Why the consumer IoT is stuck in the slow lane

A slow start for NB-IoT and LTE-M

For telcos around the world, the Internet of Things (IoT) has long represented one of the most promising growth opportunities. Yet for most telcos, the IoT still only accounts for a low single digit percentage of their overall revenue. One of the stumbling blocks has been relatively low demand for IoT solutions in the consumer market. This report considers why that is and whether low cost connectivity technologies specifically-designed for the IoT (such as NB-IoT and LTE-M) will ultimately change this dynamic.

NB-IoT and LTE-M are often referred to as Massive IoT technologies because they are designed to support large numbers of connections, which periodically transmit small amounts of data. They can be distinguished from broadband IoT connections, which carry more demanding applications, such as video content, and critical IoT connections that need to be always available and ultra-reliable.

The initial standards for both technologies were completed by 3GPP in 2016, but adoption has been relatively modest. This report considers the key B2C and B2B2C use cases for Massive IoT technologies and the prospects for widespread adoption. It also outlines how NB-IoT and LTE-M are evolving and the implications for telcos’ strategies.

This builds on previous STL Partners’ research, including LPWA: Which way to go for IoT? and Can telcos create a compelling smart home?. The LPWA report explained why IoT networks need to be considered across multiple generations, including coverage, reliability, power consumption, range and bandwidth. Cellular technologies tend to be best suited to wide area applications for which very reliable connectivity is required (see Figure below).

IoT networks should be considered across multiple dimensions

IoT-networks-disruptive-analysis-stl-2021
Source: Disruptive Analysis

 

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The smart home report outlined how consumers could use both cellular and short-range connectivity to bolster security, improve energy efficiency, charge electric cars and increasingly automate appliances. One of the biggest underlying drivers in the smart home sector is peace of mind – householders want to protect their properties and their assets, as rising population growth and inequality fuels fear of crime.

That report contended that householders might be prepared to pay for a simple and integrated way to monitor and remotely control all their assets, from door locks and televisions to solar panels and vehicles.  Ideally, a dashboard would show the status and location of everything an individual cares about. Such a dashboard could show the energy usage and running cost of each appliance in real-time, giving householders fingertip control over their possessions. They could use the resulting information to help them source appropriate insurance and utility supply.

Indeed, STL Partners believes telcos have a broad opportunity to help coordinate better use of the world’s resources and assets, as outlined in the report: The Coordination Age: A third age of telecoms. Reliable and ubiquitous connectivity is a key enabler of the emerging sharing economy in which people use digital technologies to easily rent the use of assets, such as properties and vehicles, to others. The data collected by connected appliances and sensors could be used to help safeguard a property against misuse and source appropriate insurance covering third party rentals.

Do consumers need Massive IoT?

Whereas some IoT applications, such as connected security cameras and drones, require high-speed and very responsive connectivity, most do not. Connected devices that are designed to collect and relay small amounts of data, such as location, temperature, power consumption or movement, don’t need a high-speed connection.

To support these devices, the cellular industry has developed two key technologies – LTE-M (LTE for Machines, sometimes referred to as Cat M) and NB-IoT (Narrowband IoT). In theory, they can be deployed through a straightforward upgrade to existing LTE base stations. Although these technologies don’t offer the capacity, throughput or responsiveness of conventional LTE, they do support the low power wide area connectivity required for what is known as Massive IoT – the deployment of large numbers of low cost sensors and actuators.

For mobile operators, the deployment of NB-IoT and LTE-M can be quite straightforward. If they have relatively modern LTE base stations, then NB-IoT can be enabled via a software upgrade. If their existing LTE network is reasonably dense, there is no need to deploy additional sites – NB-IoT, and to a lesser extent LTE-M, are designed to penetrate deep inside buildings. Still, individual base stations may need to be optimised on a site-by-site basis to ensure that they get the full benefit of NB-IoT’s low power levels, according to a report by The Mobile Network, which notes that operators also need to invest in systems that can provide third parties with visibility and control of IoT devices, usage and costs.

There are a number of potential use cases for Massive IoT in the consumer market:

  • Asset tracking: pets, bikes, scooters, vehicles, keys, wallets, passport, phones, laptops, tablets etc.
  • Vulnerable persontracking: children and the elderly
  • Health wearables: wristbands, smart watches
  • Metering and monitoring: power, water, garden,
  • Alarms and security: smoke alarms, carbon monoxide, intrusion
  • Digital homes: automation of temperature and lighting in line with occupancy

In the rest of this report we consider the key drivers and barriers to take-up of NB-IoT and LTE-M for these consumer use cases.

Table of Contents

  • Executive Summary
  • Introduction
  • Do consumers need Massive IoT?
    • The role of eSIMs
    • Takeaways
  • Market trends
    • IoT revenues: Small, but growing
  • Consumer use cases for cellular IoT
    • Amazon’s consumer IoT play
    • Asset tracking: Demand is growing
    • Connecting e-bikes and scooters
    • Slow progress in healthcare
    • Smart metering gains momentum
    • Supporting micro-generation and storage
    • Digital buildings: A regulatory play?
    • Managing household appliances
  • Technological advances
    • Network coverage
  • Conclusions: Strategic implications for telcos

 

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SK Telecom: Lessons in 5G, AI, and adjacent market growth

SK Telecom’s strategy

SK Telecom is the largest mobile operator in South Korea with a 42% share of the mobile market and is also a major fixed broadband operator. It’s growth strategy is focused on 5G, AI and a small number of related business areas where it sees the potential for revenue to replace that lost from its core mobile business.

By developing applications based on 5G and AI it hopes to create additional revenue streams both for its mobile business and for new areas, as it has done in smart home and is starting to do for a variety of smart business applications. In 5G it is placing an emphasis on indoor coverage and edge computing as basis for vertical industry applications. Its AI business is centred around NUGU, a smart speaker and a platform for business applications.

Its other main areas of business focus are media, security, ecommerce and mobility, but it is also active in other fields including healthcare and gaming.

The company takes an active role internationally in standards organisations and commercially, both in its own right and through many partnerships with other industry players.

It is a subsidiary of SK Group, one of the largest chaebols in Korea, which has interests in energy and oil. Chaebols are large family-controlled conglomerates which display a high level and concentration of management power and control. The ownership structures of chaebols are often complex owing to the many crossholdings between companies owned by chaebols and by family members. SK Telecom uses its connections within SK Group to set up ‘friendly user’ trials of new services, such as edge and AI

While the largest part of the business remains in mobile telecoms, SK Telecom also owns a number of subsidiaries, mostly active in its main business areas, for example:

  • SK Broadband which provides fixed broadband (ADSL and wireless), IPTV and mobile OTT services
  • ADT Caps, a securitybusiness
  • IDQ, which specialises in quantum cryptography (security)
  • 11st, an open market platform for ecommerce
  • SK Hynixwhich manufactures memory semiconductors

Few of the subsidiaries are owned outright by SKT; it believes the presence of other shareholders can provide a useful source of further investment and, in some cases, expertise.

SKT was originally the mobile arm of KT, the national operator. It was privatised soon after establishing a cellular mobile network and subsequently acquired by SK Group, a major chaebol with interests in energy and oil, which now has a 27% shareholding. The government pension service owns a 11% share in SKT, Citibank 10%, and 9% is held by SKT itself. The chairman of SK Group has a personal holding in SK Telecom.

Following this introduction, the report comprises three main sections:

  • SK Telecom’s business strategy: range of activities, services, promotions, alliances, joint ventures, investments, which covers:
    • Mobile 5G, Edge and vertical industry applications, 6G
    • AIand applications, including NUGU and Smart Homes
    • New strategic business areas, comprising Media, Security, eCommerce, and other areas such as mobility
  • Business performance
  • Industrial and national context.

