MWC16 May Reveal that IoT Will Upset the Industry’s Balance of Power

Summary Bullets:

• The sharing economy plus IoT is changing the balance of power between telcos and their suppliers

• CSPs may be powerless to stop themselves from being marginalized.

There are two big questions hanging over Mobile World Congress 2016, which opens in Barcelona in a couple of weeks. The first is about who will win the scramble for account control in the Internet of Things. The second is about the industry’s balance of power as firms test the limits of the rented/shared asset ownership model.

To sketch some broad definitions, the M2M world is what happens “inside the firewall”. This is largely the domain controlled by the former SCADA equipment suppliers, is well-defined and essentially runs on private networks, but it drives the ambition inherent in the newer, broader IoT idea. The IoT world exists largely “outside the firewall”, where privately-owned devices connect and interact with others in what is essentially public space, and generates performance, usage and environmental information that needs to be collected, assimilated, analysed and translated into action.The IoT is presently a free-fire zone; everyone thinks there are fortunes to be made, and is anxious not to lose out, but no one has the weight to drive the market the way IBM drove the mainframe market, or Microsoft the desktop market. So they must reduce risk and minimise their cost of entry – hence the ubiquitous use of partnerships and shared services. To date the IoT market has been a partner-found, partner-lost dance, but that might be about to change. The poster child for this shift is Ericsson.

On one hand, the vendor is working with AT&T and Verizon on dedicated IoT network roll-outs and use cases in the US, and with Deutsche Telekom in Europe, and it has just announced Networks Software 17A for Massive IoT. This is a soup to nuts offer of three 3GPP protocols, Narrowband-IoT, LTE-M and EC-GSM, which aims to address the market for IoT devices that need low power, long range coverage to justify their cost. This is great news if you are an MNO trying to cover all the IoT bases wirelessly, but you will have to be patient – the commercial release is set for Q4 2016, and modules that exploit these protocols may take another 12 months to emerge in commercial quantities.

But Ericsson’s own data suggest that cellular will make up just one-seventh of all M2M connections. This puts a different complexion on its concurrent announcement that it will offer Smart Metering as a Service (SMaaS). This contained no mention of connectivity, only that the buck will stop with Ericsson.

The offer is based on Ericsson’s experience in “enabling” 42 million smart meters. “Utility providers will enjoy lower total cost of ownership, reduced complexity as Ericsson acts as a single point of contact with IT service providers, telecom operators and field services companies; and improved quality of service,” the equipment maker promises.

If network equipment suppliers like Ericsson now gain direct traction with customers like energy suppliers and water companies, telcos could find themselves squeezed back into the connectivity market, which is commonly agreed to be just five percent of the IoT value pie.

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