The Internet of Things. IoT. One of the hottest topics in communications today. But for Communications Service Providers (CSPs) – whether they use fixed line, mobile, cable or satellite networks to deliver their services – IoT is both an opportunity and a threat.
On the plus side, IoT has the potential to create significant new revenue streams for CSPs, providing they can insert themselves into the value chain at a high enough level and don’t just end up as ‘dumb pipes’ for all the new Internet-enabled devices, smart meters, vehicles, homes, cities, etc. Just providing the network connectivity is a sure fire way of missing out on the major new monetisation opportunities that IoT, together with its little brother M2M, has the potential to deliver.
However, it’s not just the opportunity cost that CSPs have to urgently address, because a fully IoT-enabled world will also load massive additional incremental costs onto them too.
Networks will have to be able to handle traffic from billions of devices, not just millions. Even more challenging, many IoT-based applications also demand truly real-time responses from the network.
And tomorrow’s customers won’t be prepared to accept any network ‘black spots’ when their daily commute relies on an IoT-enabled driverless smart car, or countenance any network latency issues when they’re depending on an IoT-enabled smart pacemaker to keep their heart beating regularly!
To deliver against these expectations requires significant additional investment by CSPs in their network infrastructure. Today’s ‘best efforts’ communications networks simply won’t be acceptable in tomorrow’s IoT-enabled world.
Back-office systems (billing, service fulfilment, assurance, etc) will also have to activate, deactivate, transfer ownership, and generally manage individual devices on a scale that no CSP (or indeed systems vendor) ever contemplated only a few years ago.
As if this were not enough, if CSPs are going to position as major players at the heart of the new IoT landscape, instead of just dumb pipes on the periphery of this brave new world, they will also need to become enablers of the new global IoT applications ecosystem.
Of course, many CSPs already partner with application developers, but it's the sheer scale of this new ecosystem that's the challenge. Because of the quantity of new IoT-enabled devices that will be out there, there is bound to be an equivalent explosion in the number of application developers who're writing programs to exploit this new addressable market.
The problem here is that the supporting infrastructure - such as partner management and bill reconciliation systems - currently used by today’s CSPs simply aren’t equipped to handle billions of devices and potentially hundreds of thousands of applications, all demanding real-time activation and management of their individual services, customers and devices. Particularly as many IoT services will depend on what will probably be quite complex revenue-sharing arrangements.
So here’s the big unknown: Where’s the money going to come from to pay for all of this?
It’s generally accepted that the vast majority of business models for IoT-based services are predicated on ultra-high volumes of device-based transactions (ie millions, and eventually even billions), but at ultra-low prices (ie cents, rather than dollars).
After all, how much would you be willing to pay for the convenience of having your shiny new smart fridge automatically place an online order for some more milk to be delivered by your local grocery store when it sees that you’re down to your last half litre? 1 cent? 2 cents? Certainly no more than that.
So, if CSPs are going to make any money from new IoT services like these to compensate them for all the extra costs they’re going to be incurring just to stay in the game, they’re going to have to offer them as part of their overall product portfolio, which means handling the activation and ongoing management of the smart fridges, billing the 2 cents for the service, handling the revenue share with the application developer who created the smart fridge reorder app, and providing support to the customer (ideally online or via mobile apps) if their smart fridge stops working or decides to over-order milk.
And finally, of course, at only 2 cents a pop, they’re going to have to do this for many hundreds of thousands of smart devices, or the new revenues generated simply won’t be worthwhile.
How they deal with these challenges is at the very heart of whether CSPs can realise the full potential that IoT promises them.
About the author
Richard Hubble is Regional Vice President, EMEA, for Intraway Corp, whose portfolio includes an IoT Management & Operations Platform which enables CSPs to deploy, manage and monetise new IoT services and therefore take advantage of the global IoT opportunity.