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Overview of SKT’s activities

Network coverage

SK Telecom has been one of the earliest and most active telcos to deploy a 5G network. It initially created 70 5G clusters in key commercial districts and densely populated areas to ensure a level of coverage suitable for augmented reality (AR) and virtual reality (VR) and plans to increase the number to 240 in 2020. It has paid particular attention to mobile (or multi-access) edge computing (MEC) applications for different vertical industry sectors and plans to build 5G MEC centres in 12 different locations across Korea. For its nationwide 5G Edge cloud service it is working with AWS and Microsoft.

In recognition of the constraints imposed by the spectrum used by 5G, it is also working on ensuring good indoor 5G coverage in some 2,000 buildings, including airports, department stores and large shopping malls as well as small-to-medium-sized buildings using distributed antenna systems (DAS) or its in-house developed indoor 5G repeaters. It also is working with Deutsche Telekom on trials of the repeaters in Germany. In addition, it has already initiated activities in 6G, an indication of the seriousness with which it is addressing the mobile market.

NUGU, the AI platform

It launched its own AI driven smart speaker, NUGU in 2016/7, which SKT is using to support consumer applications such as Smart Home and IPTV. There are now eight versions of NUGU for consumers and it also serves as a platform for other applications. More recently it has developed several NUGU/AI applications for businesses and civil authorities in conjunction with 5G deployments. It also has an AI based network management system named Tango.

Although NUGU initially performed well in the market, it seems likely that the subsequent launch of smart speakers by major global players such as Amazon and Google has had a strong negative impact on the product’s recent growth. The absence of published data supports this view, since the company often only reports good news, unless required by law. SK Telecom has responded by developing variants of NUGU for children and other specialist markets and making use of the NUGU AI platform for a variety of smart applications. In the absence of published information, it is not possible to form a view on the success of the NUGU variants, although the intent appears to be to attract young users and build on their brand loyalty.

It has offered smart home products and services since 2015/6. Its smart home portfolio has continually developed in conjunction with an increasing range of partners and is widely recognised as one of the two most comprehensive offerings globally. The other being Deutsche Telekom’s Qivicon. The service appears to be most successful in penetrating the new build market through the property developers.

NUGU is also an AI platform, which is used to support business applications. SK Telecom has also supported the SK Group by providing new AI/5G solutions and opening APIs to other subsidiaries including SK Hynix. Within the SK Group, SK Planet, a subsidiary of SK Telecom, is active in internet platform development and offers development of applications based on NUGU as a service.

Smart solutions for enterprises

SKT continues to experiment with and trial new applications which build on its 5G and AI applications for individuals (B2C), businesses and the public sector. During 2019 it established B2B applications, making use of 5G, on-prem edge computing, and AI, including:

  • Smart factory(real time process control and quality control)
  • Smart distribution and robot control
  • Smart office (security/access control, virtual docking, AR/VRconferencing)
  • Smart hospital (NUGUfor voice command for patients, AR-based indoor navigation, facial recognition technology for medical workers to improve security, and investigating possible use of quantum cryptography in hospital network)
  • Smart cities; e.g. an intelligent transportation system in Seoul, with links to vehicles via 5Gor SK Telecom’s T-Map navigation service for non-5G users.

It is too early to judge whether these B2B smart applications are a success, and we will continue to monitor progress.

Acquisition strategy

SK Telecom has been growing these new business areas over the past few years, both organically and by acquisition. Its entry into the security business has been entirely by acquisition, where it has bought new revenue to compensate for that lost in the core mobile business. It is too early to assess what the ongoing impact and success of these businesses will be as part of SK Telecom.

Acquisitions in general have a mixed record of success. SK Telecom’s usual approach of acquiring a controlling interest and investing in its acquisitions, but keeping them as separate businesses, is one which often, together with the right management approach from the parent, causes the least disruption to the acquired business and therefore increases the likelihood of longer-term success. It also allows for investment from other sources, reducing the cost and risk to SK Telecom as the acquiring company. Yet as a counterpoint to this, M&A in this style doesn’t help change practices in the rest of the business.

However, it has also shown willingness to change its position as and when appropriate, either by sale, or by a change in investment strategy. For example, through its subsidiary SK Planet, it acquired Shopkick, a shopping loyalty rewards business in 2014, but sold it in 2019, for the price it paid for it. It took a different approach to its activity in quantum technologies, originally set up in-house in 2011, which it rolled into IDQ following its acquisition in 2018.

SKT has also recently entered into partnerships and agreements concerning the following areas of business:

 

Table of Contents

  • Executive Summary
  • Introduction and overview
    • Overview of SKT’s activities
  • Business strategy and structure
    • Strategy and lessons
    • 5G deployment
    • Vertical industry applications
    • AI
    • SK Telecom ‘New Business’ and other areas
  • Business performance
    • Financial results
    • Competitive environment
  • Industry and national context
    • International context

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The changing consumer landscape: Telco strategies for success

Winning in the evolving “in home” consumer market

COVID-19 is accelerating significant and lasting changes in consumer behaviours as the majority of the population is being implored to stay at home. As a result, most people now work remotely and stay connected with colleagues, friends, and family via video conferencing. Consumer broadband and telco core services are therefore in extremely high demand and, coupled with the higher burden on the network, consumers have high expectations and dependencies on quality connectivity.

Furthermore, we found that people of all ages (including non-digital natives) are becoming more technically aware. This means they may be willing to purchase more services beyond core connectivity from their broadband provider. At the same time, their expectations on performance are rising. Consumers have a better understanding of the products on offer and, for example, expect Wi-Fi to deliver quoted broadband speeds throughout the house and not just in proximity to the router.

As a result of this changing landscape, there are opportunities, but also challenges that operators must overcome to better address consumers, stay relevant in the market, and win “in the home”.

This report looks at the different strategies telcos can pursue to win “in the home” and address the changing demands of consumers. It draws on an interview programme with eight operators, as well as a survey of more than 1100+ consumers globally . As well as canvassing consumers’ high level views of telcos and their services, the survey explores consumer willingness to buy cybersecurity services from telcos in some depth.

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With increasing technical maturity comes an increasingly demanding market

Consumers are increasing in technical maturity

The consumer market as a whole is becoming much more digital. Over the past decade there has been a big shift towards online and self-service models for B2C services (e.g. ecommerce, online banking, automated chatbots, video streaming). This reflects the advent of the Coordination Age – connecting people to machines, information, and things – and the growing technical maturity of the consumer market.

COVID-19 has been a recent, but significant, driver in pushing consumers towards a more digital age, forcing the use of video conferencing and contactless interactions. Even people who are not considered digitally native are becoming increasingly tech savvy and tech capable customers.

Cisco forecasts that, between 2018 and 2023, the number of Internet users globally will increase from 51% to 66% . It has also forecast an increase in data volumes per capita per month from 1.5GB in 2017 to 9.7GB in 2022 . Depending on the roll out of 5G in different markets, this number may increase significantly as demand for mobile data increases to meet the potential increases in supply.

Furthermore, in our survey of 1,100+ consumers globally, 33% of respondents considered themselves avid users and 51% considered themselves moderate users of technology. Only 16% of the population felt they were light users, using technology only when essential for a limited number of use cases and needing significant support when purchasing and implementing new technology-based solutions.

Though this did not vary significantly by region or existing spend, it did vary (as would be expected) by age – 51% of respondents aged between 25 and 30 considered themselves avid users of technology, while only 18% of respondents over 50 said the same. Nevertheless, even within the 50+ segment, 55% considered themselves moderate users of technology.

Self-proclaimed technical maturity varies significantly by age

Source: STL Partners consumer survey analysis (n=1,131)

The growing technical maturity of consumers suggests a larger slice of the market will be ready and willing to adopt digital solutions from a telco, providing an opportunity for potential growth in the consumer market.

Consumers have higher expectations on telco services

Coupled with the increasing technical maturity comes an increase in consumer expectations. This makes the increasing technical maturity a double edged sword – more consumers will be ready to adopt more digital solutions but, with a better understanding of what’s on offer, they can also be more picky about what they receive and more demanding about performance levels that can be achieved.

