June 25, 2019

Top 4 IoT Revenue Opportunities for CSPs in the Early 2020s

As the Internet of Things showcases more opportunity, communications service providers must be ready to evolve their service portfolios and business models to capitalize on its promise.

According to a recent report by Telecoms Tracker titled “The Impact of the IoT Boom on CSP Operations 2018-2023,” worldwide IoT markets will generate around $700 billion USD in revenue, yet very little of this will be associated with connectivity services provided by communications service providers (CSPs). The percentage of the value chain that CSPs can participate in by charging for connectivity ranges from 2 to 20 percent depending on the use case.

Almost all major CSP groups currently have a plan in place to provide IoT services to consumers and enterprises in various business models as part of their ongoing digitalization strategy. This strategy must have a diversification plan to access revenues from other parts of the IoT value chain beyond traditional telco connectivity models. Set against the backdrop of flattening revenue growth and falling ARPUs for traditional communications revenues, this diversification of business represents one of the next great commercial opportunities for CSPs. The primary strategic goal should be to open up as much of the value chain as possible and become the de facto platform upon which all other IoT ecosystem players operate.

Let’s take a look at some of the IoT use cases that demonstrate the strongest revenue opportunities for CSPs, based on Telecom Tracker’s estimates.

1. Connected Vehicles: $130B in IoT Revenues by 2023

Connected cars are perceived to have increased safety features, optimized routing GPS technology and improved media consumption capabilities as part of a smart home model. Car manufacturers are now investing heavily in next-generation technologies to transform the concept of the car into a fully connected extension of the user’s digital life. As such, to diversify out into the rest of this value chain, CSPs must have a hand in the media content delivery business, augment existing cellular triangulation capabilities under a 5G regime to form a competitive GPS system and partner with car manufacturers to pre-integrate C2X technology, virtual SIMs and all other radio-related technologies for maximum stickiness.

2. The Industrial Internet: $220B in IoT Revenues by 2023

The initial play for CSPs in IoT is providing a big data analytics solution that can sit at the heart of an ecosystem of sensors and inputs from myriad and disparate data sources. The value for the industry (which typically has an aging workforce) is offering the IT know-how to collect and harmonize various structured and unstructured data sources, then provide real-time analytical insights that offer resource or capex savings or competitive advantages. Broadly speaking, CSPs currently have the capabilities to provide that service today and have evolved those capabilities as part of this digitalization strategies. 5G networks will provide guaranteed connectivity packages over network slices.

3. Smart City: $190B in IoT Revenues by 2023

Possibly the highest margin and best showcase opportunity for CSPs is providing a vast range of products and service bundles within city areas where their radio and fixed network presence is densest. Under the 5G and M2M buildouts, CSPs have a golden opportunity to permeate those networks with smart city application capabilities and IT-centric business models. Security, smart grid utilities, data-driven traffic management and smart lighting are all service markets that CSPs can enter by a partnership or by helping to digitalize the incumbents in those industry verticals on a platform model.

4. Inventory Management of Physical Stock: $100B in IoT Revenues by 2023

The optimization of inventory systems is key for many online retailers handling large stocks of products, with Amazon providing a global model of what the modern retailer’s digitalized stock handling should look like. CSPs are not a huge part of the value chain for companies like Amazon and Wal-Mart, as they have built their business around their inventory management and logistics capabilities, so many of these systems and process were built in-house. However, anywhere they have a retail offering outside of their own network infrastructure, they will need a link back. So this is a communications play for the CSPs with possible sensor network management add-ons. In the case of new retail start-ups, the CSPs are in a prime place to offer a pay-as-you-go holistic IoT solution for smart inventory management and additions like digital shelves, RFID and even automated carts.


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