How will Internet of Things (IoT) and Machine to Machine (M2M) fuel the MVNO sector?
The number of devices connected to the internet has surged over recent years, and this trend is showing no signs of slowing. According to Gartner, the number of connected ‘things’ in use will reach 20.4 billion by 2020.
These devices – which range from point to point connections known as machine to machine (M2M) through to internet of things (IoT) – require connectivity in order to realise their full value. This presents an opportunity for mobile virtual network operators (MVNOs).
Indeed, due to their agility, MVNOs have an advantage over the mobile operator giants in this space, according to James Gray, managing director at Graystone Strategy.
Unlike mobile operators, smaller MVNOS can be more innovative, and have the ability to move quickly to offer new services, agrees Whitey Bluestein mobile strategist and industry veteran. “There are all kinds of people who need a connectivity solution and have no idea how to do that,” he says. “And anybody who calls themselves an MVNO has connections to a carrier and the ability to activate and provision a service.”
Taking this into account, which IoT verticals offer the most potential for MVNOs? Gray points to five key areas of opportunity: manufacturing, transportation, utilities, healthcare and consumer electronics such as connected home.
Within this, Aricent’s AVP of technology, Ezhirpavai Pavai says the automotive industry could be particularly lucrative: “We see the MVNO model being deployed by automotive OEMs as a big push for providing connected car solutions,” she adds.
Taking this one step further, Craig Bachmann, TMForum’s senior director for IoE and digital business, says there is an opportunity for MVNOs to be part of what he calls IoT “mash ups” such as smart cities. “This is a mash up of areas including smart buildings, smart health and smart energy” he explains.
Daniel Neal, chairman, CEO and founder of Kajeet and Arterra Mobility, thinks the healthcare sector is especially ripe for disruption. However, he advises MVNOs to focus on a sub segment within the sector, such as hospitals. “MVNOs should delve deeply into a sub segment of a vertical: Learn it very well; engage deeply; speak with people who know who the buyers are; know what’s going to change.”
Indeed, in order to succeed MVNOs must ensure they are experts within their chosen sector, says Thandi Demanet, business analyst for IoE and digital businessat TMForum. “They need to look at the transformations required in order to fit into the ecosystem. It’s hard for the MVNO, but they do have capabilities that can be monetised within IoT,” she adds.
As part of planning their business strategy, MVNOs need to decide whether to focus on M2M or IoT. Because M2M is a fairly well-established and already commoditised area, it is therefore an entry point, says Gray. “The real value comes from IoT: Customers won’t be buying IoT, they buy a service such as ‘monitoring my production line to improve my efficiency’.”
Therefore, rather than simply offering connectivity, Gray advises MVNOs to be part of the value chain. “MVNOs should try to be more creative with their commercials. The real value in IoT is the service that wraps around it.”
At the same time, there are a number of entry hurdles for MVNOs looking to enter IoT and M2M. According to Gray, these include: “Owning your own infrastructure and correct connectivity agreements. And, having the experience and knowledge to be able to operationalise that and turn it into a service – as that’s where the value sits. You don’t just charge people for megabytes, you have a monthly fee.”
Finding where they fit in the IoT value chain will be a challenge for MVNOs. Taking this into account, Gray thinks there is an opportunity to provide elements of the value chain to someone with a use case. He cites the example of Cubic Telecom, which now provides “an extensive IoT solution”.
He explains: “They have infrastructure, an understanding of connectivity, and roaming agreements as well as the technology to back it up. If you have your own infrastructure and the ability to build the proposition, then it’s a good market.”
Arkessa counts itself as an MVNO service provider and also a “light MVNO” – including elements such as a billing platform. “We have two main products and then value-added services such as location and analytics,” says John Freeman, CTO at Arkessa. “Sometimes people want the entire package, so they ask for design and delivery of that too, but we focus on being the core connectivity layer to integrate into solutions,” he adds.
In the end, according to Dan Warren, head of 5G research at Samsung, innovative IoT MVNOs will be set apart from their rivals. He thinks they will do this through “demonstrating innovative business models, charging structures and technical solutions that allow them to differentiate themselves from a direct mobile operator proposition”.
And in the future, as 5G enters the fray and mobile operators start to offer network slicing, large enterprises with significant IoT-enabled assets may seek to form MVNOs of their own, Warren predicts. “This can be done either via a direct relationship with the mobile operator or using a wholesale MVNO to act as a broker,” he says.
However, at the same time, he warns: “This means operators run the risk of being significantly disintermediated from the inherent value in IoT, by being the first ‘B’ in a B2B2B model.”
There are multiple opportunities and many challenges for those striving to become MVIoTs. If new entrants to either the MVNO or IoT market are going to be successful in this fast-growing space, they should be aware that partnerships are needed – especially on the hardware side.
But their agility and flexibility put MVNOs in a unique position in the telecoms sector. This should help those who are innovative to quickly find their place in the IoT ecosystem. As Gray says: “MVNOs can be anything from a grocer to a technology company. The right MVNO with the right team and a good idea and use case could develop a proposition.”
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