From monetising traffic to international regulations, Gareth Willmer examines the road ahead for IoT and the advances on the horizon
The Internet of Things holds the promise of connecting billions more devices over the coming years, with multiple opportunities in segments from sensors and connected cars to full-blown smart cities. But the IoT market appears to be at a key juncture, with the advent of 5G and the need to work out how best to operate and coordinate global platforms to support the new types of delivery required to profit from massive IoT.
“IoT requires a long-term vision and significant investment,” says Michele Mackenzie, an analyst at Analysys Mason. Yet this will need to be achieved amid challenges in the market. “High levels of competition… and the effects of the Covid-19 pandemic have put pressure on connectivity pricing and IoT revenue,” she says.
Elements of the IoT business have also progressed slower than previously expected, such as the low-power segment with technologies like Narrowband IoT (NB-IoT). For these reasons, some are therefore predicting more gradual IoT growth than before, while Analysys Mason estimates that many operators are still earning no more than a few percent of revenues from IoT.
For carriers, there is still a need to get models right to support a multi-layered strategy, incorporating both global and local cases for international businesses, while supporting low latency and platforms allowing revenue growth from massive IoT. There are also regulatory hurdles, with countries such as Brazil, China and India currently restricting permanent roaming that IoT devices can need.
Operators are pursuing a variety of strategies and are at different stages, with Gartner recently naming players including Vodafone, Telefónica, AT&T and Orange Business Services as leaders in this segment.
With 5G expected to boost the potential for massive IoT, this creates the need for new ways of doing things for carriers other than legacy methods, says Cedric Gonin, senior marketing director of the mobile services division at Orange International Carriers.
He points out that massive IoT will mean many devices consuming small amounts of data, but a huge volume globally, raising new questions of how operators will deal with and monetise traffic, and how it will be regulated. “We have to reinvent some models to be able to do some local breakout of the traffic,” Gonin says. “We have to adapt both technically, economically and commercially.”
Currently, he says, IoT business is often negotiated case by case and managed like business-as-usual, but there is a need to do things differently long term. “It’s not something fully standardised in terms of commercial relationships, and even technical,” adds Gonin.
Carriers are seeking to jointly improve peering for IoT via their IPX services, thereby cutting latency and jitter, and improve service availability by enabling direct interconnection rather than home routing for devices moving internationally. In March, Orange was among nine carriers to sign a code of conduct published by the ITW Global Leaders’ Forum (GLF) that defines a framework for direct IoT peering. Other signatories included China Telecom, Deutsche Telekom, PCCW, Sparkle and Vodafone Business.
This move is set to “accelerate the IoT industry”, believes Craig Price, PCCW Global’s SVP for mobility products and marketing. “It will provide customers with a high level of confidence that mission-critical IoT devices and services are being supported by operators as part of their overall network design.”
At the same time, he refers to the need to overcome new challenges as IoT grows. “Global data communications for IoT devices are managed mostly via roaming bilaterals agreed between MNOs, and these were initially based and negotiated on people roaming [P2P],” says Price. “Now, however, MNOs need to consider M2M, P2M and M2P roaming arrangements, which often require a different approach.”
This means PCCW Global is keeping “very open” to new ways of doing business, showing its intentions to ramp up IoT by launching a global eSIM this April, which Price also sees as a “major milestone” for its service. Despite the big challenges, he believes this segment also promises big rewards.
He adds that PCCW Global sees 5G as “supercharging” IoT. “It allows for virtualisation of the core, which opens up interesting use cases for service architecture, especially the opportunity provided by multi-access edge computing.”
The GLF effort adds a string to the bow to help carriers provide more extensive offerings to international customers, says Federico Homberg, head of business development and innovation at Deutsche Telekom Global Carrier (DTGC). “We believe that those who can offer end-to-end service-level agreements will have a competitive edge over others.”
With Deutsche Telekom working closely with automotive companies this could also be key, because such players are seeking global connectivity but connected vehicles need good latency for maintaining real-time communication. And such relationships may be further boosted by the campus networks that Homberg expects to gain traction in the coming years, with more potential for rolling these out internationally in collaboration with local carriers.
DTGC has also been growing its IPX capacity to capitalise on an anticipated ramp-up in IoT use cases post-Covid, and is seeking to expand its eSIM offering and add more locations to its Regional Packet Gateway platform, launched in 2019 to help route traffic locally. “Not every carrier has that, because it’s an investment you have to make. But it’s very important for our automotive IoT customers,” says Homberg.
“The advantage of doing all this is that we can be a one-stop shop for car manufacturers or manufacturers of IoT devices that want to be truly global.”
