How will Telco’s really introduce new revenue streams from the Internet of Things?

The Internet of Things (IoT) has been promising new revenue streams for telecoms operators for almost a decade, but these revenues are still yet to materialize. In this blog we take a look at where IoT revenues really lie for telecoms operators, from insightful upsell to connected cars.

The Internet of Things (IoT) has been promising new revenue streams for telecoms operators for almost a decade, but these revenues are still yet to materialise. In fact, just last year Andrew Entwistle of New Street Research made a bold statement suggesting that IoT revenues won’t materialise at all for Telco’s;

“There is an awful lot of noise about the internet of things that doesn’t actually translate into, to put it strongly, a whole hill of beans for the telecoms operator who’s looking to sell services to achieve revenue per customer or revenue per device.”

So with little evidence of new revenue streams appearing any time soon, is there really a way that Telco’s can cash in on the Internet of Things?


Who needs an internet connection anyway!?

There are hundreds of new IoT devices being released on a monthly basis, but not all of these have the potential to create new revenue for Telco’s. A huge chunk of the IoT market is made up of Personal Devices such as smart watches and fitness monitors. These devices do not connect directly to the network, instead they use Personal Area Network (PAN) technologies such as Bluetooth to connect to an existing mobile device. For the Telco’s, these devices are simply contributing to the data usage of an existing mobile subscriber rather than introducing an entirely new revenue stream.  

And it is a very similar story for ’Smart Home’ devices too. Devices such as the smart fridge or home surveillance camera utilise Wi-Fi technology to connect to the Local Area Network (LAN). Again, for Telco’s these devices simply add to the usage of an existing home broadband subscriber instead of introducing an entirely new revenue stream.

In fact, research has shown that today a whopping 70% of all IoT devices only support short range technology such as PAN and LAN. That leaves approximately 30% of the IoT market with the greatest potential to become an entirely new revenue stream for Telco operators.


So where is the money for Telco’s?

Although short range IoT devices do not act as a direct new revenue stream, they shouldn’t be ruled out completely. One of the fastest and simplest ways for fixed-line Telco’s to actually increase revenues is through upsell packages to heavy data users. A few years ago a household may have had one or two laptops utilising their home broadband connection. Today that household has laptops, gaming consoles, a media streamer and a home surveillance system to boot.

By utilising advanced network analytics, operators can monitor individual usage, and automatically alert to subscribers who are nearing their usage limits on a regular basis. Advanced software solutions can also enable Telco’s to automatically contact these subscribers with a recommended upgrade, increasing the total revenue generated from that subscriber.


Connected cars look like the answer

When it comes to completely new revenue streams, the greatest potential perhaps lies in Connected Cars. Of the 30% of IoT devices that use a Wide Area Network (WAN) connection, almost half fall under the Connected Cars category. To deliver on the promise of consistent video streaming and web browsing on the go, connected cars need to offer their own internet connection. And this is where the telco’s can get their slice of the pie.

Some manufactures are going down the path of user-supplied mobile broadband modems (internet dongles). For example, the Ford Sync has a built in Wi-Fi receiver which enables an internet dongle to be plugged straight into the car. Mobile operators can easily introduce these as a monthly subscription package, or on a pay-as-you-go basis to introduce a new revenue stream per subscriber.

Alternatively, Telco’s can open up their mobile networks through partnerships directly with the car manufactures themselves. Audi has partnered with T-mobile to add built in 3G modems to the A4 and A5 models. And more recently, BMW and Audi have integrated 4G modems into their vehicles. With monthly subscription costs in the range of $30, these partnerships have the potential to deliver new, consistent revenue from the Internet of Things.


Telco diversification is also on the cards

An alternative revenue stream for Telco’s in the Connected Cars arena is sensor monitoring, enabling use cases such as vehicle safety monitoring and driver health checks. Telco’s and OEMs are still discovering and understanding these use cases, as well as predicting their revenue potential, however some revenue generating use cases have begun to emerge. One such example is stolen vehicle recovery. In 2014 Vodafone acquired Cobra, consolidating it under the Vodafone Automotive brand. All Porsche vehicles now contain Vodafone devices to monitor a vehicles location, and if a vehicle is stolen it can be tracked and recovered. Revenue from these such use cases will of course take years to materialise, and also raise the question of how far are Telco’s willing to diversify to actually generate long term revenue from the Internet of Things?

  • Gerard De Bourbon Ponce De Leon
    Gerard De Bourbon Ponce De Leon Thanks for the article Keli, whilst I agree that the B2C business has yet to show significant top line growth, when it comes to B2B; I disagree fully that Telcos are not generating revenues, increased ARPU from IOT connectivity and value added services. I...  more
    February 24, 2017