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 work hard to approach could increase the question their role in selling any capability justify their presence in the market. addressable market for an operator to for which they do not have a strong around USD20 billion in 2025 – 10% of differentiator. Possible differentiators for the total. operators to explore could include local hosting (for low latency and to meet any Questions? • Vertical-specific platform. An data sovereignty requirements), local Please feel free to contact operator offers platforms or capabilities language sales and support, and bundles Tom Rebbeck, Research Director, at tailored to a specific vertical market, (for example, of approved hardware, [email protected] such as healthcare. The size of the connectivity and security), which simplify addressable market depends on the the buying process for customers. application area, but it could be worth as
1 AT&T even grew germanium crystals as part of its quest to develop solid state transistors. 2 For an excellent overview of AT&T’s early research and development work, see Jon Gertner’s The Idea Factory: Bell Labs and the Great Age of American Innovation, Penguin (London, 2012). 3 http://www.analysysmason.com/Research/Content/Reports/Operator-approaches-IoT-Jan107-RDME0/ 5 IoT will have little impact on revenue for most mobile operators
MICHELE MACKENZIE Principal Analyst Most operators are not well-positioned to “capitalise on the IoT opportunity. IoT has become a persistent theme in business than connectivity alone can telecoms industry conversations. Few generate.” strategy plans for operators do not Operators will need to adopt new mention IoT, and for some operators strategies to win a share of the USD173 (including, Orange, Verizon and Vodafone), billion spend on devices and applications IoT is of central importance. This focus is understandable: although the worldwide While connectivity represents just a small TOM REBBECK mobile telecoms industry is only forecast proportion of the total spend on IoT Research Director to grow at a 1% CAGR between 2016 and solutions enabled by mobile operators, 2025, Analysys Mason has calculated that by 2025, revenue from application revenue from IoT solutions enabled by development and enablement will • Its performance metrics should be mobile operators (that is, the total spend represent USD123 billion, and hardware commensurate with a new growth area, – including devices, applications and will account for USD50 billion. Mobile and it should be granted a fair degree connectivity – on devices that use a wide operators are seeking additional of autonomy to make its own area connection) will exceed USD200 incremental value by offering other investment decisions. Investment in billion in 2025, representing a CAGR of components. However, this may present hardware and application services 18%. This is equivalent to 22% of the total challenges because mobile operators do should be focused on growing the IoT spend on mobile services worldwide not typically have the skills required to business and should not be hindered by (USD888 billion) for the same year. build a viable proposition. To capture a legacy business considerations (for larger share of hardware or application However, IoT connectivity revenue will example, Bouygues Telecom and revenue, mobile operators should only reach USD28 billion by 2025, Vodacom have demonstrated how consider the following strategies. representing just 3% of worldwide mobile operators can use separate units to 1 telecoms revenue. If IoT is to become a • Create an independent entity to target develop IoT solutions). new growth area within the telecoms the IoT opportunity. An IoT business • Leverage in-house capabilities to build industry, it will need to contribute unit should be able to make decisions IoT enablers and applications. significantly more revenue to the overall independently of the legacy business. Operators need to build platforms and enablers to operate in new areas of the value chain. Some operators have separate R&D and ICT divisions that focus on developing new capabilities and solutions that target specific Worldwide mobile industry sectors. For example, IoT spend enabled Deutsche Telekom’s ICT business, by mobile/LPWA telecoms spend T-Systems, developed a healthcare USD201 billion platform (e-Health Connect), which USD888 billion supports IoT applications such as remote patient monitoring. In addition, IoT connectivity Verizon has developed ThingSpace, and revenue Indosat has developed NexThing to USD28 billion build the developer ecosystem to support their initiatives.