An example of this is in home broadband. It is no longer sufficient to deliver quoted throughput speeds only within proximity to the router. A good Wi-Fi connection must now permeate throughout the house, so that high-quality video content and video calls can be streamed from any room without any drop in quality or connection. It must also be able to handle an increasing number of connected devices – Cisco forecasts an increase from a global average of 1.2 to 1.6 connections per person between 2018 and 2023 .

Consumers are also becoming increasingly impatient. In all walks of life, whether it be dating, technology or experiences, consumers want instant gratification. Additionally, with the faster network speeds of 4G+, fibre, and eventually 5G, consumers want (and are used to) continuous video feeds, seamless streaming, and near instant downloads – buffering should be a thing of the past.

One of our interviewees, a Northern European operator, commented: “Consumers are not willing to wait, they want everything here, now, immediately. Whether it is web browsing or video conferencing or video streaming, consumers are increasingly impatient”.

However, these demands extend beyond telco core services and connectivity. In the context of digital maturity, a Mediterranean operator noted “There is increasing demand for more specialized services…there is more of a demand on value-added, rather than core, services”.

This presents new challenges and opportunities for operators seeking growth “in the home”. Telcos need to find a way to address these changing demands to stay relevant and be successful in the consumer market.

Table of Contents

  • Executive summary
  • Introduction
  • Growing demand for core broadband and value-added services
    • COVID-19 is driving significant, and likely lasting, change
    • With increasing technical maturity comes an increasingly demanding market
  • Telcos need new ways to stay relevant in B2C
    • The consumer market is both diverse and difficult to segment
    • Should telcos be looking beyond the triple play?
  • How can telcos differentiate in the consumer market?
    • Differentiate through price
    • Differentiate through new products beyond connectivity
    • Differentiate through reliability of service
  • Conclusions and key recommendations
  • Appendices
    • Appendix 1: Consumer segments used in the survey
    • Appendix 2: Cybersecurity product bundles used in the conjoint analysis

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Coordinating the care of the elderly

Are telcos ready to enable digital health?

The world has been talking about connected healthcare – the use of in-home and wearable systems to monitor people’s condition – for a long time. Although adoption to date has been piecemeal and limited, the rapid rise in the number of elderly people is fuelling demand for in-home and wearable monitoring systems. The rapid spread of the Covid-19 virus is putting the world’s healthcare systems under huge strain, further underlining the need to reform the way in which many medical conditions are diagnosed and treated.

This report explores whether telcos now have the appetite and the tools they need to serve this very challenging, but potentially rewarding market. With the advent of the Coordination Age (see STL Partners report: Telco 2030: New purpose, strategy and business models for the Coordination Age), telcos could play a pivotal role in enabling the world’s healthcare systems to become more sustainable and effective.

This report considers demographic trends, the forces changing healthcare and the case for greater use of digital technologies to monitor chronic conditions and elderly people. It explores various implementation options and some of the healthcare-related activities of Tele2, Vodafone, Telefónica and AT&T, before drawing conclusions and recommending some high-level actions for telcos looking to support healthcare for the elderly.

This executive briefing builds on previous STL Partners reports including:

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Why healthcare needs to change

During the twentieth century, life expectancy in most countries in the world rose dramatically.  This was down to advances in medical science and diagnostic technology, as well as rising awareness about personal and environmental hygiene, health, nutrition, and education. Average global life expectancy continues to rise, increasing from 65.3 years in 1990 to 71.5 years in 2013.  In some countries, the increase in lifespans has been dramatic. The life expectancy for a Chilean female has risen to 82 years today from 33 years in 1910, according to the World Health Organization (WHO).

Figure 1: Across the world, average life expectancy is rising towards 80

raising lift expectancy to 2050

Source: The UN

Clearly, the increase in the average lifespan is a good thing. But longer life expectancy, together with falling birth rates, means the population overall is aging rapidly, posing a major challenge for the world’s healthcare systems. According to the WHO, the proportion of the world’s population over 60 years old will double from about 11% to 22% between 2000 and 2050, equivalent to a rise in the absolute number of people over 60 from 605 million to an extraordinary two billion. Between 2012 and 2050, the number of people over 80 will almost quadruple to 395 million, according to the WHO. That represents a huge increase in the number of elderly people, many of whom will require frequent care and medical attention. For both policymakers and the healthcare industry, this demographic time bomb represents a huge challenge.

Rising demand for continuous healthcare

Of particular concern is the number of people that need continuous healthcare. About 15% of the world’s population suffers from various disabilities, with between 110 million and 190 million adults having significant functional difficulties, according to the WHO. With limited mobility and independence, it can be hard for these people to get the healthcare they need.

As the population ages, this number will rise and rise. For example, the number of Americans living with Alzheimer’s disease, which results in memory loss and other symptoms of dementia, is set to rise to 16 million by 2050 from five million today, according to the Alzheimer’s Association.

The growth in the number of older people, combined with an increase in sedentary lifestyles and diets high in sugars and fats, also means many more people are now living with heart disease, obesity, diabetes and asthma. Furthermore, poor air quality in many industrial and big cities is giving rise to cancer, cardiovascular and respiratory diseases such as asthma, and lung diseases. Around 235 million people are currently suffering from asthma and about 383,000 people died from asthma in 2015, according to the WHO.

Half of all American adults have at least one chronic condition with one in three adults suffering from multiple chronic conditions, according to the National Institutes of Health (NIH). Most other rich countries are experiencing similar trends, while middle-income countries are heading in the same direction. In cases where a patient requires medical interventions, they may have to travel to a hospital and occupy a bed, at great expense. With the growing prevalence of chronic conditions, a rising proportion of GDP is being devoted to healthcare. Only low-income countries are bucking this trend (see Figure 2).

Figure 2: Spending on healthcare is rising except in low income countries

Public health as % of government spending WHO

Public health spending as % of GDP WHO

Source: The WHO

However, there is a huge difference in absolute spending levels between high-income countries and the rest of the world (see Figure 3). High-income countries, such as the U.S., spend almost ten times as much per capita as upper middle-income countries, such as Brazil. At first glance, this suggests the potential healthcare market for telcos is going to be much bigger in Europe, North America and developed Asia, than for telcos in Latin America, developing Asia and sub-Saharan Africa. Yet these emerging economies could leapfrog their developed counterparts to adopt connected self-managed healthcare systems, as the only affordable alternative.

Figure 3: Absolute health spending in high income countries is far ahead of the rest

per capita health spending by country income levelSource: The WHO

The cost associated with healthcare services continues to rise due to the increasing prices of prescription drugs, diagnostic tools and in-clinic care. According to the U.S. Centers for Disease Control and Prevention, 90% of the nation’s US$3.3 trillion annual healthcare expenditure is spent on individuals with chronic and mental health conditions.

On top of that figure, the management of chronic conditions consumes an enormous amount of informal resources. As formal paid care services are expensive, many older people rely on the support of family, friends or volunteers calling at their homes to check on them and help them with tasks, such as laundry and shopping. In short, the societal cost of managing chronic conditions is enormous.

The particular needs of the elderly

Despite the time and money being spent on healthcare, people with chronic and age-related conditions can be vulnerable. While most elderly people want to live in their own home, there are significant risks attached to this decision, particularly if they live alone. The biggest danger is a fall, which can lead to fractures and, sometimes, lethal medical complications. In the U.S., more than one in four older people fall each year due to illness or loss of balance, according to the U.S. Centers for Disease Control and Prevention. But less than half tell their doctor. One out of five falls causes a serious injury, such as broken bones or a head injury. In 2015, the total medical costs for falls was more than US$50 billion in the U.S. Beyond falls, another key risk is that older people neglect their own health. A 2016 survey of 1,000 U.K. consumers by IT solutions company Plextek, found that 42% of 35- to 44-year-olds are concerned that their relatives aren’t telling them they feel ill.

Such concerns are driving demand for in-home and wearable systems that can monitor people in real-time and then relay real-time location and mobility information to relatives or carers. If they are perceived to be reliable and comprehensive, such systems can provide peace of mind, making home-based care a more palatable alternative for both patients and their families.

