Next generation telco strategies for IoT
Jim Morrish
One of the key trends emerging in the telco space right now is technology agnosticism, an approach that puts the need to connect a device ahead of the technology that connects it. It sounds like a small (and obvious) shift, says Jim Morrish, but actually it’s a huge change.
It’s worth recapping some of the relevant history here. Back in 2009, Ericsson forecast that there would be 50 billion networked devices around the world by 2020. Ericsson never specified any connectivity technologies, but the suitability of mobile technologies for connecting remote devices was clear and a myth was born – the 50 billion figure was almost adopted as a target for the mobile industry.
And this was in the early days of consumer data, where the costs of data were much higher than they are now. So, the mobile industry adopted a consumer-like strategy for machine-to-machine communications or M2M (as it was then): The big telcos established divisions to sell ‘their’ connectivity, assuming that margins would flow from data connectivity.
Since then, there has been a gradual tempering of expectations, as it has become clear that the margins for IoT solutions lie in the solutions (and so customer ownership) rather than the connectivity. Expectations for the total number of devices have been reined back, and it has become clear that 80-90% of these devices will be connected by technologies other than traditional mobile connectivity.
Simply put, early telco strategies were inconsistent with where we now know that the biggest and best margins in the IoT space lie. The inevitable conclusion is that those IoT ‘competence centre’ divisions that were established within telcos with the aim of selling lots of connection subscriptions for devices, at high margins, should really focus on selling solutions and not really worry too much about what kind of technology (or even which technology providers) are used to deliver solutions.
This new positioning could be described as a products and services business sitting on top of a technology-agnostic, provider-agnostic connectivity platform.
For many years, the only company offering that kind of connectivity platform was Stream Technologies. Nobody else really noticed that this kind of concept was inevitable in the connected device space. And those IoT industry participants that did notice found themselves in a position where it was politically impossible to move to such a model, for a range of reasons. The industry continued to work in a stable state, albeit a meta-stable state.
But this is exactly what seems to be changing right now. Tata Communications (who claim partnerships with 900 mobile connectivity service providers globally) play into this space with their MOVE platform. Huawei’s OceanConnect platform has a similar technology- and carrier-agnostic capability.
Additionally, some bigger players such as for instance Telefonica seem to be becoming much more sanguine about the specific connectivity technologies that are actually used to enable those fat (or, at least, ‘fatter’) margins for solution provision.
The emergence of a technology-agnostic, provider-agnostic approach to connectivity is a sea-change for the mobile industry. The obvious question is: What might happen next?
Well, examining the fundamentals of the situation, it seems clear that those operators that are likely to gain most from this new-emerging approach would be the first to really proactively pursue an agnostic connectivity strategy.
Potentially, such a strategy might include splitting an existing IoT competence centre away from its parent CSP, and trading under a new name – there would be no need to be associated with any specific CSP network any more, indeed the lack of any such tie would most likely be perceived as a positive thing by end users.
And the operators that will have most to gain are likely to be:
- Strong and established players, that are in a position to capitalise on the opportunity.
- Domiciled in smaller country markets, where the ‘international’ opportunity is likely to significantly outweigh the potential loss of domestic on-net traffic and subscriptions.
- Established in technically sophisticated countries that traditionally have an ‘international’ perspective.
So, the names that spring to my mind as the connectivity service providers that might seek to adopt a technology-agnostic approach with most vigour are Tele2 and Telia Sonera. Step forwards Messrs. Avidan and Dahlberg …
The author of this blog is Jim Morrish
About the author:
Jim is a respected IoT industry expert, with over 20 years’ experience of strategy development and operations management. He is chairman of the Industrial Internet Consortium’s Business Strategy Task Group and led the development of the IIC’s Business Strategy and Innovation Framework. He is also co-chair of the IIC’s Business Strategy and Solution Lifecycle Working Group, and is responsible for the addition of the term Low Power Wide Area (LPWA) networking to the lexicon of the IoT.
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