FIGURE 1: TOTAL VALUE OF IOT REVENUE ADDRESSABLE BY MOBILE OPERATORS (MOBILE AND LPWA), TOTAL MOBILE TELECOMS SPEND AND IOT CONNECTIVITY REVENUE, 2025 [SOURCE: ANALYSYS MASON]
6 • Foster partnerships to bring IoT Most operators are not well-positioned programme. Our reports include Operator propositions to market. Not all mobile to capitalise on the IoT opportunity approaches to IoT: from connectivity to operators have all the skills required or platforms and full solutions, as well as a IoT currently represents only a small in-house expertise to develop hardware comprehensive forecast on the total share of operator revenue – even for and application solutions. Even those addressable IoT market for operators those operators with a large IoT business. operators with an established IT published in the DataHub and For example, Vodafone reported that IoT division (such as Deutsche Telkom) will summarised in our report IoT value chain accounted for only 1.3% of its revenue in depend on partnerships for certain revenue: worldwide trends and forecasts 3Q 2016, and Verizon reported that IoT components. Most operators will need 2016–20252. We have also undertaken a accounted for only 0.8% of its revenue in to build partnerships to enter new number of projects for telecoms 4Q 2016. For IoT to grow to a sizeable areas of the value chain, either in operators to develop their approach to share of revenue – that is, 10% or above capabilities such as application IoT, including one-day strategy workshops – and be considered an important driver enablement platforms or by bringing and full strategy reviews. for growth, operators will need to capture end-to-end solutions to market. some of the USD123 billion application • Make bold moves in investment and revenue or USD50 billion hardware Questions? acquisition. Mobile operators have revenue that we have forecasted for 2025. Please feel free to contact been relatively cautious in terms of Addressing these areas of the value chain Tom Rebbeck, Research Director, at acquisition in the IoT space. There have will require significant investment and [email protected] and been a couple of major exceptions: carries a higher risk of failure. EBIT Michele Mackenzie, Principal Analyst, at Vodafone acquired Cobra to compete in margins which are relatively high for [email protected] every part of the automotive IoT value connectivity at around 10% will likely be chain. Similarly, Verizon has made a lower in these areas. However, if spate of high-profile acquisitions operators want to remain visible in IoT totalling USD3.5 billion to compete in and develop strong revenue streams, they fleet management. On a smaller scale, will need to increase their appetite for Telia has invested in Springworks to risk and invest accordingly. enable its connected car platform, and it recently acquired Fältcom to compete Analysys Mason has produced extensive in smart-city applications. research on the role of operators in IoT as part of its IoT and M2M Services
1 For more information, see Analysys Mason’s Mobile payments in emerging markets – beyond m-pesa. Available at: www.analysysmason.com/About-Us/News/Newsletter/mobile-payments-in- emerging-markets-Jan17/ 2 http://www.analysysmason.com/Research/Content/Reports/IoT-value-chain-Feb2017-RDME0 7 Operators are racing to enable IoT applications, but a winning approach is yet to emerge
Operators need to differentiate their platform AHMED ALI services with key strengths such as connectivity Senior Analyst “and local support in order to compete with large players, including Amazon and Microsoft.
Operators are eager to move up the IoT Deutsche Telekom, Telefónica and IoT application enablement platforms value chain and get involved in the Vodafone) have partnered with platform (AEPs) offer a set of tools that simplify the application enablement process to vendors such as Cumulocity” and PTC process of building IoT solutions by capture a share of this market. However, ThingWorx. Each operator’s approach to enterprises and developers. The exact because this is a new area for operators, enablement has its merits, but operators capabilities vary depending on the they are taking different approaches to face strong competition from big platform technology provider and its targeted entering this space. Several operators players such as Amazon and Microsoft customers, but most solutions support with large domestic markets have created and, therefore, they need to work on features such as analytics, data in-house application enablement differentiating their solutions and integration tools and run-time solutions. Examples include AT&T’s ‘M2X’ go-to-market strategies. environments. Most technology providers and ‘Flow’ solutions, and SK Telecom’s offer a horizontal platform that supports Application enablement platforms ‘ThingPlug’ initiative. Other operators a large choice of common development enhance operators’ IoT services in (particularly those in Europe such as tools and functions. various ways
Region ThingWorx Cumulocity Telit Carriots SAP Plat.One Proprietary
Latin America and • Rogers • AT&T North America • Sprint • Verizon
