This is a post by one of our exhibitors, Bright Box. Bright Box will be participating in the 11th edition of the Asia IoT Business Platform in Hanoi, Vietnam on 29 and 30 November 2016. http://www.bright-box.eu/
As I work for an IT company within the automotive industry I can tell that cars are the best customers for mobile operators today. Do you know why?
In most countries, last year's Mobile Network Operators (MNOs) critically lost their consumer base growth. And usually they also lose business revenue every year.
People have already purchased as many SIM cards as they can. Every person (in modern countries) usually have 1–2 SIM cards for smartphones (one for personal and second for business use) and sometimes tablets equipped with SIM card. No more if we are referring to the mass market.
At the same time a competition between mobile network operators has dropped its traffic margin per SIM card to a very low level. Data bundles offered from operators are large enough for most people and same time these bundles are very cheap.
Of course regular services like voice and SMS are already in the past. People call and text using WhatsApp or Skype using Internet from their data plans with operators.
Data consumption grows fast. Most of all because video service usage has grown. And the second driver for this has been a growth in cloud music services.
Data consumption is growing at the same time operator revenue is not. Data plans become cheaper and cheaper. So operators try to sell more SIM cards with new services subscriptions or launch new services for all SIM cards to generate new revenue channels for its business.
IoT as a chance
IoT a hot topic these days the telecom sector. Operators trust IoT will bring them new growth points and they try to find out what are the best business models for it.
People already bought too many SIM cards? Sell more SIM cards to other things! Things — are new customers for operators. And a new chance to sell more.
Internet Of Things (IoT) — the connected devices market is growing very fast.
IoT looks like what M2M business operators had years before. M2M itself is about B2B projects: ATMs, payment terminals, electricity meters, fleet tracking and so on. But IoT gives M2M a new breathe — a chance to launch B2C high margin services and new business models, an empty market niche of unconnected consumer things and yet small competition.
IoT sounds good but not the whole segment can help operator business. IoT has different directions: Smart Home devices, Wearables, Connected Cars and others.
Wearables. Most new IoT devices developed are wearables. But most wearables use Bluetooth to connect to the owner’s smartphone. They don’t need a special SIM card but use the owner’s smartphone to connect to the internet and other services. At the same time wearables do not generate too much data because they don’t have services with heavy content. So they are not present for operator business.
Smart Home. If your home equipped with smart devices — it is 99%+ chance it has good Wi-Fi internet which is provided by wired connection. Again MNO are out of business here (we are not referring to MNO wired network providers).
Connected Cars. This is something really special and MNOs like it very much.
Cars are really our second home where we spend a lot of time each day, we listen to music, our passengers watch the videos, we use navigation software with traffic data updating in real time from the cloud. Our cars are something we care about very much. We want to know what happens to them when they are far from us. Cars get connected in order to provide their owners with data on their position, their health status and other things sent to the owner’s smartphone, in real time. Also, cars can become remotely controllable. So we can prepare a car to the trip in advance. Or send an address to a car navigation system before we get into the car or start the climate control system to precool or preheat the interior.
The most important thing for operators — cars are 100% movable things in the IoT world. So Wi-Fi or wired connections cannot help them stay connected to the internet and the cloud services. And our second home — we use all our gadgets in it like tablets, smartphones, laptops which always needs the internet.
So cars are the MNOs best friends. Because they can’t become smart and connected without SIM cards.
New competition for MNO s— a car as a customer
Wi-Fi inside the car has become a popular option for the US market.
Wi-Fi in OEM embedded car infotainment systems to reach almost 60% in N. America by 2019
Wi-Fi in the car also means people will download more cellular data per month. For example when you have childrens using gadgets like tablets, game PSPs and so on — you’ll plug a SIM card into every such and pay for its data subscriptions separately. But when your car has Wi-Fi — that means each child will continue to use all their devices inside the car as they do at home. When cars have Wi-Fi — car owners buy more data from operators. Because he (or his passengers) are able to use more devices inside the car they usually use only at home/office with wired internet.
But for operator business competition is not only to sell more SIM cards to new segment like cars. When in several years all cars will be equipped with a SIM card — what is next? Next again — fall of the competition margin for the full market segment.
Operators try not to be only the only connectivity provider.
VAS services like SMS dating or weather forecast, music and video content services. But operators don’t run projects fast enough and feel the market changes in time and loose VAS challenges with external services providers. Today music services are lead by Apple, Google and Spotify. Video — Netflix. SMS itself was gone after WhatsApp and others new players have arrived.
Do you remember when Nokia smartphones were run by Symbian OS? It was a basic mobile OS on the market. And operators were in the business of mobile app sales. All Symbian application stores were controlled by operators. And they thought they were smart enough to hold this market segment. But there came Apple with the first iPhone. Operators thought it was too small and a new niche product and let iPhone have their own AppStore with their own billing. So money streams for mobile applications started to flow without the operators. That was the operator’s huge mistake. After the Apple expansion next came Google with the Android with the same business model. So operators worldwide lost billions of US dollars letting Apple charge customers for applications directly without mobile operator.
Services are always more profitable than just traffic and bring competition advantages to the operator’s basic traffic business. Connected Car services are a new chance for operators to win the game. They have to learn from the past and not make these mistakes again.
Today Verizon, AT&T, TeliaSonera and others develop Connected Car products and services.
Big operators are investing in own Connected Car services and technologies. Smaller — use white label solutions presented on the market. Finally they understand — Connected Cars are their chance for a good future. There will be no other connectivity channel in cars other than the cellular network in the near future. And it is the best chance to take new market segment not only with a basic connectivity service but also with high-margin value added services.
How can operator reach the car as a customer?
At Bright Box we have successfully developed and launched Connected Cars services and products for many years.
Of course in every connected car project we have a partner — the mobile operator. Because every car we make connected in every country worldwide we need a SIM card from the operator to put it in the car. So maybe I have the first seat position to see the what happens with an operator’s expansion into the Connected Car segment today.
Operators basically have 2 ways to deliver its SIM cards to a car:
- Close a deal with a car maker or local car distributor (like Hyundai, Nissan, etc.) or Tier1/2 supplier (like Harman, Continental, etc.) to deliver SIM cards to new cars.
- Launch your own solution to the aftersales market and deliver it to all cars on the road.
The first option looks like an easier way from an operator point of view. It is a regular way for operators to sell M2M SIM cards in different market segments where GSM based M2M connectivity is needed.
As I can see that operators pay most of their attention to the first option and this might be a mistake. Let’s compare them:
So from this comparison I can tell that 2nd way is much more effective for the operator. It does require more resources to bring your own solution to the market. But at the same time it gives better perspectives for SIM cards sales and revenue from every SIM card sold to a car.
The second way is realized today by only few operators, some of them being:
As a Bright Box company — we provide Connected Cars services and we have crazy good numbers from these services, as there is strong demand from end customers as car owners. We deliver our products as the value end customers are ready to pay for.
For example our try&buy retention is at 97% and this is huge! Not many services in the world have an even similar retention when customer vote for your service with their money.
Connected Cars are not the future. Today’s products that are the future. And most important — people need them and we know it.