Can telcos help cities combat congestion?

Introduction

Part of STL Partners’ (Re)connecting with Consumers stream, this report explores how telcos could support the companies seeking to reinvent how people get around the world’s increasingly congested cities. It looks at the serious problems arising from congestion and the need for a multi-modal approach to urban travel (incorporating ride hailing, public transport, bike and scooter sharing). The report then considers the many challenges facing the new players trying to bring about this multi-modal future, before making creative and constructive suggestions as to how telcos can help address these challenges. Finally, it also outlines how some operators, such as M1 in Singapore, China Mobile and China Telecom, are already playing an enabling role in the personal transportation market.

In particular, the report explores whether telcos can help coordinate the provision of transportation, as well as providing the underlying connectivity that will enable travellers to get information and make bookings on the fly, while allowing the transport providers to monitor their assets.  In many respects, the provision of effective public transportation is a systems integration challenge that requires a wealth of highly accurate real-time information about what is happening across a city.

As explained in the STL Partners report: The Coordination Age: A third age of telecoms, telecoms networks and related services can help people and companies use assets, such as bikes, cars and roads, much more effectively than they have in the past.

This report also builds on other STL research, notably:

The financial and human costs of congestion

After decades of urbanisation, many affluent cities in North America, Europe and East Asia are gridlocked with traffic. In much of the developing world, people continue to migrate to urban centres in search of work, clogging up roads from Bangkok to Bogota. Urbanisation is at its most extreme in East Asia (see Figure 1) where internal migration over the past decade has seen cities across China expanding at breakneck speed.

Figure 1: People have been flocking into cities worldwide for the past five decades

urbanisation rate

Source: The World Bank

The population density in some major economic hubs in the developing world, such as Mumbai, Manila and Lagos, is higher than 10,000 people per square kilometre (see Figure 2), compared with 1,510 people per square kilometre in London. As the UK capital suffers from serious traffic congestion, many cities in the developing world simply do not have enough space to allow the car to be the primary form of transport for their citizens.

In any case, private cars are not a sustainable mode of transport. As well as reducing people’s productivity and quality of life, traffic congestion is damaging air quality and harming human health. Air pollution has become the fourth highest risk factor for premature deaths – one in 10 deaths worldwide is attributable to air pollution exposure, according to the World Bank. Moreover, the bank says the economic burden of pollution is immense for the world and for individual countries. It estimates that ambient particulate matter (PM2.5) air pollution alone cost the global economy US$5.7 trillion, or 4.4% of global GDP, in 2016.

Figure 2: Many cities in the developing world are very crowded and cramped

the biggest cities in the world

Source: UN

So where is traffic congestion at its worst? Of the 38 countries covered by the INRIX 2017 Traffic Scorecard, Thailand is top of the list. In Thailand, drivers spend an average of 56 hours in rush hour congestion, ahead of Indonesia (51 hours) and Columbia (49 hours), followed by Venezuela (42), and the U.S. and Russia both with 41 hours (see Figure 3). Among developed nations, U.S. and Russia have the most congested cities in the world.

Intriguingly, sales of cars fell in 2018 for the first time in almost 28 years in rapidly urbanising China, a symptom of both the economic slowdown and the frustration of trying to drive in the country’s congested cities. Traffic jams, parking difficulties and overcrowding on buses and subways are the top three problems for urban commuters in China, according to a 2018 report by think tank Tencent Financial Technology.

Figure 3: The countries where the most time is lost to traffic congestion

time people spend in congestion

Source: NRIX 2017 Traffic Scorecard

INRIX’s data shows that Los Angeles tops the list of the world’s most gridlocked cities, with commuting drivers spending an average of 102 hours in congestion in 2017, followed by Moscow (91 hours), New York (91 hours), San Francisco (79 hours) and Bogota (75 hours).