Asia–Pacific • NTT Docomo • Telstra • China Mobile • Telkomsel • KT • SK Telekom
Europe • Elisa • Deutsche • Proximus • Orange • BT • Portugal Telekom • Swisscom • Telecom Italia Telecom • EE • Tele2 • Tele2 • Sonera • Telefónica • Telenor Connexion • Vodafone
Middle East and • Etisalat • Etisalat Africa
FIGURE 1: SELECTED AEP PROVIDERS AND THEIR CUSTOMER OPERATORS [SOURCE: ANALYSYS MASON, 2017]
8 Operators that are aiming to expand their platforms. PTC ThingWorx is, by far, the IoT services and explore new business leading vendor, having secured more than cases beyond connectivity and device 10 operator partners including Telefónica management are using AEPs in ways that and Vodafone. reflect their individual strengths and the Developing an internal platform should level of confidence within their own IoT community, and operators can help enable an operator to win a greater share markets. An operator can leverage an provide this. In return, the broad platform of revenue. This strategy requires AEP in one or more of the following ways. exposure will empower operators’ own operators to have access to a large pool platform offerings and supported • Platform for internal solutions. Use of IoT developers, a willingness to invest, services. Furthermore, operators that use the platform internally for developing and a confidence about their position in the same platform (for example, applications as part of a pre-packaged the IoT market. Good examples of this ThingWorx) can combine efforts to drive complete end-to-end IoT solution. include China Mobile, SK Telekom and the platform’s adoption. Verizon, which are amongst the largest • Platform plus services. Offer an AEP IoT players within their local markets. In The main competitors for operators and as part of a complete advanced line with this strategy, these operators’ their partner vendors are the large cloud platform for business customers that AEP services compete directly with other providers such as AWS, Azure and want to develop their own applications platform vendors (for example, from Google, which are making strong moves and be supported by integration and Amazon or GE), but the operators believe into the IoT AEP market. These cloud consulting services. they have the scale to do so. providers are poised to acquire a large • Platform for developers. Provide an segment of customers and will therefore However, European operators see value in open platform of tools, often available impact AEP market dynamics, thanks to leveraging external vendor solutions to as APIs, that developers can access. their strong relationships within the speed their market growth and to reach This can be augmented with application enterprise market. For an operator, out to a wider audience. These operators, certification processes and a having an AEP is not enough; there needs including Orange and Vodafone, while marketplace that developers can use to to be a clear strategy on what to do with it also managing large-scale IoT publish/promote the apps they have and how to differentiate the operator’s operations, are spread across multiple developed. offerings from large global players. countries in varying stages of Connectivity, local support and Major operators are deploying AEPs, but development with varied business customised services are areas where regional disparities are evident requirements. Such operators tend to operators have influence and these offer platform services and use partner elements can be bundled to together to The largest operators in developed solutions to extend their own resources create more-attractive solutions. markets in Asia–Pacific, Europe and and capabilities. Figure 2 summarises the North America are already implementing arguments for building or buying an AEP. application enablement and development features within their IoT platforms and Operators need to be prepared for strong services (see Figure 1). European competition within the AEP market Questions? operators have primarily opted to use A partnership between a third-party AEP Please feel free to contact external vendor solutions, while large and an operator should be mutually Ahmed Ali, Senior Analyst, at operators in Asia and North America have beneficial. AEPs require recognition and a [email protected] decided to implement in-house wide user base in the developer
Advantages Disadvantages
Buy platform • Less investment needed • Less control • Traction already exists • Lower share of revenue • Quick to market and operator can focus on its • Platform might require optimisation for operators. strengths • Less commitment needed.
Build platform • Greater share of revenue • Lots of investment needed with long-term • More control commitment • Platform can be optimised for operator use cases (or • Gaining traction can be challenging and can be slow services that need a SIM). to market • Not a core business.
FIGURE 2: ADVANTAGES AND DISADVANTAGES OF BUYING OR BUILDING AN AEP [SOURCE: ANALYSYS MASON, 2017]
9 Successful deployment of NB-IoT will depend on spectrum choices
The fast pace of NB-IoT standardisation JANETTE STEWART during 2016 suggests there is demand for its Principal “commercial deployment.