Table of contents

  • Executive Summary
    • Barriers to more in-home healthcare
  • Introduction
  • Why healthcare needs to change
    • Rising demand for continuous healthcare
    • The particular needs of the elderly
    • Shift to value-based care
    • Demands for personalised healthcare and convenience
  • How healthcare is changing
    • Barriers to more in-home healthcare
  • Implementation options
    • Working with wearables
    • Cameras and motion sensors
    • The connectivity
    • Analysing the data
  • How telcos are tackling healthcare
    • KPN: Covering most of the bases
    • Tele2 and Cuviva: Working through healthcare centres
    • Vodafone and Vision: An expensive system for Alzheimer’s
    • Telefónica’s Health Moonshot
    • AT&T: Leveraging a long-standing brand
  • Conclusions and recommendations
    • Recommendations

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Telco innovation: Why it is broken and how to fix it

Telcos have tried innovating in many verticals

Incumbent telecommunications providers have seen their margins fall as basic telecommunications services, both fixed and mobile, have been increasingly commoditised. The need to provide differentiated services to counteract this trend is widely recognised in the industry, yet despite considerable investment and many attempts, too often new services launched by operators have failed to deliver the anticipated results. Yet some, especially in mobile banking and related services, have proved successful. Why is this so?

This report focuses on product and service innovation for customers, rather than on innovation in sales, marketing, finance, operations or networks. It addresses the introduction of new and innovative services and not the repackaging of existing communications services, for example in new pricing and service bundles (see Figure 2).

It looks at examples from a range of services, covering most of the new types of services introduced by MNOs over the past decade. These include:

  • Messaging: RCS and its competitors
  • Mobile financial and insurance services: Orange Money / Orange Bank, Millicom/Tigo’s joint ventures
  • Health: O2 Telehealth, Telenor’s Tonic health service
  • Smart home: AT&T’s Digital Life, Deutsche Telekom’s Qivicon
  • Lifestyle: Turkcell’s range of apps and Vodacom’s Mezzanine

We have covered many of these individually in previous reports, looking at how they were developed and have evolved over time, and whether and why they are (or we expect them to be) successful.

This report seeks to identify the common factors that led to success or failure, in order to establish some best practices for telcos in innovation. While we recognise that there are often several causes of success and failure, in some cases a single failure can undo much good work.

Previous reports this one builds on include:

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Product development or true diversification: How ambitious should telcos be?

Historically, telcos have aimed to find new customers for existing telecoms services, where the their market is not yet saturated, or expanding geographically to achieve scale. However, most telecoms markets are now nearly saturated – at least in the areas that telcos can profitably reach – so true service innovation, corresponding to the right hand side on the figure below, is now a crucial component for long term revenue growth.

The seven telco innovations discussed in this report are shown on the figure below. It is worth noting the progression Orange has made in building on its experience with its mobile money service to providing full banking services. This is highlighted in the diagram by the arrow, and is discussed more fully in the body of this report.

Most telcos innovation falls in the product development category on the Ansoff matrix

Telco innovations plotted on the Ansoff matrix

Source: STL Partners. For more on market development opportunity, see STL Partners report Making big beautiful: Multinational telcos need the telco cloud

In theory, one of the most effective ways of maximising the chances of success, and achieving the scale required to make a significant impact on revenues and profitability, is for operators to select services that target a large part of their existing customer base.

However, our analysis of the telco innovations in this report shows that there is actually little correlation between the distance from telcos’ core customer base and level of success. This because by tying new products and services too closely to their existing customer bases, telcos are actually limiting their ability to scale. While this approach is intended to help them compete more effectively against their peers, by increasing loyalty for core telecoms services, in reality, any telco-driven product development innovation is likely to compete with network agnostic service providers. So while it may make sense to offer something only to existing customers at the start, to truly scale telcos need to reach a wider market.

Orange is a good example of this transition. While its mobile money services in Africa remain tied to its telecoms customer base, its move into full-fledge banking in France is separate from telecoms services. As it rolls out full banking services across its footprint, this separation is likely to become more entrenched.

Many of the examples discussed in the main body of the report, including AT&T’s Digital Life, Orange Money and O2’s Telehealth venture were set up as separate businesses, which allowed their initial development to progress well. But this was not enough on their own to make them successful.

How successful have telcos been?

Comparing telcos’ investments into service innovations shows that, too often, they have made bets on areas that seem like natural opportunities for new services, but failed to gain traction because they didn’t do a rigorous enough assessment of the conditions for success.

To succeed in innovation, telcos must evaluate proposed new services or products much more painstakingly across three areas:

  1. User needs and requirements: that the product or service meets a real user need. This breaks down into two points:
    • The product or servicemust be easy to use and fit into users’ lifestyles.
    • And at the right price point. Most consumer products need a free tier to encourage customers to try and engage before paying (if ever). In some cases, the end user might not be the payer, so if that is the case then telcos need to identify the payer and ensure the product is relevant and valuable for them, too.
  2. Market structure and characteristics: clear vision of where the ROI is coming from. There are two main options for ROI – increased customer loyalty and new revenue.
    • For loyalty, telcos need a clear means of measuring whether the product or service is improving retention.
    • If telcos are seeking to build new revenue, they need to be realistic about how long it will take to achieve profitability and the size of the opportunity. Too often, telcos give up because they deem a new venture not valuable enough compared with the core business..
  3. Business structure: deciding on whether to develop something in house, to set up a joint venture, or acquire, and what the relationship is with the core business. The further away a new product or service is from the core business, the more independence it needs to develop and grow.

In this report, we compare the approaches of seven telco innovations, drawing on in-depth analysis from previous STL Partners reports, summarised in the table below.

Strategy is more important that degree of difficult for successful innovation

Assessment of quality of strategy and execution for telco innovationsSource: STL Partners

Our analysis shows that the difficulty of the innovation, i.e. whether it is product development or diversification into a new vertical, is less important to success than doing the difficult strategy and planning work outlined above.

For instance, while RCS is very closely tied to telcos’ existing customers and services, the necessary cooperation between telcos to bring it to market in a way that is valuable to consumers and potential enterprise customers was unrealistic from the start. By constrast, Tonic’s health insurance proposition is very different from Telenor’s core telecoms services, but Tonic’s clear vision and strategy, and ability to adapt to customer needs, have underpinned its early success in Bangladesh.

Read the full report to see a detailed assessment of each innovation across the three categories.

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Consumer Wi-Fi: Faster, smarter and near-impossible to replace

Introduction

This briefing, part of the Network Futures and (Re-)Connecting with Consumers research streams examines the connectivity and network options for the home – especially looking at the role of Wi-Fi (and its newest evolution, Wi-Fi 6) within the home and other consumer spaces, as a platform for connecting smartphones, PCs, IoT devices, and entertainment/media systems.

It build on the report exploring how telcos could play a coordination role in the smart home market in January 2019 (Can telcos create a compelling smart home?) with a focus on security and remote-management of assets in the home.

This report focuses primarily on developed markets (and China) in which most homes have a fixed-line connection. In developing countries where fixed-lines are scarce, Wi-Fi also plays an important background role, albeit within the constraints imposed by the more limited bandwidth available via cellular or fixed wireless connections to the Internet.

In developed markets, homes now commonly have between five and 20 Wi-Fi enabled endpoints. 

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Wi-Fi is a core consumer service

As discussed in this report, STL does not believe that 5G poses any general threat to the dominant use of Wi-Fi in homes. This document does not look in depth at trends in either enterprise Wi-Fi, or public hotspots – although in the latter case, cellular substitution is more of a genuine issue.

For the residential consumer market, readers should first be aware that Wi-Fi remains incredibly important even for “non-smart” homes. It is important to look at this space through the lens of normal broadband and ISP service delivery, even without connecting new consumer products and services. A sizeable part of both broadband customer satisfaction, and complaints/support issues stems from the quality and manageability of residential Wi-Fi.

