One of the many interesting discussions at the Great Telco Debate last week was where telcos add (and gain) value in the Internet of Things (IoT). To date, much of the activity has been about taking cost and wasted work out of the system. The focus now is on how to generate revenue out of a connected product.
The specific motion to be voted on was: “Integration is more important than connectivity” – and the audience voted in favor of this. But of course, as many pointed out, you need both. And that’s good news for telcos because they have a play in both areas.
Tim Devine, Telecoms Consultant, PA Consulting, sees opportunities in monitoring, integration and control. He said that, “almost everything that can be monitored will be.” He showed a small connected bean which can be used to monitor everything from temperature, pressure, location, and acceleration to moisture, carbon dioxide, carbon monoxide and more. You could throw it along a warehouse floor or sew it into someone’s clothes. These devices will be so cheap and versatile that you might have a number of them around your home. Even pills and medical patches are becoming connected so they can send information back about when medicine has been taken.
This generates huge amounts of data, which becomes much more valuable if it is used in an integrated way across sectors rather than in vertical silos. Mobile communications networks for police and emergency services in the UK are set to be upgraded to superfast 4G. This will be a great integration story, Devine says. Evidence shows, for example, that if you have an offending teenager who is in social care, the faster you can get their appointed responsible adult to them, the less likely they are to offend again. Integrating data from the police officer at the moment of arrest and passing it to the social care agency could be a great way of addressing that challenge.
He also sees great opportunities in voice and gesture-controlled devices such as Alexa, especially in the AI processing that makes these services smarter. Devine concluded, “It’s about joining the dots – the real value is delivered when data is shared across sectors. He added, however, “That does make monetization difficult because the value is in little bits rather than one big chunk.”
The broken glass model
Phil Skipper, Head of Business Development, M2M, Vodafone, made the case for why connectivity is important: “Without it, things don’t actually work.” However, connectivity will be paid for in a completely different way. He said, “The telco’s role is to enable a lot of the underlying infrastructure that makes it work.”
As more and more devices and “bits of plastic”are connected, fewer and fewer of those devices will say anything meaningful within their lifetime, he said. Increasingly, the value will only be unlocked when an event is triggered.
He gave the example of sticking a sensor on a pane of glass. That device might send two messages a year: the battery is OK and the window is broken. This won’t generate any revenue. However, the telco could get a fee from the glazier when the pane breaks and the glazier is paid for fixing it.
Skipper said, “All of a sudden, you have a different business model where no one is paying for anything until value is crystalized. This is how life will change in future if the IoT is going to be as big as people think.”
People shared further examples of this type of new revenue model, from mouse traps to bin lorries.
There’s also a role for telcos in enabling capability: making unilateral businesses bilateral – managing returns, fulfilment and devices and routing and managing data (and its permissions).
Skipper concluded, “Connectivity is the network. By definition, IoT is a marketplace and it’s the telco that enables that marketplace to operate. That is the case for connectivity.”