Operators must look beyond connectivity to monetize IoT

The Internet of Things (IoT) is growing at a phenomenal pace. IDC predicts investment in IoT technology will reach $745 billion this year, while cellular IoT connections are expected to grow at an annual rate of 30 percent until 2023, driven in large part by enabling technology, such as 5G and edge computing. At this level of growth, as many as 1.3 billion connections are expected in 2019.

Given the sheer scale of its adoption, IoT appears to be the perfect opportunity for operators to generate much-needed revenue. Indeed, in an increasingly competitive market in which OTT players erode the profitability of operators’ traditional voice and messaging offerings, IoT could be a huge boon for cash-strapped operators if it’s properly monetized.

Surprisingly, however, the growth of IoT isn’t translating to increased operator revenue, as evidenced by recent Analysys Mason research, which shows IoT only accounts for less than two percent of total revenue for a number of operators. What, then, can operators do to take greater advantage of the opportunities available to monetize IoT?

More than just connectivity

Currently, the most popular opportunity is for operators to monetize connectivity, especially given the fact that IoT simply won’t function without it. What’s more, monetizing connectivity can help operators build customer loyalty, while also providing them with the opportunity to be competitive when faced with increases in unlicensed spectrum technologies.

The challenge, however, is that monetizing connectivity in an increasingly crowded marketplace forces operators to compete purely on price. This option, therefore, is likely to deliver lower average revenue per user (ARPU) than other options. This outlook is supported by a forecast developed by GSMA Intelligence, which shows that connectivity will decline from 11 to five percent of IoT revenues by 2025.

So if operators are to truly capitalize on the revenue opportunities offered by IoT, they must develop monetary strategies for more than just connectivity.

One option is to create services that take advantage of the massive amounts and variety of data created by the millions of connected devices supported by IoT. For example, operators can analyze the data to deliver actionable insight and intelligence that can be used to improve customer experience, forecast network capacity and determine product performance. Monetizing that data could result in significant recurring revenue streams for operators.

Protecting that data could be lucrative, as well. Operators can provide their customers with solutions that secure IoT networks and the data that traverses them, including end-to-end encryption solutions and anti-phishing measures. By doing so, operators not only generate more revenue, but they establish themselves as trusted partners in the growing IoT ecosystem.

Operators should also consider expanding beyond single-service offerings like connectivity, data analytics and security, to become platform or service providers. Network fragmentation, for example, means that operators are able to provide their customers with application programming interfaces (APIs), creating a platform that allows them to manage a range of tasks related to IoT deployments. This includes interacting with devices, automating orchestration, managing policy and conducting the analytics crucial for efficient network performance.

Alternatively, operators can develop all-encompassing service offerings for specific vertical use cases. Such a vertical service offering can include provisioning, servicing and connectivity that specifically targets key verticals, like automotive, logistics, smart metering and smart cities. These resource-heavy offerings could prove lucrative for operators that want to build offerings that appeal to different verticals. Indeed, according to the GSMA Intelligence forecast, applications, platforms and services will account for more than two thirds of the overall IoT opportunity by 2025.

Increasing importance of converged networks

Another key consideration for operators that want to take advantage of IoT is the need for truly converged networks built over common, standard architecture. Converged networks enable more effective and efficient transport of data, voice and video and can handle the machine-to-machine (M2M) communications that are pivotal for IoT. For operators to monetize and support IoT, the network has to support seamless, automated connections for IoT devices irrespective of device location, vendor or operating system (OS).

Moreover, the converged services approach supports other operator functions related to IoT, such as billing. To effectively monetize IoT, the converged billing approach lets operators bill for devices, applications and bundled services, while also ensuring that customers can construct and implement bundled services and billing options for a myriad of use cases.

Without question, IoT is becoming an increasingly important part of business across a plethora of industries, creating the potential to transform the ways in which companies operate. Many organizations already have a strategy in place to unlock new revenue streams from IoT, and it’s vital for operators to understand those strategies and monetize their service offerings accordingly. While connectivity is certainly a sweet spot for operators, savvy operators will look beyond this to determine IoT-based service offerings that their customers need and that they are in the best position to provide. Doing so gives operators the ability to make up the ground lost to OTT in recent years.

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