This year is the 20th anniversary of consumer Wi-Fi, kickstarted by Apple’s introduction of the AirPort access-point (AP) in 1999. Since then, Wi-Fi has grown to encompass over 30 billion cumulative shipped devices, notably including virtually every PC and phone in use today. Over four billion Wi-Fi products are shipped annually, with over 13 billion in regular use.[1] It has evolved in speed, features and maturity – and is often seen by consumers as being synonymous with Internet connectivity itself.

It’s also about to evolve, encompassing a set of changes into a new packaged specification named ‘Wi-Fi 6’.

While a large part of Wi-Fi’s early success can be attributed to its use in enterprises, or through “hotspots” in public spaces like cafes and hotels, the real core of its adoption has been for residential use. The bulk of Internet access delivered in-home travels its last few metres over Wi-Fi – even for products like televisions. Many notebook PCs no longer have an Ethernet port for a wired connection.

Wi-Fi has a huge economic impact for users, SPs and industry

Chart showing the global value of Wi-Fi at the advent of Wi-Fi 6
The global value of Wi-Fi at the advent of Wi-Fi 6

Source: Wi-Fi Alliance, ValueOfWiFi.com

Telcos and Wi-Fi

While telcos have always been wary of Wi-Fi’s substitutional role vs. cellular in public spaces, within the home the majority of operators view it as a huge positive – and even a source of new revenue and differentiation.

All fixed/cable operators are advocates of home Wi-Fi, as it allows more data usage, from more devices, increasing the value of both Internet connectivity and “on-network” services such as IPTV and IP-based PSTN telephony. As this report discusses, Wi-Fi (sometimes combined with Bluetooth or other short-range wireless technologies) can help telcos connect new IoT systems and participate in their ecosystems, such as eHealth, smart metering, security and more. Some operators are directly monetising “premium Wi-Fi” products or using them to encourage customers to upgrade to higher-ARPU bundles.

While mobile operators sometimes dislike third-party Wi-Fi for its ability to “break out” data locally, rather than routing traffic through their cores (and billing engines), they nevertheless appreciate its ability to support Wi-Fi calling to extend voice telephony to rooms lacking good coverage. They also usually like the (network-driven or user-initiated) means to offload wireless data, that could be expensive to serve to users through walls from outdoor macro cell-sites. With 5G, this comes even further to the fore, as most of the early spectrum bands, such as 3.5GHz or 24-28GHz, will struggle with in-building penetration. We can also expect the majority of fixed-wireless access 5G to marry an external- (or window-) mounted antenna to an indoor Wi-Fi AP for final connection to most devices.

About half of all IP traffic across all devices is delivered via Wi-Fi

PrChart showing proportion of telecoms traffic delivered by Wi-Fi forecast 2019 to 2022
Proportion of telecoms traffic delivered by Wi-Fi forecast 2019 to 2022

*Wireless traffic includes Wi-Fi and mobile. Source: Cisco VNI Global IP Traffic Forecast, 2017-2022

In the rest of this report we discuss telcos’ love/hate relationship with Wi-Fi, including why the newest generation is a game changer for smart homes and the technology’s relationship with 4G/5G and IoT.

Contents:

  • Executive Summary
  • Introduction
  • Part of the broader battle for home/consumer services
  • Unlicensed spectrum – why it matters
  • What’s in a name? Why WiFi 6 is important
  • Wi-Fi and telcos: A complex relationship
  • Telco residential Wi-Fi evangelists
  • Wi-Fi technology evolution
  • Whole-home Wi-Fi: A game-changer
  • New revenue for telcos?
  • Is Wi-Fi threatened by 4G/5G?
  • Wi-Fi and IoT
  • Competition vs. Bluetooth, Zigbee & Z-Wave
  • Competition vs. cellular and LPWA?
  • The vendor / internet space
  • Arrival of the major technology firms
  • Beyond connectivity: New use-cases for Wi-Fi
  • Conclusions and recommendations
  • Recommendations for fixed and cable operators / ISPs
  • Recommendations for mobile operators
  • Recommendations for regulators and policymakers

Figures:

  1. Consumer Wi-Fi is a new control-point for smart home connections
  2. Wi-Fi has a huge economic impact for users, SPs and industry
  3. About half of all IP traffic, across all devices is delivered via Wi-Fi
  4. Simpler, more consumer-friendly branding for Wi-Fi
  5. What’s new with Wi-Fi 6 / 802.11ax?
  6. Wi-Fi is a double-edged sword for telcos; better for fixed ISPs than MNOs
  7. There are multiple determinants of good home broadband experience
  8. Some broadband operators market their service based on Wi-Fi performance
  9. MU-MIMO enables gigabit speeds for Wi-Fi
  10. Wi-Fi companion apps are becoming commonplace
  11. Mesh networks can provide a connectivity backbone for smart homes
  12. In-home Wi-Fi boosters or mesh improve satisfaction significantly
  13. KPN’s Wi-Fi tuner app enables optimal coverage & performance
  14. Some telcos & ISPs are using mesh Wi-Fi to offer QoS/coverage guarantees
  15. Whole-home Wi-Fi offers better indoor awareness than cellular
  16. Huawei’s 5G home FWA blends an outdoor mmWave unit with indoor Wi-Fi
  17. Consumer Wi-Fi is a new control-point for smart home connections
  18. Wi-Fi silicon specialists sometimes work directly with telcos
  19. Software, cloud and security capabilities are likely to be exploited by CSP Wi-Fi in future
  20. Motion-detection is one of the most intriguing future Wi-Fi capabilities
  21. Wi-Fi plus voice integration will accelerate with the Amazon/eero acquisition

[1] Source: Wi-Fi Alliance

Keywords, companies and technologies referenced: Wi-Fi 6, 5G, cellular, fixed wireless access (FWA), KPN, BT,  Blutooth, Zigbee, LPWA, IoT, smart home, Amazon, Cisco, Apple.

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Indoor wireless: A new frontier for IoT and 5G

Introduction to Indoor Wireless

A very large part of the usage of mobile devices – and mobile and other wireless networks – is indoors. Estimates vary but perhaps 70-80% of all wireless data is used while fixed or “nomadic”, inside a building. However, the availability and quality of indoor wireless connections (of all types) varies hugely. This impacts users, network operators, businesses and, ultimately, governments and society.

Whether the use-case is watching a YouTube video on a tablet from a sofa, booking an Uber from a phone in a company’s reception, or controlling a moving robot in a factory, the telecoms industry needs to give much more thought to the user-requirements, technologies and obstacles involved. This is becoming ever more critical as sensitive IoT applications emerge, which are dependent on good connectivity – and which don’t have the flexibility of humans. A sensor or piece of machinery cannot move and stand by a window for a better signal – and may well be in parts of a building that are inaccessible to both humans and many radio transmissions.

While mobile operators and other wireless service providers have important roles to play here, they cannot do everything, everywhere. They do not have the resources, and may lack site access. Planning, deploying and maintaining indoor coverage can be costly.

Indeed, the growing importance and complexity is such that a lot of indoor wireless infrastructure is owned by the building or user themselves – which then brings in further considerations for policymakers about spectrum, competition and more. There is a huge upsurge of interest in both improved Wi-Fi, and deployments of private cellular networks indoors, as some organisations recognise connectivity as so strategically-important they wish to control it directly, rather than relying on service providers. Various new classes of SP are emerging too, focused on particular verticals or use-cases.

In the home, wireless networks are also becoming a battleground for “ecosystem leverage”. Fixed and cable networks want to improve their existing Wi-Fi footprint to give “whole home” coverage worthy of gigabit fibre or cable connections. Cellular providers are hoping to swing some residential customers to mobile-only subscriptions. And technology firms like Google see home Wi-Fi as a pivotal element to anchor other smart-home services.

Large enterprise and “campus” sites like hospitals, chemical plants, airports, hotels and shopping malls each have complex on-site wireless characteristics and requirements. No two are alike – but all are increasingly dependent on wireless connections for employees, visitors and machines. Again, traditional “outdoors” cellular service-providers are not always best-placed to deliver this – but often, neither is anyone else. New skills and deployment models are needed, ideally backed with more cost—effective (and future-proofed) technology and tools.

