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Summary:

AT&T is launching yet another new business division, this one called Digital Life Services. The operator hasn’t revealed many details about the new unit, but from the sound of it, this may be AT&T’s attempt to tackle the smart grid, targeting consumers and businesses directly.

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AT&T is launching a new business division in Atlanta called Digital Life Services, focusing on new opportunities like remote health care, energy management and home security, according to a report from the Atlanta-Journal Constitution. The details on what the unit will do are still vague and AT&T isn’t saying anything about it yet, but AJC reported that it would reside in the wireless side of the business, squarely under the Emerging Devices division responsible for the tablets, e-book readers and other non-phone devices accruing to AT&T’s network.

AT&T isn’t a newcomer to the energy smart grid or telemedicine, by any means. But what’s new here may be the way AT&T is approaching these vertical markets. Digital Life Services could be the vehicle AT&T will use to become a retailer of applications that it currently addresses through the wholesale market.

AT&T’s machine-to-machine (M2M) strategy basically has two facets: it sells new emerging devices such as tablets and netbooks directly to its customers and it powers the connections between devices — whether it’s an e-book download to a Kindle or a network link to a smart meter — leaving the sale and customer relationship to its partners. Pure M2M connectivity isn’t a bad business model and the return on bits shipped is high, but it’s pennies on the dollar compared to what AT&T could make. Earlier this year, Stacey wrote about how the maker of connected pill bottle caps Vitality charges $15 a month for sending roughly 20 kilobytes of data a day over AT&T’s network. While that amounts to $25 per MB (compared to the $25 it charges for a 2-GB smartphone plan), AT&T probably sees only the tiniest fraction of that revenue. If it sold the service as well as access to the pipe, AT&T could make serious bank. Plus AT&T has a bunch of whiz kids at Emerging Devices and its new Foundries working round the clock to design and test these new applications. I’m sure AT&T would rather see a much higher return on that investment than mere carriage fees.

Why a new business division? Well, AT&T’s back office is set up do one thing very well: Sell specific telecom services at set monthly rates through contracts. These new M2M business models don’t gel easily with that concept. AT&T’s wireline division may be better equipped to handle such services, selling home health monitoring or energy management applications on top of broadband, TV and home phone subscriptions. But AT&T’s wireless customer base and mobile network is a heck of lot bigger than its residential footprint. It doesn’t want to run a DSL or passive fiber line to every customer that wants a $5 a month smart thermostat  — or write off every customer outside of its Bell operating territory — when it could much more easily and much more cheaply embed a GSM module into that thermostat.

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