveen Shankar