IoT monetization by telcos: Hype or hope?

In this article, IBM’s Rob van den Dam looks at how telcos plan to monetize IoT . He participated in two panel discussions on at TM Forum’s Internet of Everything InFocus. One panel examined the platform business opportunity and the other the value of trust.

When we talk to telcos about where they’re going to generate new revenue, almost all of them have the internet of things (IoT) high on their list. IoT is going to be huge after all, with billions of connected devices worldwide. Many telco CEOs have made bold statements about how much revenue they’re going to generate from it. But, the big questions are: How will they do this? What are the business models?

Four ways for a telco to play a role in IOT

Source: IBM

1. Network

Many operators are already active with IoT sensors, devices and network connectivity. ‘Connecting everything’ is a natural extension of their core business of ‘connecting people’.

These companies will have to consider either connectivity through licensed spectrum, or alternative methods in unlicensed spectrum like Wi-Fi or low-power networks. The economics for telcos are changing dramatically as companies like Sigfox (a French wireless company) understand that the IoT market is getting big enough to build a low-power network in unlicensed spectrum, competing directly with the telcos.

2. Platform

Many telcos, unsatisfied with a SIM-only business, are extending their IoT activities to the platform. They’re looking to offer IoT platform capabilities, such as machine-to-machine, via application program interfaces (APIs) to ecosystem participants and developers, who can in turn build IoT applications more quickly and efficiently.

It seems that most telcos are interested in the IoT platform business. A recent IBM study on ecosystems found that 57 percent of operators surveyed want their organization to become a platform provider. Meanwhile, companies like Vodafone and Orange are already adopting IoT platform architectures, and see orchestration, analytics and policy management as key components.

3. Applications

Some telcos are offering IoT applications and services themselves. One way they’re doing this is by buying applications from the market. Vodafone, for example, bought Cobra Automotive (now Vodafone Automotive) to accelerate its connected car strategy. Others are developing domain or industry expertise in-house to build tailor-made IoT applications.

4. Operations

Some telcos (not many, we expect) might even have the ambition to run a full operation service to manage the service level agreements (SLA) of IoT services themselves.

The data dilemma

Despite the many paths telcos can choose, one point of focus remains consistent across them all: data security. Telcos are seen as the custodians of the network and typically enjoy a highly trusted position with their customers, in many countries exceeding the trust level of financial institutions and governments (see: The trust factor in the cognitive era).

Meanwhile, the growth of IoT means hackers have a bigger playing field, and protecting consumers’ data across networks and stored devices is more urgent than ever. A huge amount of personal information at stake, and hackers can completely disturb society by abusing this data. Brand and reputational damage could end up being more of an issue than any financial damage (being the cause of it in most cases).

Security must be the bedrock of IoT development and deployment. Securing multiple points of vulnerability – such as smart watches, healthcare devices or home smart devices – is critical to IoT success.

IoT security is a cooperative initiative in the IoT ecosystem and telcos can play a central role here. They’re in the best position to develop initiatives and services focusing on increased trust and security, but only if they adopt the right technologies for transparent, private and secure environments such as:

  • blockchain – which could be a foundational building block in the IoT ecosystem;
  • cloud-secure technology – to provide optimal security in the cloud; and
  • artificial intelligence – cognitive security systems that identify security threats and provide recommendations to stop them.

Get involved in the IoT discussion on our Communities discussion forum.


    About The Author

    Global Telecommunications Industry Leader

    Rob van den Dam is the IBM Global Telecom Industry Leader at IBM’s Institute for Business Value. He leads strategic thought leadership in telecommunications – with focus on future agendas and industry outlooks – and is a contributor to IBM’s global telecom strategy. Rob has about 25 years of experience in the telecoms industry and has worked in a range of advisory and implementation roles for major telecommunications, media and government organizations. He periodically presents or participates in panel sessions at major industry conferences, and has published multiple articles in leading telecom magazines.

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