Standardisation of “narrowband IoT” The three deployment options for NB-IoT frequency carriers from those assigned (NB-IoT) occurred rapidly during 2016, ”RANs have performance implications, to mobile operators for MBB use. and major mobile operators such as both for IoT deployment and for MBB To date, regulators have not assigned Deutsche Telekom and Vodafone are From the perspective of the radio access separate frequencies for NB-IoT, planning wide-scale roll-out. This article network (RAN) there are three NB-IoT although this approach is available. For discusses the spectrum options for deployment options. example, it would be possible to assign NB-IoT and their commercial IoT spectrum from the 700MHz band implications. Noting that there are three • Two of these options are suitable for (so-called ‘2×3MHz’, from 733–736MHz options for deployment – namely in-band deployment in spectrum that has and 788–791MHz). This 2×3MHz spectrum deployment alongside LTE traffic, already been licensed: is adjacent to the main MBB-focused ‘guard-band’ deployment at the edges of –– an ‘in-band’ option, where NB-IoT is 700MHz band plan (as shown in Figure 1 existing LTE carriers, and use of deployed within existing LTE below1) and so would have no impact on separately assigned spectrum – the spectrum used for mobile broadband the amount of spectrum available for article discusses the trade-offs involved (MBB) services MBB. and the factors determining the best deployment choice. –– a ‘guard-band’ option using There appear to be various advantages of spectrum at the channel edges of using separately assigned spectrum The speed at which the industry has existing LTE carriers (where roll-off rather than an in-band deployment. For standardised NB-IoT suggests strong from spectral emissions creates example, operators could deploy IoT demand for the new technology ‘in-band guard bands’, which can be services without taking up spectrum used without taking capacity from The rapidly developing Internet of Things resource and/or affecting the quality of the main LTE traffic carriers) (IoT) market is being enabled by various service of MBB services. Similarly, wireless technologies. A recent addition • The third option is to deploy NB-IoT although the guard-band solution uses to this already crowded market is using a separate assignment of less MBB capacity than the in-band narrowband-IoT (NB-IoT). This modified spectrum (i.e. ‘standalone’ deployment option, it is unlikely the version of the established 4G (LTE) deployment), and different LTE guard-band solution can offer the same technology uses narrower channels (i.e. 200kHz compared to 10MHz for LTE use). z z z z z z z H H H H H H H The fast pace of NB-IoT standardisation 758 M 791 M 788 M 733 M 703 M during 2016 suggests there is demand for 694 M 736 M its commercial deployment, to address a CEPT DTT 800MHz 9MHz Uplink 30MHz 3 25MHz Downlink 30MHz 3 wide array of IoT uses over cellular 700MHz band ch48 band networks. There are similarities between plan some of these uses and those being associated with Fifth Generation (5G) APT 700MHz band plan Uplink 45MHz 10MHz Downlink 45MHz services. However, NB-IoT provides an (3GPP band 28) immediate solution for mobile operators z z z z H H H to create successful IoT businesses well H
before 5G becomes a commercial reality. 703 M 748 M 758 M 803 M
Key: FDD allocated IoT spectrum Guard band Outside of 700MHz spectrum or gap band/for other uses
FIGURE 1: 700MHZ BAND PLANS FOR EUROPE AND ASIA , HIGHLIGHTING THE 2×3MHZ SPECTRUM ASSIGNMENT SUITABLE FOR IOT [SOURCE: ANALYSYS MASON, 2017] 10 levels of performance as when using separately assigned spectrum, due to more limited prospects for optimising site placement, coverage and capacity for the IoT traffic. There could also be other benefits from using separate spectrum, including the possibility of optimising RANs to provide superior indoor coverage. There might also be device upsides, such as a reduction in power consumption from market. However, given the rapid increase IoT and MBB will decline (unless separate having better indoor coverage. Some IoT in MBB traffic reported recently, and spectrum is available). use cases require high levels of network forecasts of continued strong growth (see availability due to the nature of traffic Regulators currently appear Figure 2), it could be challenging to being carried (e.g. applications within the unconvinced about the need to assign support IoT and MBB traffic within the healthcare sector, or connections to/from separate spectrum for IoT same carriers without compromising vehicles). Separately assigned spectrum network performance. The lack of harmonised spectrum for could provide more reliable connections NB-IoT suggests that regulators are for these situations, whilst also Vodafone’s spectrum portfolio (including unconvinced about a market need for leveraging existing sites and network 2.6GHz spectrum and sub-1GHz bands separately assigned spectrum. If separate assets (e.g. billing and security). such as 900MHz) might help to reduce spectrum were to be made available any impact on network performance. If NB-IoT take-up is strong and MBB several policy questions could arise, such However, other mobile operators with capacity demand continues to grow, as: How many separate networks can be smaller spectrum holdings may be less major operators’ plans for in-band supported in 2×3MHz? How many able to mitigate this effect. deployment could compromise network networks are required? Are there performance Industry