Figure 4: Most of the most gridlocked cities are in the developed world

cities with highest congestion

Source: NRIX 2017 Traffic Scorecard

 

Contents
  • Executive summary
  • Introduction
  • Disrupting urban travel
    • Similarities with telecoms
  • Bringing about a multi-modal future
    • The Amazon of transportation?
    • Uber’s competitors
    • Takeaways – why one company won’t win
  • The rise of e-bikes and e-scooters
  • The challenges confronting micro-mobility
    • Lack of profitability
    • The maintenance and charging conundrum
    • The threats of vandalism and theft
    • Safety and public order
    • Buying rather than renting
  • How telcos are getting involved
  • Conclusions
Figures
  1. People have been flocking into cities worldwide for the past five decades
  2. Many cities in the developing world are very crowded and cramped
  3. The countries where the most time is lost to traffic congestion
  4. Most of the most gridlocked cities are in the developed world
  5. An overview of the pros and cons of different modes of urban transport
  6. Lime and Bird are clear leaders in the US e-bike and scooter sharing markets
  7. Both Lime and Bird have reported rapid growth in the number of rides
  8. Lime claims using its products is far cheaper than using a private car
  9. Challenges facing providers of shared bikes and scooters
  10. Some Northern European countries have embraced cycling in urban areas
  11. Sales of bikes (including electric-bikes) continue to rise

Can telcos create a compelling smart home?

Telcos role in smart homes

Part of STL Partners’ (Re)connecting with Consumers stream, this report analyses the role of telcos in the smart home market, which is now growing steadily in many developed countries, as consumers seek to bolster security, improve energy efficiency, adopt electric cars and further automate appliances. In most developed markets, there are scores of companies pitching often incompatible smart home products and services to householders, resulting in a fragmented mess in which consumers are often left to figure out what might work with what.

This fragmentation spells opportunity for both telcos and the major Internet platforms – both sets of companies can use their role as a supplier of a key part of the smart home proposition (connectivity and computing devices respectively) as a springboard into the smart home solutions space.

In the case of Apple, Amazon and Google that means using the smartphone, the tablet and/or smart speakers as a segue into this market, while telcos can build on their connectivity offering, which is a fundament to the concept of a smart home that can be monitored and controlled from anywhere.

The challenge facing both sets of players is essentially delivering the systems-level integration required to simplify the consumer proposition into a seamless end-to-end offering that will appeal to the mass market. Without coherent coordination, the smart home will continue to characterised by of point solutions.

This report begins with an overview of the smart home sector and the competitive landscape, paying particular attention to the strategies of the major Internet platforms – Amazon, Apple and Google. It then goes on to discuss Deutsche Telekom’s and A&T’s contrasting strategies in this space, before making some recommendations for telcos.

This report builds on previous STL research, notably:

This report is the first in a series looking at smart home/connected consumer propositions from telcos. Future reports will analyse how the leading Asian telcos are targeting this market, while exploring related propositions, such as connected bikes and scooters, pet tracking and asset monitoring and insurance.

The smart home market

In an ideal world, a householder would be able to remotely monitor and control all the systems in their home, simply by pressing a button to activate and deactivate heating, air conditioning, alarms, locks, cameras and appliances, such as washing machines and automated vacuum cleaners. Although this concept, known as a smart home, has been around for many years, it is only now beginning to come of age. The smart home could also become an enabler for the sharing economy, making it easier for people to rent out their homes, monitor energy usage and take out appropriate insurance cover.

Up until very recently, most so-called smart home implementations amounted to partial solutions, enabling a householder to check their energy usage or a CCTV camera, rather than get a complete picture of what is happening in their property. In other words, most suppliers have focused on discrete point solutions designed for a fairly narrow use case.

While homes in developed markets have a growing number of connected devices (such as televisions, sound systems, printers, smart meters and burglar alarms), they rarely exchange information and typically can’t be managed through a single app or desktop interface.

This lack of coordination is a result of the diversity of the many different players supplying consumers with connected equipment and services for their homes, ranging from utilities and security companies to equipment makers and tech companies.

The smart home value chain

Indeed, a smart home value chain can be very complex and diverse. To make a home really smart, you would typically need:

  • A central hub that can aggregate and analyse related data, such as energy usage and room occupancy. This hub could be in the cloud or a device in the home.
  • Middleware that enables connected things to exchange data with each other and the hub.
  • A large number of connected appliances, devices and sensors, ranging from boilers and washing machines to door locks and smoke detectors.
  • Suitable connectivity for all the components, which could be WiFi, Zigbee, Bluetooth or a cellular technology.
  • A user interface or interfaces, such as a voice-activated speaker or a touchscreen tablet or smartphone, the householder can use to monitor and control their home.