In essence, there is a conflict between “public network service” and “private property” when it comes to wireless connectivity. For the fixed network, there is a well-defined “demarcation point” where a cable enters the building, and ownership and responsibilities switch from telco to building owner or end-user. For wireless, that demarcation is much harder to institutionalise, as signals propagate through walls and windows, often in unpredictable and variable fashion. Some large buildings even have their own local cellular base stations, and dedicated systems to “pipe the signal through the building” (distributed antenna systems, DAS).

Where is indoor coverage required?

There are numerous sub-divisions of “indoors”, each of which brings its own challenges, opportunities and market dynamics:

• Residential properties: houses & apartment blocks
• Enterprise “carpeted offices”, either owned/occupied, or multi-tenant
• Public buildings, where visitors are more numerous than staff (e.g. shopping malls, sports stadia, schools), and which may also have companies as tenants or concessions.
• Inside vehicles (trains, buses, boats, etc.) and across transport networks like metro systems or inside tunnels
• Industrial sites such as factories or oil refineries, which may blend “indoors” with “onsite”

In addition to these broad categories are assorted other niches, plus overlaps between the sectors. There are also other dimensions around scale of building, single-occupant vs. shared tenancy, whether the majority of “users” are humans or IoT devices, and so on.

In a nutshell: indoor wireless is complex, heterogeneous, multi-stakeholder and often expensive to deal with. It is no wonder that most mobile operators – and most regulators – focus on outdoor, wide-area networks both for investment, and for license rules on coverage. It is unreasonable to force a telco to provide coverage that reaches a subterranean, concrete-and-steel bank vault, when their engineers wouldn’t even be allowed access to it.

How much of a problem is indoor coverage?

Anecdotally, many locations have problems with indoor coverage – cellular networks are patchy, Wi- Fi can be cumbersome to access and slow, and GPS satellite location signals don’t work without line- of-sight to several satellites. We have all complained about poor connectivity in our homes or offices, or about needing to stand next to a window. With growing dependency on mobile devices, plus the advent of IoT devices everywhere, for increasingly important applications, good wireless connectivity is becoming more essential.

Yet hard data about indoor wireless coverage is also very patchy. UK regulator Ofcom is one of the few that reports on availability / usability of cellular signals, and few regulators (Japan’s is another) enforce it as part of spectrum licenses. Fairly clearly, it is hard to measure, as operators cannot do systematic “drive tests” indoors, while on-device measurements usually cannot determine if they are inside or outside without being invasive of the user’s privacy. Most operators and regulators estimate coverage, based on some samples plus knowledge of outdoor signal strength and typical building construction practices. The accuracy (and up-to-date assumptions) is highly questionable.

Indoor coverage data is hard to find

Contents:

  • Executive Summary
  • Likely outcomes
  • What telcos need to do
  • Introduction to Indoor Wireless
  • Overview
  • Where is indoor coverage required?
  • How much of a problem is indoor coverage?
  • The key science lesson of indoor coverage
  • The economics of indoor wireless
  • Not just cellular coverage indoors
  • Yet more complications are on the horizon…
  • The role of regulators and policymakers
  • Systems and stakeholders for indoor wireless
  • Technical approaches to indoor wireless
  • Stakeholders for indoor wireless
  • Home networking: is Mesh Wi-Fi the answer?
  • Is outside-in cellular good enough for the home on its own?
  • Home Wi-Fi has complexities and challenges
  • Wi-Fi innovations will perpetuate its dominance
  • Enterprise/public buildings and the rise of private cellular and neutral host models
  • Who pays?
  • Single-operator vs. multi-operator: enabling “neutral hosts”
  • Industrial sites and IoT
  • Conclusions
  • Can technology solve MNO’s “indoor problem”?
  • Recommendations

Figures:

  • Indoor coverage data is hard to find
  • Insulation impacts indoor penetration significantly
  • 3.5GHz 5G might give acceptable indoor coverage
  • Indoor wireless costs and revenues
  • In-Building Wireless face a dynamic backdrop
  • Key indoor wireless architectures
  • Different building types, different stakeholders
  • Whole-home meshes allow Wi-Fi to reach all corners of the building
  • Commercial premises now find good wireless essential
  • Neutral Hosts can offer multi-network coverage to smaller sites than DAS
  • Every industrial sector has unique requirements for wireless

The IoT money problem: 3 options

Introduction

IoT has been a hot topic since 2010, but despite countless IoT initiatives being launched questions remain about how to monetise the opportunity.

This report presents:

  • A top-level summary of our thinking on IoT so far
  • Examples of 12 IoT verticals and over 40 use-cases
  • Case-studies of four telcos’ experimentation in IoT
  • Three potential roles that could help telcos monetise IoT

Overview

In the early days of the IoT (about five years ago) cellular connectivity was expected to play a major role – Ericsson predicted 50 billion connected devices by 2020, 20 billion of which would be cellular.

However, many IoT products have evolved without cellular connectivity, and lower cost connectivity solutions – such as SIGFOX – have had a considerable impact on the market.

Ericsson now forecasts that, although the headline number of around 50 billion connected devices by 2020 will remain the same, just over 1 billion will use cellular.

Despite these changes IoT is still a significant opportunity for telcos, but they need to change their IoT strategy to become more than connectivity providers as the value of this role in the ecosystem is likely to be modest.

Mapping the IoT ecosystem

The term IoT describes a diverse ecosystem covering a wide range of different connectivity types and use-cases. Therefore, to understand IoT better it is necessary to break it down into horizontal layers and vertical segments (see Figure 1).

Figure 1: A simplified map of the IoT ecosystem

Source: STL Partners

We are seeking input from our clients to shape our IoT research and have put together a short survey asking for your thoughts on:

  • What role telcos can play in the IoT ecosystem
  • Which verticals telcos can be successful in
  • What challenges telcos facing in IoT
  • How can STL support telcos developing their IoT strategy

To thank you for your time we will send you a summary of the survey results at the end of June 2017.

…to access the other 28 pages of this 31 page Telco 2.0 Report, including…

  • Introduction
  • Mapping the IoT ecosystem
  • Overview
  • Mapping the IoT ecosystem
  • IoT: A complicated and evolving market
  • Telcos are moving beyond connectivity
  • And use cases are increasing in complexity
  • IoT verticals – different end-customers with different needs
  • 12 examples of IoT verticals
  • What connectivity should telcos provide?
  • Four examples of IoT experimentation
  • Case study 1: AT&T: Vertically-integrated ecosystem architect
  • Case study 2: Vodafone: a ‘connectivity plus’ approach
  • Case study 3: SK Telecom: ecnouraging innovation through interoperability
  • Case study 4: Deutsche Telekom AG: the open platform integrator
  • Three potential monetisation strategies
  • Ecosystem orchestrator
  • Vertical champion
  • Trust broker
  • Conclusions

…and the following figures…   

  • Figure 1: A simplified map of the IoT ecosystem
  • Figure 2: Telcos moving beyond connectivity
  • Figure 3: IoT use cases are increasing in complexity
  • Figure 4: Use cases in manufacturing
  • Figure 5: Use cases in transportation
  • Figure 6: Use cases in utilities
  • Figure 7: Use cases in surveillance
  • Figure 8: Use cases in smart cities
  • Figure 9: Use cases in health & care
  • Figure 10: Use cases in agriculture
  • Figure 11: Use cases in extractive industries
  • Figure 12: Use cases in retail
  • Figure 13: Use cases in finance
  • Figure 14: Use cases in logistics
  • Figure 15: Use cases in smart home / building
  • Figure 16: Connectivity complexity profile for pay-as-you-drive insurance and rental services
  • Figure 17: Telco opportunity for deep learning pay-as-you-drive insurance and rental services

Autonomous cars: Where’s the money for telcos?

