The IoT is a $1 trillion opportunity. Can the world’s telcos take it?

The world’s telcos are running out of people. According to GSMA, there are now 5.3 billion mobile subscribers in the world. That’s nearly every adult. By 2025, there will be 5.7 billion. The days of expansion are over.

Thank goodness, then, for connected machines.

While the market for putting SIMs in phones is flatlining, the market for embedding them in smart devices is soaring to extraordinary levels.

In fact, the GSMA predicts that the number of global Internet of Things (IoT) connections will hit 25 billion by 2025, while IoT revenue will tip $1.1 trillion.

This is a fantastic opportunity for the world’s telcos. Why? Well, the main reason is connectivity. In the IoT future, enterprises will need connectivity that can support low power devices in remote settings as well as advanced data-hungry machines in local proximity. Only mobile networks have the scale, technology and footprint to meet this demand.

And the demand will come from everywhere. IoT devices are proliferating by the minute. In developed countries, demand is exploding for smart home products, health monitors, wearables, in-car and more. But this is just the public face of IoT. There’s a much bigger potential market for smart IoT products in industries, such as agriculture, energy, finance, utilities etc.

IoT tech will let businesses interact with customers anytime, anywhere, and on any device. They will be able to launch products that they can remotely control – sensors, meters and monitors – and that will improve efficiency and reduce costs.

Eyes on a 1 trillion dollar market

Experts believe the total IoT market is already worth $440 billion. They estimate it could pass $1 trillion by 2030.

To be clear, this revenue will not come purely from device sales and connectivity subscriptions. It will also come from data insights.

This is extremely significant. Why? Because it will put telcos in a position to overcome two of their biggest historical hurdles: commoditisation and customer attrition.

Historically, mobile and network connectivity services have tended to become commoditised. Services become very similar from one provider to the next. With so little differentiation, telcos default to competing on price. Inevitably this ends up as a race to the bottom, leading to low average revenue per user (ARPU).

High customer attrition – or churn – is the inevitable by-product of these price wars. There’s little loyalty from customers when price is the only competitive factor. Instead, customers shop around.

Telcos can tackle both challenges by collecting valuable IoT data and using it to solve their customers’ problems. From smart cities and healthcare to dynamic parking, they can unlock IoT data to benefit consumers and provide tremendous value to enterprises.

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5G: the key that will unlock the IoT telco opportunity

Of course, the world’s telcos are already active in IoT markets. They offer low-power connection options such as LTE-M and NB-IoT via the existing cellular networks. But with the arrival of standalone 5G networks, they will be able to unlock immense new value. 5G network technology is virtual. It replaces many physical elements with software. For this reason, it can deliver incredible new service offerings when used in conjunction with cloud computing platforms and analytics.

This is key to the huge growth potential of the telco-based IoT market.

Obviously, it will not be easy. To capitalise on their position and monetise the data they have access to, telcos must go through a holistic digital transformation. They need to create a robust ecosystem of partners to deliver IoT services across six dimensions:

Connectivity

Managed connectivity services and connectivity as a service will significantly increase ease of use and customer retention.

Network/infrastructure as a service

Telcos and communications service providers (CSPs) can unlock new revenue streams by providing edge computing infrastructure for over-the-top (OTT) service providers and application developers. Effectively, they can enable cloud capabilities for network equipment. This is ‘infrastructure as a service’ and it will give customers the ability to store, filter, clean and process IoT-generated data.

Applications

Telcos can use their infrastructure to deliver custom consumer applications, broad IoT solutions, and new IoT managed services. With unrestricted access to network infrastructure and vast pools of user data, they can deliver better performance, wider scale, and far better availability.

Operations

The IoT gives telcos and CSPs the chance to dive into descriptive, diagnostic, predictive and prescriptive data. They can extract value from this operational data and share the insights with customers.

Security

Security should be the foundation of IoT architecture, development and deployment. When large amounts of personal information are lost or misused, this can completely disrupt society. When this happens, the resultant brand and reputation damage can become an even bigger problem than financial damage.

As network administrators, telcos can play a central role in the growth of an IoT ecosystem based on trust and security. They can use four key technologies to do this:

Blockchain – distributed ledgers can be a fundamental building block in the IoT ecosystem for security matters.

Artificial intelligence (AI) – cognitive security systems can identify potential security threats.

Microsegmentation – the ability to separate critical applications and devices and ensure they are locked down.

Cloud security and Zero Trust – for optimum protection in the cloud.

Conclusion

Telecoms are already at the forefront of IoT innovation. But this doesn’t mean the work is done. The massive scale of telecom IoT use cases comes with huge challenges, such as overcoming the risk of resource overload and ensuring a reliable quality of service.

However, I am optimistic. IoT might be an emerging market, with many unknowns and challenges, but I’m encouraged by how quickly businesses are starting to jump in.

I believe IoT innovation will gain traction across multiple sectors – and that telcos will play their part in accelerating this process. The proof will be in the outcomes: cost savings, greater efficiency and a flood of innovative new consumer services.

The opportunity size and the proliferation of connected devices attracted ‘hyperscalers‘ to join the party and they now own over 75% of the IoT market share.  Telcos are running the risk of losing out on IoT opportunities if they don’t innovate fast to catch up with the hyperscalers. 

Are you curious about IoT? Get in touch with the GTC team to help define your IoT opportunity.

Global Telco Consult (GTC) is a trusted independent business messaging consultancy with deep domain knowledge in application-to-person (A2P) services. GTC provides tailor-made messaging strategies to enterprises, messaging service providers, operators and voice carriers. We have expertise in multiple messaging channels such as RCS, Viber, WhatsApp, Telegram and SMS for the wholesale and retail industry.

GTC supports its customers from market strategy through service launch, running the operations and supporting sales and procurement. The company started in 2016 with a mission to guide operators and telcos to embrace new and exciting opportunities and make the most out of business messaging. For more information or industry insights, browse through our blog page or follow us on LinkedIn.

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