Today, most telco-led smart home implementations take an ‘inside out’ approach in which the hub is located in the home: short range wireless technologies collect data from connected devices, which are aggregated in the hub and are then made available to the consumer via a smartphone app. In this scenario, the hub is generally connected to a fixed-line network via WiFi. However, 4G and 5G technologies, such as NB-IoT and LTE-M, could make it feasible to connect more devices directly to a cloud-based hub, which could ultimately allow smart homes to emerge in the many communities not served by fixed-line networks.

In some markets, these two approaches may be combined: cellular connectivity may be used to back-up WiFi, while some data and services will reside in both the cloud and on a local device in case the wide area connectivity fails or is tampered with.

For telcos providing the underlying fixed-line or cellular connectivity, the sheer variety of players touting smart home products and services makes the market both complex and challenging. Figure 1, an overview of the smart home ecosystem produced by the GSMA, highlights how many different angles there are on the smart home concept. However, even this chart is an over-simplification – the smart home market also overlaps with the personal transport market to some extent. Some of the potential use cases, such as charging electric vehicles, require coordination between the consumer’s home and vehicle.

Figure 1: The smart home ecosystem is complex and fragmented

smart home market

Source: GSMA Intelligence

Size of smart home market

Given the breadth of the smart home market and the blurred lines between it and other segments, sizing it in dollar terms is difficult. Research firm Strategy Analytics estimates worldwide consumer spending on smart home devices, systems and services totalled US$84 billion in 2017 and will reach almost US$96 billion in 2018.

However, ABI Research is more conservative, pegging the global smart home market at US$56 billion in 2018. The actual number will be down to what products and services are included and whether analysts are counting the total value of an appliance or just the embedded connectivity and processing power.

For example, should the total sale price of a washing machine with built-in WiFi be included? Or should analysts just count the value of the connectivity module? What if the WiFi is never activated? In any case, it is clear that the market is growing steadily as the cost of adding connectivity to consumer appliances and devices falls. The cost of adding a WiFi or cellular module to an appliance is in the region of US$10 to US$20, depending how many frequencies it supports and which radio technology is used.

Contents:

  • Executive Summary 
  • Introduction
  • The smart home market
  • Sizing the smart home space
  • How important are smart speakers?
  • The Internet players and their strategies
  • The Internet platforms jostle for position
  • Amazon bets big on Alexa
  • Google plays aggressive defence
  • Apple plays the premium game
  • Facebook struggles to differentiate
  • Utilities/security companies
  • Consumer electronics/appliances
  • The role of telcos in the smart home
  • Deutsche Telekom offers data protection
  • Does DT need its own voice?
  • Differentiation through data protection?
  • AT&T changes course
  • Conclusions
  • A major opportunity to cut complexity
  • Internet players don’t have a stranglehold

Figures:

  • Figure 1: The smart home ecosystem is complex and fragmented
  • Figure 2: Amazon and Google face growing competition in the smart speaker market
  • Figure 3: Alexa is integrated into the control panel of Amazon’s new microwave
  • Figure 4: The new Google Home Hub is designed to be fairly proactive
  • Figure 5: Facebook’s premium Portal has a rotating screen and a video camera
  • Figure 6: The Magenta Smarthome app can manage temperature, security and lighting
  • Figure 7: Deutsche Telekom’s growing smart home service
  • Figure 8: DT’s new smart speaker
  • Figure 9: Some of the functionality available from AT&T’s Digital Life service
  • Figure 10: AT&T’s LTE-M enabled button works with AWS to perform a specific task

Consumer IoT: How telcos can create new value

Introduction: Trust is a must for consumer IoT – but is consumer IoT a must for telcos?

Lack of trust is a major barrier to mass-market consumer IoT adoption

There was an expectation two to three years ago that take-up of consumer Internet of Things (IoT) services was set to accelerate, and that we would soon witness the success of mass market consumer IoT offers in areas such as energy management (linked to roll-outs of smart metering), home automation and security, and health and wellness applications (linked to wearables such as smart watches, fitness trackers and medical condition sensors). It was also widely expected that telcos would play a leading role in this market.

Although growth has occurred in these product areas, it has generally been below expectations. Everett M. Rogers’ diffusion of innovations theory shows how the different stages of public acceptance a new product goes through, with successive groups of consumers adopting the new technology (shown in blue), so its market share (yellow) eventually reaches saturation level. Looking at this theory, STL believes that consumer IoT is still in the “early adopter” stage.

