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Comcast is acquiring Icontrol to boost its Xfinity smart home platform. What’s the buy mean for SHaaS market consolidation and rivals?

Before smart homes were smart, there was Icontrol Networks, Inc.  An early entrant in the home automation market, Icontrol helped establish the Smart Home-as-a-Service (SHaaS) sector and twelve years after its launch, Icontrol is witness to market consolidation. Divvying up its assets, Icontrol is being sold to Comcast Corp. and Alarm.com, Inc. Its smart home software will become part of the Comcast Xfinity Home offering, while its standalone Piper smart home security system will go to Alarm.com. To date, Icontrol has raised $93.5 million over five funding rounds.

Very few details have been provided about the acquisition, the sale amount is undisclosed. No word on Comcast’s plans for integrating Icontrol’s smart home management platform, but as an early investor and one of Icontrol’s largest customers, the acquisition seems a sensible decision. As a more direct competitor, however, Alarm.com’s role in the acquisition could be a preemptive move to own Icontrol intellectual property (IP). Icontrol and Alarm.com in fact went through extensive litigation before reaching a licensing agreement in 2014.

Update: Comcast tells us its portion of the Icontrol acquisition is specific to servicing cable companies, “such as Rogers (in Canada), Cox, and Charter (which is acquiring two other iControl customers, TWC and Brighthouse).” In its release, Alarm.com stated that it will be paying approximately $140 for Icontrol’s two business units, Connect and Piper.

Telecoms built the back door to smart homes

It’s the telecom players like Comcast that have been especially aggressive in the SHaaS market, laying down the infrastructure to distribute a seemingly endless array of services. They’re hoping to beat out other consumer-facing platforms such as those from Amazon, Apple and Google, all of whom have been investing heavily in smart home tech to own the digital assistant market, gaining even more access to consumer purchasing behavior.

The SHaaS market has been a ripe opportunity for refreshing business in telecom and networking, clearing a direct path to consumers seeking mainstream alternatives for the much hyped trend around DIY smart homes. According to a recent Icontrol report, the Do It For Me market is bursting with willing customers, reporting a 98 percent satisfaction rate Comcast was among the most active in pushing smart home services as add-ons to its cable offering, battling Time Warner, AT&T and ADT. Several of these top players turned to Icontrol to power their SHaaS platforms, but Comcast’s acquisition means they get to keep Icontrol’s technology to itself.  

Why Icontrol?

Intellectual property has been key to Icontrol’s market dominance thus far, but today’s acquisition indicates the company’s golden days are waning. Having forgone an IPO at the peak of smart home tech hype when Nest was acquired by Google (unlike Alarm.com’s IPO play), Icontrol now faces growing competition from other startups like Zonoff, Inc. and Vivint, Inc., as well as from its customers including Comcast. Providing back-end software for smart home solutions has been the core focus of Icontrol, but Comcast last year revealed plans to build its own platform. Nevertheless, Comcast may have found an easier path in acquiring Icontrol.

Alarm.com’s bid to acquire Icontrol technology hints at major market consolidation for third-party SHaaS providers to the telecom industry, leaving Alarm.com to take over Icontrol’s other customer accounts like ADT LLC, gaining access through this acquisition.

“A sale of Icontrol would substantially consolidate the the market with most service providers using either an in-house solution (Vivint, AT&T, Comcast, TWC) or Alarm.com as an outsourced solution,” speculated Raymond James analyst Tavis McCourt in an early Barron’s piece discussing the rumored acquisition. “By adding ADT to its customer list through an acquisition of iControl, Alarm.com would become the de facto standard for the alarm monitoring industry.”

Yet some of those customers, like ADT, have already established alternative partnerships with Icontrol rivals including Zonoff. The independent dealer space, however, could be left with even fewer options for SHaaS providers. Given Alarm.com’s dominance over Icontrol in the dealer’s market, one less player could impact pricing. According to Security Sales, Icontrol’s late entry into the dealer space limited its revenue opportunity, suggesting another factor in the company’s decision to sell, writing:

“Both companies probably have about the same number of subscribers — maybe 2.7 to 3 million-ish — but margins (therefore revenues) would be lower for Icontrol, given 1) the negotiating power of its very large customers and 2) Alarm.com’s historically high dealer pricing vis-a-vis competitors.”

Competition had become particularly fierce for Icontrol from the likes of Vivint, which has risen through the ranks these past three years. Earlier this year Vivint took in $100 million in financing from investors including Peter Thiel, and even bought a sports arena. Where Icontrol stands out is its minimal hardware offerings (none of which are going to Comcast in the acquisition), focusing on cloud integration for supported hardware from third parties, and data analytics. It’s this cloud-based approach to creating a whole-home snapshot that could give Comcast the consumer insight to drive even more business opportunities during this era of digital transformation.

“From a technology perspective, the way that that can happen is cloud integration where an Icontrol platform is talking to another platform and doing all the magic there in the cloud. When that happens you can provide all of those benefits back down to the end user, and really the opportunities there are endless,” explained Greg Roberts, Icontrol VP of marketing, during an earlier interview with SiliconANGLE.

This approach also raises questions regarding optimal monetization methods around consumer data gleaned from the home, as hardware becomes less and less relevant. According to our own Chief Research Officer Peter Burris, the challenge for Comcast is adding value to its infrastructure, which he says has failed for the telecom industry at large (think forced bundle packages with landlines that never get used). In the face of Google and Facebook rolling out their own network infrastructures to curb reliance on the telecom industry, Comcast is rebutting with services of their own. Icontrol’s acquisition boosts their software capabilities, which are arguably subpar to stalwarts like Google, Facebook and Amazon.

“Is a home Internet of Things play useful and relevant for Comcast? Could be,” Burris surmised. “Certainly there are security services that are popular, but it’s still kind of a luxury play, still not as ubiquitous as cable TV or internet. What’s Comcast going to do to make it more attractive? There’s a bunch of end devices that have to be out there, tie them together — Comcast’s remote control [for home automation] is nowhere near as easy to use as what Apple provides, or what Google is starting to provide.”

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