Introduction

Connected cars have been around for about two decades. GM first launched its OnStar in-vehicle communications service in 1996. Although the vast majority of the 1.4 billion cars on the world’s roads still lack embedded cellular connectivity, there is growing demand from drivers for wireless safety and security features, and streamed entertainment and information services. Today, many people simply use their smartphones inside their cars to help them navigate, find local amenities and listen to music.

The falling cost of cellular connectivity and equipment is now making it increasingly cost-effective to equip vehicles with their own cellular modules and antenna to support emergency calls, navigation, vehicle diagnostics and pay-as-you-drive insurance. OnStar, which offers emergency, security, navigation, connections and vehicle manager services across GM’s various vehicle brands, says it now has more than 11 million customers in North America, Europe, China and South America. Moreover, as semi-autonomous cars begin to emerge from the labs, there is growing demand from vehicle manufacturers and technology companies for data on how people drive and the roads they are using. The recent STL Partners report, AI: How telcos can profit from deep learning, describes how companies can use real-world data to teach computers to perform everyday tasks, such as driving a car down a highway.

This report will explore the connected and autonomous vehicle market from telcos’ perspective, focusing on the role they can play in this sector and the business models they should adopt to make the most of the opportunity.

As STL Partners described in the report, The IoT ecosystem and four leading operators’ strategies, telcos are looking to provide more than just connectivity as they strive to monetise the Internet of Things. They are increasingly bundling connectivity with value-added services, such as security, authentication, billing, systems integration and data analytics. However, in the connected vehicle market, specialist technology companies, systems integrators and Internet players are also looking to provide many of the services being targeted by telcos.

Moreover, it is not yet clear to what extent the vehicles of the future will rely on cellular connectivity, rather than short-range wireless systems. Therefore, this report spends some time discussing different connectivity technologies that will enable connected and autonomous vehicles, before estimating the incremental revenues telcos may be able to earn and making some high-level recommendations on how to maximise this opportunity.

 

  • Executive Summary
  • The role of cellular connectivity
  • High level recommendations
  • Contents
  • Introduction
  • The evolution of connected cars
  • How to connect cars to cellular networks
  • What are the opportunities for telcos?
  • How much cellular connectivity do vehicles need?
  • Takeaways
  • The size of the opportunity
  • How much can telcos charge for in-vehicle connectivity?
  • How will vehicles use cellular connectivity?
  • Telco connected car case studies
  • Vodafone – far-sighted strategy
  • AT&T – building an enabling ecosystem
  • Orange – exploring new possibilities with network slicing
  • SoftBank – developing self-driving buses
  • Conclusions and Recommendations
  • High level recommendations
  • STL Partners and Telco 2.0: Change the Game 

 

  • Figure 1: Incremental annual revenue estimates by service
  • Figure 2: Autonomous vehicles will change how we use cars
  • Figure 3: Vehicles can harness connectivity in many different ways
  • Figure 4: V2X may require large numbers of simultaneous connections
  • Figure 5: Annual sales of connected vehicles are rising rapidly
  • Figure 6: Mobile connectivity in cars will grow quickly
  • Figure 7: Estimates of what telcos can charge for connected car services
  • Figure 8: Potential use cases for in-vehicle cellular connectivity
  • Figure 9: Connectivity complexity profile criteria
  • Figure 10: Infotainment connectivity complexity profile
  • Figure 11: In-vehicle infotainment services estimates
  • Figure 12: Real-time information connectivity complexity profile
  • Figure 13: Real-time information services estimates
  • Figure 14: The connectivity complexity profile for deep learning data
  • Figure 15: Collecting deep learning data services estimates
  • Figure 16: Insurance and rental services’ connectivity complexity profile
  • Figure 17: Pay-as-you-drive insurance and rental services estimates
  • Figure 18: Automated emergency calls’ connectivity complexity profile
  • Figure 19: Automated emergency calls estimates
  • Figure 20: Remote monitoring and control connectivity complexity profile
  • Figure 21: Remote monitoring and control of vehicle services estimates
  • Figure 22: Fleet management connectivity complexity profile
  • Figure 23: Fleet management services estimates
  • Figure 24: Vehicle diagnostics connectivity complexity profile
  • Figure 25: Vehicle diagnostics and maintenance services estimates
  • Figure 26: Inter-vehicle coordination connectivity complexity profile
  • Figure 27: Inter-vehicle coordination revenue estimates
  • Figure 28: Traffic management connectivity complexity profile
  • Figure 29: Traffic management revenue estimates
  • Figure 30: Vodafone Automotive is aiming to be global
  • Figure 31: Forecasts for incremental annual revenue increase by service

AI: How telcos can profit from deep learning

The enduring value of connected assets

In the digital economy, the old adage knowledge is power applies as much as ever. The ongoing advances in computing science mean that knowledge (in the form of insights gleaned from large volumes of detailed data) can increasingly be used to perform predictive analytics, enabling new services and cutting costs. At the same time, the widespread deployment of connected devices, appliances, machines and vehicles (the Internet of Things) now means enterprises can get their hands on granular real-time data, giving them a comprehensive and detailed picture of what is happening now and what is likely to happen next.

A handful of companies already have a very detailed picture of their markets thanks to far-sighted decisions to add connectivity to the products they sell. Komatsu, for example, uses its Komtrax system to track the activities of almost 430,000 bulldozers, dump-trucks and forklifts belonging to its customers. The Japan-based company has integrated monitoring technologies and connectivity into its construction and mining equipment since the late 1990s. Komatsu says the Komtrax system is standard equipment on “most Komatsu Tier-3 Construction machines” and on most small utility machines and backhoes.

Komatsu’s machines ship with GPS chips that can pinpoint their position, together with a unit that gathers engine data. They can then transmit the resulting data to a communication satellite, which relays that information to the Komtrax data centre.

The data captured by Komtrax (and other Internet of Things solutions) has value on multiple different levels:

  • It provides Komatsu with market intelligence
  • It enables Komatsu to offer value added services for customers
  • It gives detailed data on the global economy that can be used for computer modelling and to support the development of artificial intelligence

Market intelligence for Komatsu

For Komatsu, Komtrax provides valuable information about how its customers use its equipment, which can then be used to refine its R&D activities. Usage data can also help sales teams figure out which customers may need to upgrade or replace their equipment and when.

Komatsu’s sales and finance departments use the findings, for example, to offer trade-ins and sales of lighter machines where heavy ones are underused. Its leasing firm can also use the information to help find customers for its rental fleet.

Furthermore, Komatsu is linking market information directly with its production plants through Komtrax (see Figure 1). It says its factories “aggressively monitor and analyse the conditions of machine operation and abrasion of components” to enable Komatsu and its distributors to improve operations by better predicting the lifetime of parts and the best time for overhauls.

Figure 1: How Komatsu uses data captured by its customers’ equipment

Source: Komatsu slide adapted by STL Partners

Value added services for customers

The Komtrax system can also flag up useful information for Komatsu’s customers. Komatsu enables its customers to access the information captured by their machines’ onboard units, via an Internet connection to the Komtrax data centre.

Customers can use this data to monitor how their machines are being used by their employees. For example, it can show how long individual machines are sitting idle and how much fuel they are using. Komatsu Australia, for example, says Komtrax enables its customers to track a wide range of performance indicators, including:

  • Location
  • Operation map (times of day the engine was on/off)
  • Actual fuel consumptionAverage hourly fuel consumption
  • Residual fuel level
  • High water temperature during the day’s operation
  • Dashboard cautions
  • Maintenance reminders/notifications
  • “Night Time” lock
  • Calendar lock
  • Out of Area alerts
  • Movement generated position reports
  • Actual working hours (engine on time less idle time)
  • Operation hours in each work mode (economy, power, breaker, lifting)
  • Digging hours
  • Hoisting hours
  • Travel hours
  • Hydraulic relief hours
  • Eco-mode usage hours
  • Load frequency (hours spent in four different load levels determined by pump pressures or engine torque)

 

Content:

  • Introduction
  • Executive Summary
  • The enduring value of connected assets
  • Tapping telecoms networks
  • Enabling Deep Neural Networks
  • Real world data: the raw material
  • Learning from Tesla
  • The role of telcos
  • Conclusions and Recommendations

Figures:

  • Figure 1: How Komatsu uses data captured by its customers’ equipment
  • Figure 2: Interest in deep learning has risen rapidly in the past two years
  • Figure 3: Deep learning buzz has helped drive up Nvidia’s share price
  • Figure 4: The key players in the development of deep learning technology
  • Figure 5: Mainstream enterprises are exploring deep learning
  • Figure 6: The automotive sector is embracing Nvidia’s artificial intelligence
  • Figure 7: Google Photos learns when users correct mistakes
  • Figure 8: Tesla’s Autopilot system uses models to make decisions
  • Figure 9: Tesla is collecting very detailed data on how to drive the world’s roads

Amazon: Telcos’ Chameleon-King Ally?

