Chris Newton-Smith, VP of marketing at Redknee, breaks down the potential CSP business models for the Internet of Things, and the necessary tools to make them work
BSS Insights: Everyone talks about the Internet of Things, but what does that actually mean for CSPs in terms of new revenue opportunities?
Chris Newton-Smith: It’s predicted that the installed and connected base of IoT units will reach approximately 30 billion in 2020. There will be tremendous revenue opportunities for CSPs with regards to the IoT, but predictions vary wildly at this point. Regardless, it is becoming a game-changer for our industry, with some analysts predicting that it will double the size of today’s current global wireless market.
Initially the IoT market has been focused on sensors that are fixed, utilizing Wi-Fi networks where data volumes are low but transaction rates are high. Going forward, we’re seeing this shift to the next stage, where connected devices are becoming more mobile, transporting larger amounts of data and relying on wireless connectivity that requires more complex usage-based billing scenarios. At Redknee, we are focused on providing real-time rating and charging of these services, helping to monetize the Internet of Things and drive this new digital economy forward.
How does the digital ecosystem of IoT change the business landscape from the telco point of view, in terms of partnerships, customers, competition, etc? Is it radically different from the traditional telecoms business or relatively familiar territory?
We see three business model options that CSPs can take for addressing this business opportunity. The first and lowest on the value chain is that of the connectivity provider. This is where the IoT enterprise business requires connectivity of their device or service, and the operator provides that for a fee as they would today for any other service. The “customer” is the IoT provider, not the end user, and connectivity costs are generally passed along to the consumer as a fixed fee or it is rolled into the price of the device. Think of e-readers such as Amazon Kindle as an example of this type of model.
The second is the IoT platform provider or IoT enabler. In this scenario the CSP moves up the value chain a bit by providing more than just connectivity, and instead becomes the provider of a host of other services as well, such as device management, product catalog, rating and billing and even customer care and loyalty programs. This is similar to today’s MVNE/MVNO models, but the device isn’t a handset or tablet, it’s a connected “thing” such as home security, connected cars, telematics or e-health services. This is a B2B2C model, where the CSP customer is typically an enterprise who then resells the connectivity under their label.
The third business model is that of the IoT provider. In this model the CSP owns the relationship with the customer, which can be either enterprise or consumer, and provides services based on an ecosystem of IoT partners they bring to the table as a bundled offer, all under the trusted brand of the CSP. Generally CSPs will focus on specific business areas, such as connected homes, transportation, or even prepaid energy services.
What kinds of technologies and tools are telcos going to need take advantage of these IoT-related opportunities?
In a nutshell, the IoT requires greater agility across the board. Whether it’s the network or the back office, the IoT means more data, more partners, more devices, and even more business models - just more complexity in general, which requires systems and networks to be incredibly flexible and dynamic. One of the first steps CSPs have taken to help address this has been with virtualization and NFV - moving their OSS and even their BSS systems into a cloud-based environment, which delivers greater elasticity, scalability, and flexibility, and also helps reduce costs. In addition, CSPs need to be able to monetize these new IoT offerings, and are either upgrading their legacy BSS systems or bringing in new real-time systems that are more agile and able to support launching new services more quickly, along with complex billing and charging scenarios that are arising from new partnerships and business models. This will be critical if CSPs want to take advantage of the new digital economy, and the time to do that is now.
This article first appeared on Telecom Asia BSS Insights May 2015 Edition