sources point to key benefits of competition implications for the MBB NB-IoT being quality of service and the market? Despite the performance compromises possibility of re-using LTE infrastructure noted above, Vodafone’s plans to offer With no regionally or globally harmonised (e.g. sites, backhaul and core network NB-IoT services in markets across solution for separately assigned capabilities). LTE infrastructure can be Europe involve using its existing 800MHz spectrum, it seems likely that early re-used whether deploying within existing spectrum. Vodafone has indicated that deployments will follow Vodafone’s model LTE MBB spectrum or in separately this is because its 800MHz LTE RAN is of in-band deployment. Ultimately, the assigned carrier(s). However, quality of ready to support NB-IoT (i.e. most sites success or otherwise of these early service depends on the spectrum being can be software upgraded and current launches of NB-IoT using capacity from used – the possibility of mobile operators systems can be updated quickly without LTE carriers could determine whether capturing a significant share of IoT traffic needing extensive additional further dedicated spectrum is needed. is important in this regard, since as traffic infrastructure)2. One of the key benefits levels grow the quality of service for both for Vodafone is likely to be speed to Questions? Please feel free to contact Janette Stewart, Principal, at 350 [email protected] 300 )
B 250 E (
a
t 200 a d
l
a 150 t o T 100
50
0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
FIGURE 2: FORECAST GROWTH IN WORLDWIDE MOBILE DATA TRAFFIC, EXCLUDING IOT [SOURCE: ANALYSYS MASON, 2017]
1 ECC Decision (15)01 includes the 2×3MHz IoT 2 See http://www.vodafone.com/content/index/what/ spectrum as an option; see http://www.erodocdb. technology-blog/enabling-iot.html dk/doks/doccategoryECC.aspx?doccatid=1 11
IoT Scorecard 2017: China Mobile and Vodafone excel in strategy and execution in
emerging Asia–Pacific MICHELE MACKENZIE Principal Analyst
Analysys Mason’s ‘IoT Scorecard 2017’ for EMAP does not rank CSPs based on size alone; instead, we “assess how the market pioneers have established successful IoT businesses to achieve scale and examine their best practices.
SHERRIE HUANG Analysys Mason has identified in its IoT their IoT strategy. The IoT Scorecard 2017 Senior Analyst Scorecard 20171 two telecoms operators focused” on six key categories on which in emerging Asia–Pacific that have operators in emerging Asia–Pacific were excelled in this area: China Mobile and ranked: strategy and vision, structure and Important areas where both leading Vodafone. China Mobile topped the overall organisation, ecosystem and partnership, operators excelled include the following. pioneer ranking, thanks to its heavy market status and size, network status Structure and organisation: Both China investment in network technologies, IoT and technology, and capabilities and Mobile and Vodafone scored highly in capabilities, as well as its presence in portfolio. their structure and organisation for multiple sectors and a dedicated IoT Independent IoT business units, as well delivering IoT services. To enhance their business unit to drive growth. Vodafone is as active engagement in network and chances of success, operators worldwide also a pioneer due to its advanced vision technology development, support market need to have an IoT division that operates and strategy, extensive international success with a high level of independence, but is coverage and partnerships, which it leverages in the region to facilitate inbound and outbound IoT services. This article summarises these operators’ Pioneers strengths and best practices, which may serve as a guide for other operators China Mobile seeking to build an IoT business. Best practice, not size, defines the IoT pioneers in emerging Asia–Pacific Vodafone It would be easy to assume that the region’s IoT market pioneers were identified according to their size. Both China Mobile and Vodafone enjoy significant scale in the IoT market. Execution Main Challengers However, Analysys Mason’s IoT Scorecard 2017 does not rank based on size alone. Instead, we assess how the market pioneers have established successful IoT businesses to achieve this scale and examine the best practices that they have developed to succeed. These best Emerging Contenders practices can serve as a guide for other operators just starting out in the market Strategy or at an early phase of implementing
FIGURE 1: CHINA MOBILE’S AND VODAFONE’S RANKING FOR ANALYSYS MASON’S IOT SCORECARD 2017, EMERGING ASIA–PACIFIC. [SOURCE: ANALYSYS MASON, 2017) 12 still able to leverage the resources and member. It is also trialling LTE-M with brand of the core business. China Mobile Ericsson and Qualcomm. Vodafone has established an independent IoT business been at the forefront of promoting NB-IoT unit in September 2012 – China Mobile standards and is preparing to launch the IoT subsidiary – in order to grow its IoT technology commercially in several of its business. Its primary role is to innovate European markets. It is working to build and consolidate resource across the IoT the ecosystem and to establish the (unsurprisingly, given the size of the value chain.2 Similarly, Vodafone IoT technology as a worldwide standard. opportunity), while Vodafone has pursued benefits from a high degree of autonomy, Both operators have made significant opportunities that require international despite being part of Vodafone’s Group investments in backing their