Most mobile operators’ business models are outdated. Global mobile revenues have flatlined at around $1 trillion per year. Going forward, there appear to be three ways operators can grow. One is expanding into the bottom of the pyramid, as only 50% of the world’s population fits the category of “unique subscribers” to mobile services. The second one is selling more services to existing subscribers, which is driving migrations to 3G and 4G in emerging markets and to LTE-A in developed markets. The third is machine-to-machine (M2M) communications to build the Internet of Things (IoT). All three require changing and adapting business models. I will focus here on the IoT.
The real opportunity for mobile operators to succeed with the IoT lies in moving up the value chain away from the simple provision of data transmission. Operators must allow the end-user experience (consumer and business-to-business) to lead the technical and commercial ecosystems required to deliver new services. Data sciences will be essential for monetizing the value of the IoT as the new data wealth will not pay off by itself without proper handling and analysis. A paper recently published by TechPolis and Xona Partners explore these trends in detail (see the paper, “Internet of Things Coming of Age” at the Research section of this site).
Data transmission will be commoditized as pressure for low-power, low-cost and long-range technologies will undermine the automatic extension of high-power, high-cost 3GPP mobile technologies to the IoT field. As mobile operators look into the IoT profitably addressing consumer and business needs, they must combine low-power, low-cost technologies with 3GPP mobility standards. Managing the new technical ecosystem, however, is just part of the task.
Market research of a type operators are not used to is now being adopted. Digging deep into understanding consumer and business requirements in multiple economic sectors—from primary industries such as agriculture and mining to transportation and urban management—is a necessity. To put together a delivery model for new services, multiple alliances and/or acquisitions are necessary. Managing the services requires flexible platforms capable of including both sensor networks and traditional mobile networks. Finally, data mining capabilities can turn unprofitable business models into feasible ones.
In the policy and regulatory realm, operators can no longer rely only on their close relationship with telecoms authorities. Telecoms regulators and policy-makers no longer have control over the development of the digital economy, much less of IoT growth across multiple economic sectors (verticals such as transport, utilities and health) which have their own forms of governance. Telecom authorities remain relevant but are insufficient to shape the future, and it is no use trying to pretend this isn’t the case.
Operators worldwide are experimenting, becoming more comfortable with the IoT and working out how to benefit from it. Leading the pack, as has often been the case of late, are the East Asian operators from Korea and Japan. Contrary to the traditional, pre-packaged operator business model, the IoT is a wild frontier for new services development. As such it requires a lot of innovative new technology, and the development of new forms of data access, analysis and billing. Operators need to refresh their DNA.