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The Missing Piece at CES

by Colin Dixon

This year's CES was everything it promised to be, packed with announcements from Hollywood executives, TV network operators, mobile service providers, and the CE and PC powerhouses that have for years dominated the show floor. But as I left CES, I walked away with a general impression framed as much by what wasn't at the show as what was at show.

What Was at CES

Amidst the clatter and noise that was CES, you didn't have to look very hard to see that three broad themes dominated most of the announcements and showcases: anytime/anywhere video, device convergence, and device integration.

(1) Video - Whether fixed or mobile, PC or TV, video was no doubt the centerpiece of this year's CES. Video is findings its way into virtual 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 looked there were devices and services doing double, triple and quadruple duty in attempts to "simplify" our lives and unclutter our home entertainment systems.

(3) Device Linkage - As has been the case for the last several years, there was no shortage of networking solution providers promising to "seamlessly link" the different devices and services in such a way that consumers would enjoy a more elegant experience.

What Wasn't at CES

Perhaps more significant was what was absent from this year's CES - namely, solutions positioned to manage all of these devices and services. Yes, CES has never been known for network operations systems and support solutions. Then again, until this year CES was not 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 seen at CES 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. For example, until recently, when you signed up for cable TV, a technician appeared, put a set-top box under your television, and left when you could see TV. Of course, that box essentially provided a "lock" on the types of TV programming that consumer would receive, so by placing the box in the home the service provider gained 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 - a tendency that continues to haunt service providers.

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 hoped would (1) decrease their per-subscriber set-up costs, and (2) move specific support costs off the books. Sounds great, but hold on a moment.

Suppose a customer buys Scientific Atlanta's MCP-100 and archives a show to DVD that was recorded from their 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 morass. Today, their existing installation and support services do not scale to the complexity of the task at hand. Where were the solutions at CES that would catch the hard disk starting to fail and give warning to the customer and operator before the loss of valuable data? Where were the companies that can help with trouble shooting complex home theater set ups? Where were 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 that CES trumpeted so loudly will never be practical in the real world. 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.

At CES 2007, perhaps we'll see some of these new consumer devices with advanced management features that help reduce the burdens of installation and maintenance. Until then, as system operators consider these new devices and services for deployment, 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. -- cd



About Colin Dixon: Colin Dixon is a senior Analyst at the Diffusion Group. The Diffusion Group is the first research consultancy solely dedicated to the digital home and connected consumer. Our analysts are charged with providing timely, actionable intelligence designed to best position new consumer technologies for rapid diffusion. Actionable intelligence is more than just our maxim – it is our commitment to providing market research and strategic consulting services based on conservative, real-world analysis and market forecasts grounded in consumer research.


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