Internet of Things (Iot)
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VOLUME III INTERNET OF THINGS (IOT) OPPORTUNITIES FOR TELECOMS OPERATORS Contents Introduction p 3 Four operator approaches for IoT as the market opens up p 4 IoT will have little impact on revenue for most mobile operators p 6 Operators are racing to enable IoT applications, but a winning approach is yet to emerge p 8 Successful deployment of NB-IoT will depend on spectrum choices p10 IoT Scorecard 2017: China Mobile and Vodafone excel in strategy and execution in emerging Asia–Pacific p12 IoT: Seven areas for regulators and policy makers to consider p14 Analysys Mason’s expertise in IoT p16 About Analysys Mason p17 Introduction With connectivity only representing a small share of the IoT opportunity, for many telecoms operators the focus is on how to play a role in other parts of the value chain Welcome to our third collection of We explore the value of IoT articles exploring how telecoms connectivity relative to both the operators can make the most of the operator’s core business and to the IoT opportunity. broader IoT market. The articles we included here, written • Operators are racing to enable IoT by a mix of our analysts and applications, but a winning consultants, gives you a flavour of our approach is yet to emerge. This thinking on IoT and what it means for piece outlines how operators can operators. Analysys Mason helps differentiate their IoT platforms. TOM REBBECK clients in all geographies and parts of Research Director • Successful deployment of NB-IoT [email protected] the value chain to develop their will depend on spectrum choices. approach to IoT. Our assignments We examine the different range from rapid reviews of existing deployment options for NB-IoT, and plans to full strategy development. their advantages and downsides. While much attention for telecoms • IoT Scorecard 2017: China Mobile operators understandably remains on and Vodafone excel in strategy and connectivity for IoT, as we discuss in execution in emerging Asia–Pacific. these pieces, connectivity revenue Based on the strategies of the only represents a small share of the most successful operators, we IoT opportunity. Furthermore, relative provide some suggestions for best to the core business, connectivity for practice. IoT is low in value; only 3% of mobile revenues according to our 2025 • IoT: Seven areas for regulators and forecast. As well as discussing policy makers to consider. This connectivity, these articles provide article explores the regulatory and suggestions for how operators can policy issues that need to be position themselves in other parts of addressed for IoT to grow the value chain. We hope that you find this collection The articles featured in the brochure of articles useful. We welcome cover the following topics: feedback and encourage you to contact the authors directly if you • Four operator approaches for IoT would like to discuss any of the points as the market opens up. We argue raised, or are looking to understand that operators should position how a specific issue or trend will themselves for how the value chain affect your business. will look as the market matures and not how it looks today. We look forward to working with you. • IoT will have little impact on revenue for most mobile operators. 3 Four operator approaches for IoT as the market opens up The breaking down of the IoT value chain could “create new opportunities for telecoms operators AT&T owned the full value chain for its This process has now begun in IoT. TOM REBBECK Research Director telecoms network during the company’s Companies selling early IoT solutions ” first few decades. Bell Labs did research often wrote the software, specified the This breaking down of the IoT value chain and development (including pure hardware, supported customers and even could create new opportunities for research1), Western Electric manufactured built the network. (For example, Telensa operators. Each operator can focus on the equipment for both the network and end undertook many of these roles for its activities (such as security or device users, while AT&T itself managed the smart city solutions.) However, this model management)that fit best within its network and customers.2 Later is increasingly breaking down. An IoT current business and for which it has technological developments meant that solutions provider can now buy off-the- differentiators, rather than facing the the telecoms network no longer needed shelf hardware, develop applications using choice of providing either only connectivity full vertical integration and AT&T opened standard enablement platforms and sell or full end-to-end solutions for different up to external suppliers. This pattern is through channel partners, due to a verticals. common to new technologies: full vertical combination of standardisation and the integration is initially required, but increasing maturity of the technology. Figure 1 summarises some of the standards then develop, specialist players activities in the IoT value chain. Each A more-open value chain creates emerge and the value chain breaks down operator needs to map the component opportunities for operators, but also for into its component parts. Television sets, activities to assess the size of other players computers and other technologies have followed a similar development path. Devices Connectivity Applications Spectrum SIM Hosting/storage System design Connectivity Analytics management Application Radio module enablement Logistics Cellular access Application Processors Security LPWA access development Visualisation Satellite Sensors Sales/marketing Activity Installation Fixed Distribution Device management Core network Support/maintenance BSS/OSS Customer support Sales/marketing Service provision Sales/marketing Billing System Other Other integration Other FIGURE 1: SIMPLIFIED MAPPING OF ACTIVITIES WITHIN THE IOT VALUE CHAIN [SOURCE: ANALYSYS MASON, 2017] 4 opportunities and identify the roles that it much as USD10 billion – 6% of the Operators also need to consider how to can play. This is inevitably a complex addressable market. sell these capabilities. Currently, the exercise, as the value chain will differ for process of selling IoT solutions for many • End-to-end solution. An operator offers each application within a vertical market. operators involves a complex consulting all components of a solution. The For example, the value chain for engagement to understand a client’s addressable market size again varies embedded connectivity in a car differs requirements and to advise on the according to the application area, but from that for a pay-as-you-drive insurance available options. This level of effort may this could be as much as USD19 billion proposition, even though both are be warranted for major contracts, but (or 10% of the opportunity), which is the ‘connected car’ solutions. most operators are not able to provide this value of fleet management alone. sort of support for many IoT customers. Operators have four possible approaches Connectivity builds on operators’ current Each IoT solution cannot require a full to IoT business, but end-to-end solutions require consulting project, if the technology is to We believe that operators should explore operators to fundamentally change their reach the billions of connections that are four approaches to IoT using this operations, with implications ranging from forecast. Operators should instead explore framework, as discussed in more detail in sales commissions to organisational new ways of advertising, selling and our recent report Operator approaches to structure. The end-to-end approach may supporting their capabilities, as AT&T is IoT: from connectivity to platforms and full be justified for the largest vertical markets doing with M2X and Flow. Operators can solutions.3 (such as fleet management), but not keep the cost of sales and support low by across multiple sectors, as it will be providing developers with tools, typically • Connectivity. This forms the basis of difficult to exploit synergies between these via APIs. This reduction in costs is most operator IoT solutions and or with a platform offering. For example, essential for solutions where the revenue operators must ensure that they are the expertise gained in supporting fleet per device will often be under USD10 well-placed to provide a range of managers will be of little benefit in per year. connectivity options, such as NB-IoT. We launching a healthcare solution. forecast that the total value chain for IoT Operators will need to work hard to justify solutions supported by traditional In contrast, operators using the generic or their presence in services other than cellular and LPWA connectivity will be vertical-specific platform approaches can connectivity worth USD200 billion worldwide in 2025, focus on areas where their offerings have The development of the original telecoms of which connectivity will represent the strongest differentiators or on network gradually eroded the role of AT&T around USD27 billion (14%). capabilities that are common across in the value chain, but developments in IoT multiple applications. • Generic platform. An operator provides will result in the opposite trend. It is basic tools and capabilities (such as The risk in providing capabilities is that becoming easier for AT&T and other device management) that developers operators will be competing against a telecoms operators to play larger roles in can use to create IoT solutions. This range of providers. Operators should IoT, but they will need to