5 July 2016
Telcos Seek to Harness Power of IoT for Post-Connectivity Profits
With telecommunications companies looking to search services and solutions as revenue streams beyond connectivity, the Internet of Things (IoT) has emerged as the battlefield for innovative monetisation across this highly competitive sector.
As telecommunication companies ('telcos') look to move beyond simply providing connectivity, seeing search services and solutions as their primary new revenue streams, data analytics emerged as the key area of interest at this year's CommunicAsia event, a development that has been largely driven by the increasing ubiquity of the Internet of Things (IoT). As well as maximising revenues from the more developed markets, connecting the unconnected billions around the world – particularly those in Asia – was also high on the agenda, as well as the question as just how to deliver the greater bandwidth demanded by data hungry users.
One of this year's keynote speakers was Gerd Leonhard, Chief Executive of The Futures Agency, a Switzerland-based technology thinktank. Addressing, this year's delegates, he said: "Digital transformation requires a change to business models. In the case of the auto industry, for instance, its future will not be about selling more cars, largely because we will be sharing more cars. Instead of selling cars, the industry will be selling mobility.
"In the same way, telcos can no longer solely sell traditional telecoms services. While the provision of networks and developing infrastructure was once a good business model, the future will be about adding value via services, experiences and platforms."
This year the event was co-located with BroadcastAsia and EnterpriseIT, one of Asia's largest information technology expos. Turning his attention to broadcasters, Leonhard said: "You need to realise you are not the only game in town. You, too, will need to generate new business models or become irrelevant.
"TV is a societal event and will remain a key platform for delivering live sports and political events. Thanks to increasingly ubiquitous high-speed, low-cost internet, however, everything else can be delivered by other players."
Echoing Leonhard's sentiments, Gary McLaren, Chief Technology Officer of the Hong Kong Broadband Network, said: "Unless broadcast TV changes its business model, it will die off within ten years."
Providing the secure networks – as well as the required services and solutions – for the widely-predicted digital transformation of the IoT is another development that telcos clearly see themselves driving. According to Darren Hubert, Chief Architect for Microsoft Services APAC, there will be 50 billion connected devices by 2020, representing a global market worth at least US$1.7 trillion. Significantly, he also sees Asia leading this growth. Overall, he sees IoT being driven by four key concerns – What happened? Why did it happen? What will happen? What should I do?
Expanding on his vision, he said: "While capturing data is cool, the real promise of IoT is in tying that data together with insight and intelligent action. The cloud stores and processes data, the data provides insight, with that insight ultimately leading to intelligent action. IoT is really all about large, complex data, which, in turn enables new types of insight and new business opportunities."
Hubert believes that the IoT in now on the verge of becoming truly mass market. In light of this, his advice to companies is clear: "Start by connecting devices you already have. Use services and the cloud. Combine the data you already have rather than store it in silos. Then start generating new insights, which will ultimately create new business value."
Keen to put into perspective just how big Big Data actually is was Ong Geok Chwee, Vice-president of Emerging Businesses for Starhub, a Singapore-based multi-platform communications company. She said: "Every day, we generate enough data to fill 10 million Blu-Ray disks. How can we make sense of all of this data? For us, as a traditional telco and cable services provider, it's no longer about connectivity. It's about providing user-directed content, services and solutions.
"One such service is outcome-driven analytics. We now provide actionable analysis to a number of clients. In the case of retail malls, for instance, we help them the better understand the needs, behaviour and traits of their customers."
According to Sue Bryant, Director of South Pacific Solutions Marketing for Huawei, the Chinese telcom technology giant, there are a number of factors driving the growth of the IoT, with the most significant being falling device costs, widening connectivity and improving industry standards. Explaining the challenge currently facing the sector, she said: "If telcos do not have a strategy, then someone else will come in and monetize IoT, using the networks built by the telcos. This will be very similar to the way that certain services providers – notably Netflix and Spotify – have done with existing digital networks."
Citing an example of one company already meeting with some success in this sector, she said: "Telefonica, the Spanish telecoms operator, rolled out smart home solutions four years ago. It now has more than a million domestic customers in South America. This is the kind of mass market approach telcos should adopt, one that builds on their existing strengths."
Moving on to prospects in the smart car sector, she highlighted the success of Zain, a Kuwaiti telecoms group, that has already developed connected car technology, a move that anticipates the inevitable surge in demand when driverless cars become mainstream. She also gave an appreciative nod to China's Unicom, with the telecoms giant already established as a pioneer in the smart car parking solutions sector. Summarising her message, she said: "Telcos need to ask where they fit in the value chain. They also need to consider the exact nature of their revenue model and identify partners who will help them deliver their solutions.
Despite the clear excitement associated with developments in this sector, IoT and data analytics are, of course, only relevant to the 50% of world's population that is currently digitally enfranchised. For many at the show, connecting the other half remained both a challenge and a priority.
Keen to address this particular issue was Ulf Ewaldsson, Group Chief Technology Officer for Ericsson, the Swedish telecoms technology company. Predicting dramatic changes, he said: "The number of the unconnected will drop by half to 1.5 billion over the next 20-25 years. A key part of this change will be the increased availability of more affordable devices. We believe that when connected devices are available for US$10, we will be able to connect another one billion people".
One country seeking to bring itself into the fully connected age is Australia. Bill Morrow is the Chief Executive of NBN, the Melbourne-based company tasked with the design, build and operation of the country's National Broadband Network.
Demonstrating the sheer scale of the project his company has undertaken, he said: "In most countries across the world, the cities have excellent and competitively priced connectivity. The rural areas, however, remain poorly connected, especially in a country such as Australia, where the distances between rural communities can be immense.
"Private enterprise cannot tackle this particular issue. The solution – as has been shown in places like Singapore – is a private/public partnership. In line with this model, we hope to connect eight million rural homes by 2020, providing them with speeds of at least 25mbps."
Gustav Grundin, Associate Principal with the New York office of McKinsey & Company, sees a similar challenge facing Asia's smaller cities. He said: "It's costly to deliver connectivity to the low-density, low-rise cities that are common across Asia. The way forward is to maximize frequency spectrum allocation, using what's available more efficiently.
"The higher spectrums – 3G, LTE, and the like – are much more efficient and cost effective when it comes to data transmission, with some spectrum currently allocated to radio arguably better utilised by such services.
"Overall, it's comparable to building a better highway and ensuring that that highway is well used. The opportunity for doing so is greatest in Asia, with its huge, young, increasingly affluent and tech-savvy population all keen to move to the cities."
Craig Thomas, Senior Director, International Marketing for Calix, a Californian telecoms equipment manufacturer, however, sees another way forward for telcos. He said: "We have been great at competing on price and speed, but that model is not sustainable. In truth, we've overdone it. We have provided fibre to the home, and high speed Wi-Fi, but the bandwidth is too high for many older devices to make proper use of. As a result, customers complain that they are not getting the speeds they expect. In fact, our data shows that 63% of customer complaints are about their home Wi-Fi.
"We need to work out how to meet their requirement in a more effective manner. Telcos also need to identify profitable niches – such as gamers – and sell properly-tailored packages."
CommunicAsia 2016 was held at the Marina Bay Sands, Singapore from 31 May-3 June. The show was held in conjunction with BroadcastAsia and EnterpriseIT. In total, the events attracted some 48,000 attendees from 102 countries and regions.
Ronald Hee, Special Correspondent, Singapore