In recent years telecommunication companies have been facing severe challenges: voice and SMS revenues have been under pressure, costly investments for the deployment of broadband data networks are required and profits are shrinking due to global competition.
As the profitability of the old business model declines, the telecommunication companies (telcos) find value in another area. With the need to connect billions of devices globally, the Internet of Things can provide a new and significant revenue stream. This is reflected in the setting up of IoT/M2M teams in telcos globally. The benefits of this are straight forward, telcos gain the possibility for additional revenue through, new business models, products and a wider range of potential customers.
One example of a telco that is highly involved in IoT is Verizon, which 2015 made almost half a billion US$ in revenue from the Internet of things. The reason for Verizon’s success is, that the company does not merely offer cellular connections but is instead building tools for companies. Its executives are convinced that in a future where cars, factories, and home appliances are connected to the Internet, success will come from selling applications. This is also reflected in Verizon’s revenue as stated by its SVP, which derives by 80% of its applications, 15% from the platform and only 5% from connectivity.
But Verizon is not the only telco offering applications, the flow away from connectivity towards solution provider can be observed also in other telcos, Vodafone for example at acquired Cobra, in order to become a full service provider to the automotive industry.
As it always is the case with new technologies, there are challenges and IoT is no exception to this. The most pressing challenges according to IBM are:
- The variety in technical standards between and within telcos, regions and countries.
- Privacy and security, with particular attention to the sectors health care and financial data
- Consumer trust with 53% concerned about data sharing and 51% concerned with hacking, according to Adweek
- Network reliability, with increased stress on the networks due to the rising number of things connected to the internet and a more severe impact in case of a network failure
Regardless of these challenges, telcos cannot wait in adopting IoT applications to their portfolio if they want to stay competitive. This can be observed at our IoT events in Southeast Asia, where we work with telcos that are highly active and interested in partnering with IoT solution providers.