preferred mobility and enable it to leverage its Enterprise. It exerts sufficient influence standards and building support from global footprint. However, their strategies within the group to ensure that IoT is other operators and players, such as start to converge as they focus on represented in network investment module manufacturers and application delivering IoT services into and out of the decisions (for example, in NB-IoT). developers instrumental to the IoT emerging Asia–Pacific region for local Moreover, Vodafone Automotive operates ecosystem. Both China Mobile and and global companies alike. Both have as a separate business unit, which is Vodafone have led the way in ensuring made significant investments in dedicated to building this new growth that wide-area cellular networks remain developing IoT best practices across a area. Both companies have demonstrated relevant to IoT. Other operators in the range of criteria and leveraged these to that success in this segment depends on region have run trials of LPWA build successful IoT businesses in a relatively independent business unit technologies, but have been less active emerging Asia–Pacific. that focuses on new business in building the case for LPWA. opportunities separate from legacy Both operators ranked highly in other business considerations. Other operators criteria. For example, Vodafone has are adopting this best practice. For invested significantly in building example, Indosat Indonesia has had a partnerships with other players that are separate IoT operating division since active in building their IoT businesses in 2013, and Reliance India launched a the region. Finally, China Mobile has separate IoT business unit, UNLIMIT, invested in enabling capabilities such as in November 2016. Questions? its OneNet platform. Please feel free to contact Network status and technology: While Operators have different approaches and Michele Mackenzie, Principal Analyst, at most of the operators surveyed have a start points for entering the IoT market, [email protected] strong portfolio of cellular technologies, but the same best practices lead to and Sherrie Huang, Senior Analyst, at China Mobile and Vodafone stand out as success [email protected] pioneers, thanks to the bold moves that they have made to support IoT-specific China Mobile and Vodafone have taken wide-area networks. China Mobile has quite different approaches to building conducted outdoor trials of NB-IoT with their IoT businesses. China Mobile has Huawei and ZTE and is a NB-IoT Forum typically focused on the domestic market
1 http://www.analysysmason.com/Research/Content/Reports/IoT-scorecard-EMAP-Mar2017-RDME0 2 More information available at: http://www.5lian.cn/html/2012/qiye_1205/35944.html [Chinese version]. 13 IoT: Seven areas for regulators and policy makers to consider
Governments are active participants, as well as rule TOM REBBECK “makers, for IoT. Research Director The potential for IoT to” have a positive Act funding supported smart grid Seven key areas of interest for economic, societal, and environmental initiatives. Governments are also regulators impact worldwide is substantial, but its supporting the deployment of vehicle We have identified seven key areas of development also raises new questions to accident alert systems (such as the interest for regulators reviewing IoT be addressed by regulators and policy European Commission’s initiative, eCall), (see Figure 1). makers. The need to protect consumers, and providing funding for smart cities and and to help them understand how their more general IoT innovation.1 Policy makers need to consider existing data is being used, must be balanced rules when exploring IoT regulation Governments need to be wary of the against the need to ensure that the potentially negative consequences of their potential of the IoT market is not stifled. We believe that four broad factors should involvement. For example, one operator be considered when reviewing regulation Governments are not neutral actors suspended its plan to build a large-scale and policy for IoT: in IoT LPWA network after the national government suggested that it would • Although IoT development raises some Governments are active participants, as instead fund a similar system to support new concerns, many issues will already well as rule makers, for IoT, with smart city services. However, after 18 be covered by existing regulation, government policy driving some of the months with no development of the making new rules unnecessary. For largest IoT projects worldwide. For promised government network, the example, privacy concerns have been example, the European Union is aiming country in question still has no LPWA raised about drones that can take for 80% of electricity meters to be smart connectivity. videos or photographs, with some meters by 2020, and in the USA, Recovery attempts to ban drone photography.2 Most countries already have legislation on photography, which means that additional rules are not needed. • Current and planned regulation may be too stringent for IoT, and could threaten innovation. The need to relax existing rules has been recognised in both Japan and Korea. • IoT requires regulatory certainty due to the long-term nature of investments. A 15-year lifetime for an IoT device will not be uncommon. For such commitments, the firms involved will want to have confidence in the regulation. For example, the rules governing permanent roaming3 are unclear in many countries and this may dissuade IoT companies from using it.
