Mobile operators are struggling with how to build a business model around the projected explosion of Internet of Things (IoT) traffic on their networks. In their perennial quest to avoid merely being bit-pipes, they are looking to monetize the IoT in various ways, from managing devices and security in the cloud, to layering their own added-value consumer services in the smart home or smart car.
Progress remains uncertain, given that cloud services providers, IT suppliers and specialist IoT companies are also fighting for these markets. But according to an estimate by specialist IoT analysts Berg Insight of Sweden, MNOs have already achieved €11bn in IoT revenues in 2016.
It predicts that several leading operators will break the billion-euro mark in 2017. In the third quarter, Vodafone and Verizon generated around €200m each in direct sales from IoT connectivity, solutions and applications, says Berg.
“Until recently, the principal financial metrics for IoT has been projected, not actual, revenues. Now the market has entered a new phase in which hard business facts take precedent over lofty projections”, said senior analyst Tobias Ryberg in a statement.
He added: “Wireless connectivity is now near-ubiquitous and there will be half a billion cellular IoT connections in 2017, but revenues are still relatively small”.
Berg Insight estimates that the global monthly ARPU for cellular IoT devices was €1.40 in 2016, with regional variations from less than €0.30 in some emerging economies to over €3 in developed markets where, however, competition is not yet high.
Berg said: “Identifying and implementing successful strategies for moving up in the value chain is widely recognized as the biggest challenge ahead for mobile operators in IoT. For large mobile operators in vehicle producing countries, the automotive market has been a natural starting point”
AT&T, Vodafone, Verizon and Deutsche Telekom are among the operators which have set up dedicated units to support automotive OEMs in delivering connected car solutions for the global market. Verizon and Vodafone made acquisitions of telematics businesses to accelerate these strategies, while AT&T and Deutsche Telekom developed their platforms in close cooperation with customers.
An alternative strategy is to develop a broad ecosystem and sell IoT solutions from preferred partners through existing B2B channels, says Berg, and this may be more achievable for many smaller operators than creating a full platform around a competitive market like automotive.
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