And though the business cases are still being developed, he says IoT has the potential to protect carriers against future roaming revenue losses in crises such as Covid-19. “I would say there is more emphasis than before on IoT because it makes us, to some extent, more resilient,” adds Homberg.
Agility at 1NCE
Meanwhile, Homberg says the challenge of generating margins from technologies such as NB-IoT has been helped by
Deutsche Telekom’s strategic partnership with MVNO 1NCE, to which it outsources business in this area. This gives the operator more agility, via offering a service on a virtual platform rather than its legacy infrastructure, which Homberg says is much costlier and has all the “bells and whistles” that customers on the 1NCE platform do not need.
This is teaching DTGC and its parent how these kinds of models can be established, he says. “The idea is that over time we decommission the legacy stuff and, in parallel, build a new environment that is virtualised and provides that flexibility.” This need for agility is also reflected in Deutsche Telekom’s spin-off of IoT into a separate business last year, dubbing it “the world’s first open platform for IoT”.
1NCE, which was founded in 2017, has already sold more than five million SIM cards with a simple, disruptive offer for IoT SIMs of €10 for 10 years.
Arne Aßmann, head of strategy and business development at 1NCE, says this is one way for operators signing up to its offering to get a quicker foothold in this market. In addition to its presence in Germany and Austria, the company has expanded its NB-IoT flat-rate offering to the Netherlands, Spain, Greece, Italy and the UK. It has also launched a roaming offering in China powered by China Telecom Global.
Traditional carriers can struggle in this segment because their own networks have grown over decades and their platforms are designed to fulfil many different needs, says Aßmann. “The flexibility and customisability of major players’ IoT platforms come with high costs and can be overkill when addressing these lower-end, low-bandwidth opportunities.”
Big bet Telefónica, which has made a big bet on IoT, has made significant strides by running its own platforms dedicated to this business, and has gained more than 35 million connections so far.
In late 2019, the company formed a new unit, Telefónica Tech, to boost its agility in fostering digital services for IoT, as well as cloud and security. Within this, it operates its Kite platform, which provides global cloud-hosted IoT infrastructure, and a global SIM for worldwide connectivity.
In addition, with aims to improve latency through local breakout to the internet and to extend the ability to swap to a local SIM in more countries where permanent roaming is restricted – already offering this possibility in Brazil – the company is creating an environment to foster growth.
Such flexible approaches are required in light of the need to combine the wide number of use cases, including cellular IoT, NB-IoT and LTE-M, thinks Jose Antonio Cortés, head of voice, mobile and IoT product marketing at Telefónica Global Solutions (TGS). “You don’t have so much in terms of margins with some kinds of connectivity,” he says. “You have to build your value-added proposal on top of all these new connectivity methods to be profitable.”
With this need for global carriers to still figure out their long-term business models to support multiple use cases, Joaquín Flores Zapata, IoT product and marketing manager at TGS, concedes that the pace of delivery of IoT services has not always been as fast as customers would like and that IoT take-up is perhaps more step by step than the explosion predicted a few years ago.
“From the telco side, we are trying to better understand how all of this will work,” says Flores. “But for us, it’s a clear bet for the future.”
Separately, Telia Carrier is working with a couple of customers on providing mobile network access to cloud infrastructure to connect them into different regions from the IPX network, says Matthew Jones, global sales director for mobile data products.
But he says that, among carriers, platforms still need to be set up on a wide scale to support business cases. Jones says he is “optimistic” about the future of IoT, yet currently “data volumes are still quite low, so we need a significant ramp-up in the number of SIMs that are being utilised for this… It’s believed that 5G will be the kind of saviour, as network slicing and edge services will support critical IoT and enterprise mobility services.”
BICS has been expanding its options in IoT, with moves such as the recent addition of both private mobile network connectivity to its global SIM For Things offering and international 5G connectivity to global IoT devices. SIM For Things aims to act as an agile API-based platform for customers to manage global IoT connections, and Mikaël Schachne, CMO and VP of mobility and IoT business at BICS, says this platform is expanding the scope for serving wider business verticals.
“Not only can we provide the roaming coverage or access to different mobile networks around the world for devices, but we are also providing some capabilities to manage the devices and the SIMs,” says Schachne.
Wide-scale IoT is still in its early phases, he says, but manufacturers are developing new use cases every day. “What is sure is that for a very long future, we will have more and more connected devices and applications around us, and this connectivity will be highly critical.”
Although lots of work still needs to be done, he thinks the onset of 5G and up-and-coming types of IoT will broaden the opportunities. “We are right in the middle of a multi-factor acceleration of IoT,” he says. “You really need to look at the connected solution you want to build.”