14 • Finally, IoT is a global business, Analysys Mason has over 30 years which limits the impact that any of experience supporting telecoms Questions? single national government can have regulators and policy makers, and in Please feel free to contact over many aspects, including IoT recent years has supported several Tom Rebbeck, Research Director, at standards. While it may not be organisations on the topics [email protected] desirable or possible for governments discussed above. or James Allen, Partner and Senior to decide upon standards, they do Regulatory Expert, at have influence.4 [email protected]
Issue Regulatory and policy considerations
Device and service • New rules may impact multiple regulators (for example, healthcare devices may require involvement security from telecoms and healthcare regulators). • Few countries will have the clout to mandate security standards alone.
Data privacy and • Issues around data ownership could involve device manufacturers, application providers, and network ownership operators, and affect multiple regulatory bodies. Network security and • New services (such as healthcare and energy) may require increased levels of security and resilience. resilience • Multiple government bodies beyond communications regulators may be involved in regulation.
Data sovereignty and • Governments considering restrictions on the transfer of IoT data will need to balance the benefits residence against potential consequences. IoT organisations may choose not to launch a service if rules appear too restrictive, or require substantial local investment. Allocation of scarce • Most IoT applications will be low bandwidth and will not require additional network capacity.5 resources (including • Some applications (for instance, healthcare) may benefit from dedicated spectrum, such as that spectrum and proposed for 2 x 3Mhz in the 700MHz band, to support higher quality-of-service levels. numbering) • Regulators may also need to clarify rules about existing spectrum usage.6 • A number of countries, including the Netherlands, Norway and Spain, have released new number ranges for M2M services. • When addressing the allocation of resources, governments can encourage the use of IPv6 by encouraging its use by the public sector, as Belgium has done.
Roaming and network • Many (if not most) IoT companies would prefer flexibility when it comes to which option to use for switching connected services worldwide (for example, a choice between using a local physical SIM, a global roaming SIM or an eSIM). • Rules surrounding eSIMs and permanent roaming are often unclear, creating avoidable uncertainty.
IoT standards • The absence of globally accepted IoT standards is a barrier that may be delaying IoT deployment. • Regulators and governments should consider how they can support the development of standards.7
FIGURE 1: KEY ISSUES IN IOT REGULATION [SOURCE: ANALYSYS MASON, 2016]
1 For example, the UK government has committed GBP40 million to projects such as IoTUK, a national programme that supports the development and adoption of IoT in the UK. 2 In 2013, US state of New Hampshire’s government unsuccessfully attempted to introduce a bill to ban “images of a person’s residence to be taken from the air.” Available at: http://www.modelaircraft. org/gov/statebills/NHHB619.pdf 3 Permanent roaming is where a SIM from one country is installed permanently in a device that originates in another country. For example, in Ireland, the lottery terminals use SIM cards from Telefónica Spain. 4 In the UK, the government is providing support, including funding, for the development of the Hypercat standard. 5 Analysys Mason forecasts that IoT devices will represent 3% of total global cellular traffic in 2020. See Analysys Mason’s Wireless network data traffic: worldwide trends and forecasts 2015–2020. Available at: www.analysysmason.com/Research/Content/Reports/Wireless-Network-Traffic-Jan2016-RDTN0. 6 For example, in March 2016, Ofcom clarified that certain VHF bands could be used for IoT applications. See article: Ofcom (London, UK, 23 March 2016), VHF radio spectrum for the Internet of Things. Available at: http://stakeholders.ofcom.org.uk/binaries/consultations/radio-spectrum-internet-of-things/statement/vhf-iot-statement.pdf. 7 RAND Europe recently published its report Accelerating the Internet of Things in the UK, which explores some of these topics. Available at: https://www.rand.org/randeurope/research/projects/ accelerating-internet-of-things-uk.html.
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