Figure 1: Rogers’ diffusion of innovations theory

Source: Rogers, E. (1962) Diffusion of innovations, image from Wikipedia

In addition to this, telcos have tended to play a peripheral part in the market thus far, limited largely to providing the wireless and broadband connectivity supporting third-party products developed by players focused on adjacent vertical markets. Already the focus of telcos’ IoT strategies seems to have been redirected to enterprise and industrial IoT applications, along with the rapidly maturing connected car and smart cities markets, judging from the wave of new product and partnership announcements in these areas at recent trade shows, such as this year’s Mobile World Congress (MWC). Despite this, we believe that consumer IoT could still represent a large addressable market for telcos, based on data presented in chapter 3.

There are many reasons for the levelling of the expected consumer IoT growth curve, some of which we will explore in this report. In terms of definitions, we are limiting the term ‘consumer IoT’ to ‘consumer-centric’ applications and services, whether these are deployed primarily in the home (such as home automation and security) or on the person (e.g. wearables, and health and wellness). We will not directly discuss connected car / autonomous vehicle and smart cities applications, even though they relate to consumer services and experiences, as the dynamics of these services and their technological challenges are quite distinct. In addition, we will only tangentially discuss healthcare IoT, as it is far from clear what sort of ‘consumer’ business model will be established in this sector (as opposed to a public service model); although it is likely that remote health and social care will play an increasingly central role in a prospective ‘second wave’ of consumer IoT services, based on trustworthy processing of intimate personal data to enable really useful services.

In addition, we make a distinction between ‘connected’ devices and homes, on the one hand, and ‘smart’ devices / homes and IoT services, on the other. A home is not smart, nor an IoT service present, until the connected devices or ‘things’ involved, and the data they generate, are integrated as part of an app that the user controls. As shown in Figure 2, in the existing IoT business model, this involves delivery of the data from multiple devices and sensors to a cloud-based service, enabling collection, aggregation and analysis of the data, and remote and automated performance of actions on those devices based on the analysis and on the user’s preferences.

Contents:

  • Executive Summary: Trust is king
  • Introduction: Trust is a must for consumer IoT – but is consumer IoT a must for telcos?
  • Lack of trust is a major barrier to mass-market consumer IoT adoption
  • Building trust with customers must be at the forefront of telcos’ consumer IoT offer and brand
  • Consumer IoT 1.0: opportunities and threats for telcos; telco strengths and weaknesses
  • Opportunities: The addressable market for telcos is potentially huge
  • Threats: do consumers buy it?
  • Established telco strengths can help offset the risks
  • Weaknesses: IoT exemplifies the challenges of digital innovation in general
  • Conclusion: consumer IoT is a huge challenge but also a huge opportunity that plays into telcos’ strengths
  • Deutsche Telekom’s consumer IoT platform and services
  • Deutsche Telekom and the Qivicon platform
  • Efforts to address the data security and privacy issues of consumer IoT 1.0
  • Avast: telcos can play a role as part of a cross-industry approach
  • Orange: transparency over use of data is key
  • Atomite: consumer consent and rewards for sharing data with third parties
  • Telefónica’s AURA: cognitive intelligence but an immature business model
  • Consumer IoT 2.0: A move to a (data) sharing economy
  • GDPR: A change in the rules that looks set to change business models
  • Databox: “privacy-aware data analytics platform”
  • IoT and the personal data economy: putting ‘me’ at the centre of my internet of things
  • Conclusion: Telcos need to be in the consumer IoT 1.0 game to win in consumer IoT 2.0
  • A massive potential market, with a large slice of the pie available to telcos…
  • … but do the risks outweigh the potential benefits?
  • Telcos need to play the consumer IoT 1.0 game to reach consumer IoT 2.0

Figures:

  • Figure 1: Rogers’ diffusion of innovations theory
  • Figure 2: Consumer IoT 1.0
  • Figure 3: Consumer concerns about connected devices
  • Figure 4: Strengths, weaknesses, opportunities and threats for telcos in consumer IoT
  • Figure 5: Connected home installed base and penetration EU and North America, 2013–19
  • Figure 6: Companies most trusted with personal data
  • Figure 7: The Qivicon consumer IoT platform
  • Figure 8: Orange ‘Trust Badge’ – what personal and usage data is collected, and why
  • Figure 9: Key functionality of the Meeco personal data portal