Introduction

Amazon is using an array of innovative propositions to sidestep the Android-Apple duopoly in the smartphone market and Facebook’s rapidly expanding digital commerce ecosystem. Amazon’s vast selection, unparalleled logistics, innovative bundling, laser-like focus on the customer, rapidly improving entertainment proposition and leadership in voice-controlled in-home systems mean the Seattle-based e-commerce giant is fast becoming a omnipresent convenience store that always has what you want, when you want it.

Continually reinventing itself, Amazon’s restlessness could seriously disrupt the balance of power between the major global Internet ecosystems. Although the Amazon, Apple, Facebook and Google ecosystems all originate from the PC-era, they have each managed to successfully extend their digital platforms into the smartphone and tablet markets. But not without a dramatic change in the pecking order. In fact, the advent of touch-controlled smartphones enabled Apple to become a major force in the digital consumer market, while weakening the position of its long-standing foe Microsoft.

Now these ecosystems need to navigate the tricky transition to voice-controlled digital platforms, which depend heavily on advanced speech recognition, artificial intelligence and machine learning technologies. Amazon is leading the way, having created this new market with the rollout of its Echo speaker, underpinned by the cloud-based Alexa personal assistant system.

This report analyses Amazon’s financial firepower, the Amazon Prime bundle and strategy of bundling entertainment with retail, before considering Amazon’s areas of relative weakness – the smartphone and communications markets. In this section, the report also considers whether Amazon can sustain its lead in the nascent market for voice-controlled speakers for the home.

It concludes by exploring whether Amazon has sufficient economies of scope to build the expertise in artificial intelligence that will be required to ensure the Apple-Android duopoly that exists in the smartphone market won’t also dominate the emerging smart home sector. Finally, it considers the ramifications for telcos and makes several high level recommendations.

The global e-commerce market

Online commerce continues to grow rapidly. In 2016, global retail e-commerce sales (products and services ordered via the internet) will rise almost 24% to reach $1.915 trillion in 2016, according to research firm eMarketer. As that represents just 8.7% of total retail spending worldwide, there is plenty more growth to come. eMarketer expects retail ecommerce sales will increase to $4.058 trillion in 2020, making up 14.6% of total retail spending that year (see Figure 1).

Figure 1: Retail online commerce continues to grow rapidly

The major global Internet ecosystems – Amazon, Apple, Facebook and Google – all take a slice of this market. Within their ecosystems, they act as brokers bringing buyers and sellers together, earning a commission for facilitating interactions and transactions. Google and Facebook are the leading players in online advertising, while Apple is a leading distributor of digital content: Although Apple still generates most of its revenue from devices, its App Store and iTunes service are now major contributors to its top line. Still, in online commerce, Amazon rules the roost: Its online marketplace, which offers a vast selection of products and services from millions of merchants, continues to grow rapidly.

 

  • Introduction
  • Executive Summary
  • The global e-commerce market
  • Amazon’s financial firepower
  • Key takeaways
  • Amazon Prime: The Convenience Engine
  • Eroding Google Search
  • Key takeaways
  • Why Amazon wants to entertain us
  • A push into user-generated content
  • Key takeaways
  • Amazon’s Devices: Ups and Downs
  • Navigating Google’s mobile maze
  • Amazon’s Attempts to Develop Device Platforms
  • Key takeaways
  • Communications: Amazon’s Blind Spot?
  • Conclusions and Recommendations

The IoT ecosystem and four leading operators’ strategies

The IoT ecosystem

The term IoT is used to describe a broad and diverse ecosystem that includes a wide range of different connectivity types and use-cases. Therefore, it is not helpful to discuss the IoT ecosystem as a whole, and to understand IoT better it is necessary to break it down into horizontal layers and vertical segments.

Figure 1: A simplified map of the IoT ecosystem

Source: STL Partners


The five horizontal layers in the figure above are essential elements common to all IoT use-cases, regardless of vertical segment, and comprise:

  1. Sensors or controllers (embedded in connected devices, the “things” in the Internet of Things)
  2. A gateway device to aggregate and transmit data back and forth via the data network.
  3. A communications network to send data.
  4. Software for analysing and translating data.
  5. The end application service.

Perhaps surprisingly we have not included ‘IoT platforms’ as a horizontal layer in its own right.  IoT platforms are designed to organise, analyse, and (in some cases) act upon the data from connected devices. Because there can be differences in platform capabilities from vendor to vendor, a platform horizontal layer has not been included in this analysis. Depending on the platform, it will be designed to deliver any combination of horizontal layers 3, 4, and 5.

Level 5 – the end application service – is where material differences exist between vertical segments. Because IoT is a young market new use-cases are still emerging and existing use-cases are still evolving. The IoT ecosystem is not static and will continue to change, grow, and develop, and could look quite different in the next ten years. However, several distinct IoT vertical markets – sometimes described as ecosystems in their own right – are already emerging. These include:

  1. Smart and connected cities.
  2. Connected vehicles.
  3. Industrial IoT (including smart manufacturing).
  4. Smart home.
  5. Smart healthcare.
  6. Smart agriculture.

Within each of these six verticals there are several use-cases, and each vertical is developing and evolving new ones all the time. Figure 2 shows examples of use-cases either currently in use or under development in each vertical.

Figure 2: IoT vertical markets and use cases

Source: STL Partners

The complexity and technical requirements of each use-case varies widely. For example, the requirements of a smart thermostat compared to those of an autonomous vehicle are distinctly different. The next section of this report will provide an overview of the different technologies enabling IoT, followed by a section providing analysis of the technological requirements of several use-cases to illustrate how the IoT ecosystem will be enabled by not just one, but several different connectivity technologies.

 

  • Executive Summary
  • Introduction
  • Methodology
  • The IoT ecosystem
  • Six key technologies enabling IoT
  • 1. Cloud computing
  • 2. Low-power wide-area technologies
  • 3. Big data analytics
  • 4. Network function virtualisation (NFV) and software-defined networking (SDN)
  • 5. 5G
  • 6. Edge computing
  • Will one connectivity technology be dominant?
  • Use-case one: Smart metering
  • Use-case two: Autonomous driving
  • Use-case three: Smart thermostat
  • Use-case four: Smart home security system
  • How will IoT use-cases evolve?
  • Telcos’ role in the IoT ecosystem
  • The IoT value chain
  • AT&T: the ambitious ecosystem orchestrator
  • Vodafone: a ‘connectivity plus’ approach
  • SK Telecom: connectivity via multiple technologies
  • Deutsche Telekom AG: the open platform integrator
  • Adapting for evolution

 

  • Figure 1: A simplified map of the IoT ecosystem
  • Figure 2: IoT vertical markets and use-cases
  • Figure 3: The role of ‘network slicing’ in IoT
  • Figure 4: The role of Edge Computing in IoT
  • Figure 5: Complexity profile criteria ratings
  • Figure 6: Smart metering complexity profile
  • Figure 7: Autonomous driving complexity profile
  • Figure 8: Smart thermostat complexity profile
  • Figure 9: Smart home security system complexity profile
  • Figure 10: IoT use-case evolution
  • Figure 11: Telco’s original role in the IoT ecosystem
  • Figure 11: Telco’s current role in the IoT ecosystem