Will IoT provide the necessary boost for the existing MVNOs in the developed markets to build new products to different market segments?
Of course there are new niches in the mobile ecosystem under the concept of IoT. Visionaries can design new business models to capitalize opportunities and resolve social problems.
It will be very difficult for MVNOs in IoT to get things going. Wholesale deals are difficult because of the low usage per sim (although there will be lots of sims), MNOs/MVNEs will charge (substantial) hosting fees to cover their business cases... Plus, just connectivity is (getting) a commodity, so MVNOs need to partner to expand into the value chain. Wholesale is hugely profitable for the operators, with the possible initial inconvenience of interfacing with new wholesale providers, i.e., turning up new wholesale providers. Larger volumes of wholesale use is probably not bad for the operators, except that a lot of wholesale providers want 3G/LTE — the highest speeds, and as MNOs build out their LTE networks, they will want to satisfy the demand of their retail customers before their wholesale ones, especially given the capital costs involved. The number one big issue shaping the industry— the high cost of LTE data, where the “wholesale” costs to MVNOs can exceed the retail price the host carrier charges in the market.
It seems in the US IoT deals are separate and distinct agreements that can and usually are enforced as such. IoT do provide an additional revenue option if it can be packaged well. Packages of mobile services along with IoT for Communities, Corporate or governments.
There are IOT devices that are mobile, although some always think of IOT devices as fixed — appliances, garage doors, home security systems — everything for the home, which would not likely incur roaming expenses. Mobile devices like telematics etc., are more M2M than IOT — and for these, roaming costs might be an issue in the overall cost of roaming. Indeed, especially in Europe, where roaming charges are going away, traffic will go up but revenues go down.
For the customer and even IOT provider, this may not be a bad thing, but obviously for the MNO, it means lower revenue. The other interesting trend is that while IOT applications tend to not be big data consumers; this too will increase, helping on the revenue side.
This is an interesting topic and a place where the lines between M2M plays and the iOT offerings/devices blur... Where this leads may be seem like somewhat of an enigma now, but I believe the pieces are there to assemble some clear paths to opportunity. Let's examine a few things currently happening in the industry...
First, many classify M2M offerings as follows:
- Consumer & Wearables
- Wellness & Healthcare
- Security & Surveillance
And we could probably add more to that. Also, the business side of the MVNO business includes Data Solutions, Enterprise Solutions, Business VoLTE.
All of the above mentioned services overlap each other in some segments and it is easy to argue that many belong not only in the M2M space but also in the IoT space. Without having to explore these segments in detail I think we can all agree that there will be opportunity here and there will be success, which will be based on such things as uniqueness, demand, sustainable competitive advantage and ability to implement and execute.
That being said, the MNO, MVNO and MSO (a cable operator term meaning Multiple System Operator, such as Comcast) are constantly changing. The wireless space is having a lot of success now and carriers, especially in the US hold the key to access to the customers through wholesale arrangements with the MVNOs. However, as more companies like Comcast (an MSO) introduce more wifi and we get more wifi aggregators across the globe (Boingo) we see the opportunity for some MVNO offerings like Republic, Touch Mobile, Scratch Wireless, show up and offer seamless hybrid wifi cellular pricing models. T-Mobile has had this service as someone pointed out, but has not promoted it aggressively. Also, as someone pointed out, the cable operators (MSOs) are coming back to this space because of the impact that the OTT service providers (Netflix, Hulu, Google, YouTube) are having on their business.
What is happening in the hyper-competitive space now is good for the consumers, because costs seem to be going down. Follow me here: Most cable companies are losing phone customers and video customers (especially premium video HBO, Showtime, and Encore) to the OTT providers, this was eventual, so that what the cable operators are left with is a data pipe (cable modem service or DSL) into the home. In some cases, the less affluent households and migrant households or segments drop all tethered access and use their smartphones as access points and subscribe to low cost UTTD plans for $40-50 per month. They access content through their handsets and can bounce it up to an HDTV through AppleTV, Google Chromecast, Amazon Fire TV or some of the other devices that can tether to a wireless handset and stream content to your audio or video device... These events are reshaping all of this space...
As I mentioned earlier, the wifi space is intersecting now and driving costs down and we see an ecosystem where we have "On Net" portions of service and "Off Net" which can drive down costs and change business models...
Another part of this discussion is content and access. Access really is the commodity and content is the unique higher value component, which is why companies like Comcast have acquired Universal and NBC and why Disney now owns so much content like ESPN and ABC. And the discussion about Google getting into the Telco space or MVNO space is a natural step, but just a part of their strategy, which is really to capture eyeballs so they can drive advertising revenue and demonstrate they understand the consumer better than anyone else and can generate the best most cost effective means to drive sales.
With all of this said, there is still space and opportunity for the MVNOs, which was the original question, but what will it take?
What it will take for companies or businesses to succeed in this space:
- Is your service or product new, innovative or evolutionary?
- If the service or product is new, innovative, or evolutionary, do you have a sustainable competitive advantage or only a limited window of opportunity?
- How well do you understand your customer?
- How fast can you innovate and deliver new value or increase value for your customers?
- How capable and competent is your team? And leadership team?
- Have a vision of where you are going and what success with your service or product will look like?
- Try to understand the evolving competition, market-space and ecosystem
- Make sure your team can implement and execute!
- Focus on customer experience and make sure it is exceptional and better than your competition?
At the outset it may sound obvious and simple, but being able to actually accomplish these requires an exceptional team and leadership.
The growth in Internet of Things (IoT) and Machine to Machine (M2M) applications is also set to fuel growth in this sector. Over the coming year, we expect an influx of new M2M and sector-specific MVNOs to be launched. The IoT/M2M market offers a new revenue stream from roaming services as consistent global accessibility is imperative to the success of technological advances such as the connected car.
The MVNO market in the coming years will become highly-segmented with relatively small-sized players serving a range of niches and a handful of MVNOs serving the enterprise and SMB market, focusing on connectivity to the full range of devices, but this is a difficult market for MVNOs, given existing relationships. It’s all about data connectivity, which makes the current high wholesale cost of LTE an issue.
Growth in the number of MVNOs is expected to be focused on the LATAM and North Asian markets – particularly India, China, Brazil, Argentina, Mexico, Colombia, Peru – where deregulation is giving birth to new market opportunities. Some countries in these regions have relatively low smartphone penetration and are still in the process of rolling out domestic LTE, which means if they follow the same trend as the European and North American markets have in recent years, there is excellent future potential for new players.
To find out more about the opportunities in IoT, join us at MVNOs North America, 16-17 October 2017, where we will be discussion this and many other technologies during our conference.